The big things you need to know:First, it was another week of stabilization on the earnings stats we track, helping to support the recent stabilization in equity market pricing.Second, there was a little less conversation about tariffs in last week’s earnings calls, which left some additional room for discussions on the health of the consumer and the impacts of non-tariff policy changes.Third, in our other weekly updates, the thing that jumps out is that when we bake in current consensus assumptions on key macro variables and bottom-up EPS for 2025, the S&P 500 ended the week roughly in line with where our model says fair value for the index should be at year-end.
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8:21
Drinking From A Firehose of Earnings
The big things you need to know:First, earnings sentiment has stabilized a bit, helping stock prices find some footing for the moment.Second, we run through our thoughts on what we learned from last week’s earnings calls. We 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.
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7:42
The Fog of Tariffs
The big things you need to know:First, earnings sentiment is at an important crossroads, with the rate of upward EPS estimate revisions having fallen to 30%.Second, what we read in S&P 500 earnings call transcripts last week keeps us in the camp that recession is not 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 toward the idea that the consumer is holding up but still hasn’t been unscathed.Third, the idea that investors are rotating out of the US assets into other geographies is supported by recent funds flows data.
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6:56
Our Latest Thoughts on The Tiers of Fear, Earnings Season, and The Growth Trade
The big things you need to know:First, the stock market is still experiencing a growth scare, in our view, where it is attempting to stabilize. We see more downside if recession is priced in.Second, we review how the process of resetting EPS expectations has begun, and run though key themes from the early reporters and companies that have presented at conferences since the Rose Garden. Our overarching takeaway from our reading is that recession is not yet a foregone conclusion but also that US equities are not out of the woods.Third, we run through our latest thoughts on the Growth trade, which has been outperforming again, and note that it is not a clear cut call.
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7:58
The Most Important Things We've Written About The Past Few Days
The big things you need to know:First, shortly after midnight on Friday morning, we cut our S&P 500 EPS forecast for 2025 to $258 and our YE 2025 price target to 5,550 – the price target cut was something we’d been telegraphing we’d do if the drawdown in the index broke 10% from peak for quite some time, which it did on Thursday.Second, as the stock market has continued to gap down, we’ve continued to highlight our tiers of fear framework for how far US equities could decline in different scenarios. We see the index falling as low as 4,900 if this remains a growth scare, but a drop to 4,200-4,500 is a reasonable way to think about where the index could fall if a recession is priced in.Third, our weekly valuation and flows updates provided us with some insight into why US equity markets have been gapping down so severely.
Our regular podcast from Lori Calvasina, Head of US Equity Strategy, that brings a fresh perspective and nuanced, data driven view on the forces shaping U.S. equity markets.
Disclaimer: https://www.rbccm.com/en/policies-disclaimers.page
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