Takeaway #1
Starting with Takeaway #1: Earnings Sentiment Is at an Important Crossroads
We are entering the busiest stretch of S&P 500 earnings releases for calendar 1Q25, with 290 companies currently scheduled to report in the remainder of this week and next week.
The process of resetting earnings forecasts has gotten underway, a necessary step in the bottoming process for stocks. One of the ways we track this quantitatively is by watching the bottom-up consensus 2025 EPS forecast for the S&P 500. That stat (which had been sitting comfortably above $270 for most of calendar 1Q) continued to fall over the past week and is now down to $265. We expect this number to go lower (our own top-down estimate, which bakes in a stagflationary economy and margin contraction, is $258), but it’s worth noting that important progress continues to be made here.
Takeaway #2
Moving on to Takeaway #2: What We Read Last Week Didn’t Settle any Key Debates
As our regular readers are well aware, we spend a lot of time during reporting season reading through earnings call transcripts, looking for macro insights. What we read last week (which was limited to S&P 500 earnings calls) generally kept us in the camp that recession isn’t a foregone conclusion, makes us concerned that any adverse impacts from tariffs may be felt a little later in the year or even next year, and pushes us towards the idea that the consumer is holding up but hasn’t been unscathed.
“Some companies reported that their customers were managing through tariffs with pricing, supply chain adjustments, pre-ordering, and scenario planning.”
Lori Calvasina, Head of US Equity Strategy, RBC Capital Markets
On tariffs, the financials that reported noted that impacts were indirect for them. Several said that they have been working with their customers to help them navigate the issue and to understand their exposures. Some companies reported that their customers were managing through tariffs with pricing, supply chain adjustments, pre-ordering, and scenario planning. A few observed that tariff impacts were more likely to be felt in the 2nd half of 2025 or 2026, while one suggested that small businesses might be more adversely impacted.
Takeaway #3
Wrapping up quickly with Takeaway #3: the geographical rotation in flows
We spent some time on Monday reviewing the latest weekly funds flows updates from EPFR. Frankly, we lost count of how many of the charts we track were showing outflows. Most notably, EPFR’s data has shown outflows in recent weeks for US equities and US bond funds (including high yield and investment grade), as well as money market funds.
