Our first impression of 2Q25 reporting season is “fine but not fabulous”
Discussions of the macro backdrop and overall outlook by the Financials that reported tended to paint a picture of the US economy as resilient with a solid consumer, while giving a nod to ongoing uncertainty from tariffs. A few took note of slower spending while others highlighted improving sentiment, improving strategic deal activity, or strong trading volumes. Some noted they were staying vigilant or guarded. Overall, we’d describe the tone as cautiously optimistic, with a bit more caution than what we’ve seen expressed in stock market performance recently.
We didn’t have many consumer companies reporting last week, but the comments we took note of tended to paint a picture of the consumer as resilient and stable and in good health in terms of the underlying statistics (like delinquencies) that financial institutions monitor.
The dynamic or frequently changing nature of the tariff backdrop was, not surprisingly, a key theme in last week’s earnings calls. We appreciated one industrial company’s observation that “every one of our customers is unique and specifically in how they've adjusted to changes in trade policy, some stayed the course, some paused certain items, some pulled inventory forward” and think this is an apt description for the S&P 500 generally based on our own reading. Several companies adjusted guidance based on new tariff assumptions, and we expect more of this in the weeks ahead. We suspect many investors have been anticipating this as well.
We spent some time studying what companies were saying about non-tariff government policy. The tax bill came up most often, with a few companies expressing optimism about the bonus depreciation provision that we’ve heard quite a bit about from investors in recent weeks. Deregulation, Medicaid, and food safety also came up.
Overall, we exited week 1 of 2Q25 reporting season feeling like everything is fine, but not fabulous, and wondering if investors generally got what they expected but were hoping for a bit more. We look forward to learning additional details about tariff management and overall company outlooks in the weeks ahead. So far, our concern that investors have been too quick to write off tariff impacts hasn’t been alleviated.
