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

Starting with Takeaway #1: Earnings Sentiment Is Holding at Non-Crisis Lows for Now

We are still in the middle of the busiest stretch of S&P 500 earnings releases for calendar 1Q25.

Here are some of the things jumping out to us on the stats:

• First, companies beating consensus are still outperforming in terms of immediate price reaction, while those missing are underperforming. Those beating consensus are actually outperforming in terms of immediate price reaction a bit more than they usually do.

• Third, the rate of upward EPS estimate revisions to consensus S&P 500 EPS forecasts fell to 28.5% last week, in line with the lows of 2012 and 2016. This is often the bottom in a non recession or crisis period of downward revisions. In a more dire scenario, it typically heads to the 10-20% range.

• Overall, we see the process of lowering EPS forecasts as a necessary step in the market bottoming process. There’s been enough progress and stabilization to help stock prices find their footing for now, though another major leg of downward revisions seems likely if financial market participants start to bake in a recession.

Moving on to Takeaway #2: We Were Drinking From a Firehose of Earnings Last Week

We spend a lot of time during reporting season reading through earnings call transcripts, looking for macro insights. What we read last week (limited to S&P 500 earnings calls held Monday through Thursday) continues to keep us in the camp that recession is not a foregone conclusion, but also adds to our concern that investors have gotten too worried about the near term and not worried enough about the intermediate-to-longer term. We also think there are two different perspectives at play on the consumer, which may be adding to investor confusion. We exited the week seeing managing tariff impacts as a work in progress, but with a greater appreciation of the work that has been done.

Digging into the details a little more:

• Trying to get through last week’s transcripts truly felt like trying to drink from a firehose, not just because there were so many companies that reported, but because companies finally provided detailed commentary on tariff exposures and sensitivities and began the process of adjusting guidance to account for the policy change. We’ve been open about our desire for companies to be more forthcoming in their discussions of tariffs in recent months. Recognizing that we’re getting exactly what we asked for, we will acknowledge that it is going to take some additional time for us, the sell-side broadly, and the buy-side, to digest the information we’re finally getting.

• On the macro, companies tended to rely on words like uncertain, volatile, dynamic, softening, and conservatism. Some noted they are modeling multiple scenarios, or are shifting to quarterly guidance from annual guidance. Companies varied in terms of whether and to what extent they are baking tariffs into guidance. Several alluded to the idea that they hope to gain more clarity and certainty over the next 90 days. Overall, it felt to our team like the tone wasn’t as bad as many expected given how challenging financial market conditions have been recently and how weak sentiment surveys have been coming in.

• Several referenced the idea of a better currency backdrop given recent USD weakness.

• One of the debates we’ve been monitoring is whether anticipation of tariffs has resulted in a pull-forward or pullback in demand. For now, the answer to this question seems to be that it has varied. Some companies have indicated that they or their customers have pulled forward demand (especially Industrial companies). Others talked about having seen a pause or slowdown in capex plans or decision making among their customers. Some were adamant that there has been no change in behavior that they have seen.

• With many Financials still reporting last week, one thing that jumped out to us were references to greater investor interest in markets outside the US, and damage to the US brand abroad. One of the things we’ve been talking about in our own meetings recently is how some of our indicators (AAII sentiment, EPS revisions, Michigan Consumer Sentiment, Small Cap P/Es) have hit typical recession or non-recession lows, helping stock prices stabilize, but that there are likely to be some lasting wounds (such as international investor interest in US equities) that may take time to heal.

• Last week, it became a bit more clear to us that there are two tales of the consumer going around, and that both may be correct – they are just capturing different perspectives. Financial-related companies (and Telecom companies) continued to describe the consumer as solid and still spending, with most of the stats they track on consumer health still looking good. Some noted that this seemed likely to be because they still have jobs. Others argued that the consumer is being disciplined and not overextending.

• By contrast, consumer companies continue to have a more negative tone when talking about the consumer, with a number highlighting value-seeking behavior (even at the higher end), how uncertainty is impacting spending (leading to pauses on some purchases like big-ticket items and pull-forward in other instances like mobile devices and cars), bad weather impacts in 1Q, and the impact of stock market volatility on consumers.

• Several also noted that it would take time to fully adjust for the new tariffs, the unpredictable nature and complexity of the situation, and expressed uncertainty around reciprocal tariffs in particular. Several said more color would be coming.

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