Markets Continue to Whipsaw
The markets of the last couple of weeks will probably end up in many people's memories as “I remember where I was when…” due to the unprecedented volatility. After a 4-day decline (Thursday, April 3 - Tuesday, April 8) for all the major US indices that wiped out most of 2024's gains, the announcement of a 90-day pause on reciprocal tariffs lead to those indices gaining 5-7% on Wednesday, April 9, only to dip back down on Thursday and give back half of the historic rally from the day prior.[1] By Friday, markets surprisingly were back up, despite an escalating trade war with China and the release of University of Michigan's consumer sentiment survey which fell to one of its lowest readings on record.[2]
As anyone who follows markets knows, they tend not to like uncertainty. Even as the Trump administration eased some levies on products from China, giving exemptions to consumer electronics like smartphones and computers, networking equipment and computing products, there is still a massive trade-war at play with China.[3] Tech stocks rose on that news on Monday, flattening out by today's close.
China is the top supplier of goods to the US, accounting for 16.5% of total goods imported as of a 2022 estimate.[4] The US tariff on most imports from that country remains at 145%.[5] Even with a 90-day pause, there is still uncertainty around what will happen at the end of the period. Trump hasn't ruled out extending that pause.[6] As strategists from Morgan Stanley said in a note published Monday, "Investors should prepare to be fooled many more times. Hold your convictions loosely and keep your stops tight.”[7]
Big Banks Reported Big Profits in Q1, But Caution Remains
Big bank earnings have come in better than expected thus far. All six of the biggest US banks, Morgan Stanley, JPMorgan Chase, Wells Fargo, Goldman Sachs, Bank of America, and Citigroup, beat FactSet's Wall Street consensus expectations on the bottom-line, and only Wells Fargo missed on the top-line.
As expected, some bright spots included strong net interest income due to persistently high interest rates, and robust equity trading revenues as a result of volatility and higher volumes of trading over the quarter. Morgan Stanley saw equity trading revenues soar 45% during the first quarter[8], JPMorgan set a record for equities trading revenue[9], and Goldman Sachs saw an increase of 27% for the metric.[10]
One area that has suffered is investment banking, something mentioned by both JPMorgan and Morgan Stanley. Goldman Sachs CEO, David Solomon echoed those comments during their Q1 call, saying “In investment banking, the volatile backdrop led to more muted activity relative to the levels we had expected coming into the year.”
JPMorgan CEO, Jamie Dimon, continued with his cautious tone he expressed earlier in the week through a shareholder letter and multiple media interviews, saying on the bank's earnings call: “The economy is facing considerable turbulence (including geopolitics), with the potential positives of tax reform and deregulation and the potential negatives of tariffs and ‘trade wars,' ongoing sticky inflation, high fiscal deficits and still rather high asset prices and volatility.” “As always, we hope for the best but prepare the Firm for a wide range of scenarios,” he added.[11]
Wells Fargo CEO, Charlie Scharf echoed similar sentiment, calling for a timely trade resolution, stating: “Timely resolution which benefits the U.S. would be good for businesses, consumers, and the markets. We expect continued volatility and uncertainty and are prepared for a slower economic environment in 2025, but the actual outcome will be dependent on the results and timing of the policy changes.”[12]
Fewer Companies Have Delayed Q1 Earnings Dates
After rising to its highest level in four years during the last quarter of 2024, the Late Earnings Report Index, our proprietary measure of CEO uncertainty, has reported back-to-back quarters below the historical benchmark as companies prepare to report their Q1 results.
The LERI tracks outlier earnings date changes among publicly traded companies with market capitalizations of $250M and higher. The LERI has a baseline reading of 100, and anything above that indicates that companies are feeling uncertain about their current and short-term prospects. A LERI reading under 100 suggests that companies feel they have a pretty good handle on the near-term.
The official pre-peak season LERI reading for Q1 earnings stands at 62, the lowest Q2 reading recorded. This is well below the baseline reading, suggesting when companies announced their earrings dates they were feeling more certain about economic conditions. As of April 11, there were 50 late outliers and 73 early outliers.
Source: Wall Street Horizon
Like us, you may be thinking, how could this be? CEOs have expressed an abundance of caution on Q1 earnings calls thus far, airing their uncertainty around how trade policy will impact their bottom-line. That's even come out in guidance for some of these names, with Walgreens[13] and Delta[14] saying they are now unable to give FY 2025 guidance due to the uncertainty around tariffs.
