If you’d like to hear more, here’s another 5 minutes.

Starting with Takeaway #1: Mostly Stable Earnings Stats

• The percent of companies beating consensus on EPS is still tracking a bit higher than the last reporting season.

• We are also still seeing a slightly downward bias to the rate of upward EPS estimate revisions for the S&P 500, but less pressure on this stat for the Russell 2000.

• Though it closed near all-time highs on Friday, the S&P 500 has essentially been trading sideways around the 6,100 level since late January. We think investors are taking a wait-and-see approach to the busy news flow out of Washington, and the stock market’s desire to tread water seems justified from an earnings perspective for now.

Moving on to Takeaway #2: Uncertainty, Policy, Tariffs, and FX Remain in Focus on Last Week’s Earnings Calls

Our team continued to read through S&P 500 earnings call transcripts last week. Some highlights:

• The theme of optimism being eclipsed by uncertainty that we’ve been highlighting over the last few weeks persisted last week. In terms of optimism, strong demand/orders, M&A, economic resilience, and IT budgets were cited. Risks highlighted included currency, geopolitics, tariffs and trade, energy, and monetary policy. One bellwether Industrial company noted demand had been constrained by uncertainty. Meanwhile, a Tech company noted that they had seen some evidence of caution having an impact on customer behavior (though it had not yet translated into spending pulling back). As reporting season winds down, we find ourselves thinking that it may be 1Q25 reporting season before we get good color on how policy uncertainty is affecting current business conditions.

• Consumer commentary remained light. We’ve been hoping to find clues on whether recent declines in consumer survey data might be reflective of any deterioration in consumer spending (Friday’s retail sales decline/miss suggests yes). But so far we are not getting a lot of color from companies that helps to shed light on this question.

• The headwinds emanating from the strong US dollar remained a major focal point for companies in a wide array of industries. Some noted these headwinds would be stronger in the 1st half.

• On policy, companies highlighted the uncertainties emanating generally and on trade, M&A regulations, food regulations, and SNAP benefits in particular. On DOGE, several companies highlighted the opportunity associated with a renewed focus on government efficiency.

• Tariffs were once again in focus, and commentary highlighted the fluid and uncertain nature of the current situation and references to mitigation plans and possible supply chain readjustments. Some companies that discussed the topic last have the announced tariffs baked into guidance, while others do not, and as reporting season winds down we see further downside risk to S&P 500 EPS from tariffs.

Wrapping up with Takeaway #3: More Evidence of Weakening Vibes

• In our client meetings last week, we spent a lot of time highlighting how several categories of vibes (investor, corporate, and consumer) appear to be fading to varying degrees.

• Data out last week also suggested that Small Business vibes have taken a bit of a hit. After surging in late 2024 around the election, Small Business optimism fell slightly in the January update survey update from NFIB. At the same time, Small Business Uncertainty, which initially fell after the election, moved up sharply (though still below last year’s high). The trends we are seeing on both of these time series also reflect what we’ve been hearing from public company C-suites in our earnings call transcript reading over the past few weeks.

• Digging deeper into investor vibes… US equity funds flows, as tracked weekly by EPFR, continued to trend lower last week but had not yet turned negative. Meanwhile, flows to US bond funds continue to surge.

• This data set also points to improving trends to Western European and German equity funds.

• The fade in US equity flows broadly can also be seen in Blend funds flows and Large Cap funds flows, particularly those to passive funds. What’s interesting to us about this data set, in light of the AAII update, is that we haven’t yet reached the point where investor anxiety is translating into outflows from US equity funds (enabling the index to tread water). But it’s reasonable to assume that this may be where we are headed (perhaps as more investment dollars shift abroad) if sentiment doesn’t stabilize soon.

That’s all for now. Thanks for listening. And be sure to reach out to your RBC representative with any questions.