Two thoughts on this data:
- Many of these companies confirmed their Q1 earnings dates earlier in the year. The S&P 500® hit a record on February 19 as investors were still riding high on the Trump Trade despite early tariff proposals.[15] Starting in late February fear started to creep in, culminating in the big drop spurred on April 2 or “Liberation Day” when the Trump Administration announced reciprocal trade proposals that were much larger in scope than anticipated.[16] Our theory is that companies that set their earnings dates before April 2nd still felt they had a good crystal ball for their performance in 2025. If you recall, during the Q4 earnings season in January/February, many executives commented on the rise in corporate confidence. Goldman Sachs CEO David Solomon even said “There has been a meaningful shift in CEO confidence, particularly following the results of the U.S. election,” on the earnings call.[17]
- The last time the markets had this much uncertainty was likely during the COVID 19 pandemic. During the Q1 2020 earnings season we had a whopping 736 reading for the pre-peak LERI, the highest on record. Why are we not seeing that now? Well one could argue COVID posed a lot more uncertainty for the markets. While the Trump Administration has pivoted many times on tariffs, we knew to expect them as they were a main talking point on the presidential campaign trail, and they were a centerpiece of his 2017 - 2021 presidency. Some companies have spoken to this, with the likes of WalMart commenting that they will manage tariffs, as they've done it before.[18]
Earnings up This Week:
Pre-peak earnings season continues this week with results from others in the Financial sector, including commercial banks such as US Bancorp, Citizens, KeyBank and more. We'll hear more about how the consumer is spending when American Express and Netflix report on Thursday. A few healthcare names are also scheduled to release results this week with Abbott out on Wednesday and UnitedHealth Group on Thursday. Friday is a bank holiday and therefore no companies are scheduled to report.
Source: Wall Street Horizon
Q1 Earnings Wave
The peak weeks of the Q1 earnings season are expected to fall between April 28 - May 16, with each week expected to see over 2,000 reports. Currently, May 8 is predicted to be the most active day with 1,202 companies anticipated to report. Thus far, only 52% of companies have confirmed their earnings date (out of our universe of 11,000+ global names), so this is subject to change. The remaining dates are estimated based on historical reporting data.
Source: Wall Street Horizon
1 Trump announces 90-day pause on ‘reciprocal' tariffs with exception of China, CNN, Elisabeth Buchwald and Kevin Liptak, April 9, 2025, https://www.cnn.com
2 University of Michigan, Survey of Consumers, April 11, 2025, https://www.sca.isr.umich.edu/
3 Trump spares smartphones, computers, other electronics from China tariffs, Reuters, David Lawder and Jeff Mason, April 13, 2025, https://www.reuters.com
4 Office of United States Trade Representative, Executive Office of the President, Trade Countries & Regions, https://ustr.gov
5 Trump Has Added 145% Tariff to China, White House Clarifies, New York Times, Ana Swanson, April 10, 2025, https://www.nytimes.com
6 Trump doesn't rule out extending 90-day tariff pause, CNBC, Kevin Breuninger, April 10, 2025, https://www.cnbc.com/2025/04/10/china-trump-tariffs-live-updates.html
7 Morgan Stanley issues warning: Expect to be ‘fooled many more times' on tariffs, CNBC, Yun Li, April 14, 2025, https://www.cnbc.com
8 Morgan Stanley First Quarter 2025 Earnings Results, April 11, 2025, https://www.morganstanley.com
9 JPMorgan Chase First Quarter 2025 Earnings Results, April 11, 2025, https://www.jpmorganchase.com
10 Goldman Sachs First Quarter 2025 Earnings Results, April 14, 2025, https://www.goldmansachs.com
11 Chairman and CEO Letter to Shareholders, JPMorgan Chase, April 7, 2025, https://www.jpmorganchase.com
12 Wells Fargo First Quarter 2025 Earnings Results, April 11, 2025, https://www.wellsfargo.com
13 Walgreens Boots Alliance Reports Fiscal 2025 Second Quarter Results, April 8, 2025, https://investor.walgreensbootsalliance.com
14 Delta Air Lines Announces March Quarter 2025 Financial Results, April 9, 2025, https://ir.delta.com
15 S&P 500 edges to record closing high as Fed minutes parsed, Reuters, Stephen Culp, February 19, 2025, https://www.reuters.com
16 Trump's ‘Liberation Day' tariffs were worse than expected—sparking a global selloff, Fortune, Diane Brady, April 3, 2025, https://fortune.com
17 Goldman Sachs Conference Call on 2024 Full Year and Fourth Quarter Earnings Results, Goldman Sachs, January 15, 2025, https://www.goldmansachs.com
18 Walmart Q4 FY25 Earnings Call Transcript, February 20, 2025, https://corporate.walmart.com
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