While the equity markets got a shot in the arm this week from the U.S. election, results from the Materials sector this earnings season are yet another reminder that the market is not the economy.
Earnings season continues to march on, demonstrating that it’s tough out there from a top-line perspective. Something to be aware of, more companies continue to highlight cost-cutting initiatives, raising the level, while layoff announcements and restructurings underpinned by headcount reductions are on the rise.
While there is hope for a greater sense of clarity once past the U.S. election (less than two weeks away!), shifting policy implications remain a wild card, and geopolitical tensions have shown no signs of abating. In addition, the impact of Fed rate cuts will take time to be felt, while recent hurricanes in the Southeast and evolving labor actions are adding to near-term headwinds in some sectors.
Overall U.S. Bank commentary is more upbeat than expected on a resilient economy, but executives remain guarded in their comments around the road ahead given ongoing risks with heightened geopolitical turmoil and an uncertain U.S. political landscape as we march toward the November U.S. presidential election.
Investor sentiment captured in our Inside The Buy-Side® Earnings Primer® Q3’24 survey reveals heightened concerns around demand and growth with a focus on margins. Off-cycle earnings reports are corroborating what we’re hearing more broadly – continued retrenchment across many markets amid a subdued customer and strapped consumer, while AI / digital and infrastructure stimulus continue to serve as bright spots.
As we wrap up our coverage of Q2’24 earnings season, it’s clear that commentary remains heavily influenced by macro factors like the election, the Fed’s actions, geopolitical risks, and shifting consumer behavior.
The Materials sector, a barometer for the broader economy, continues to reflect the complexities and challenges of the current economic landscape. While last quarter indicated a move towards slow but steady stabilization with hopes of a back-half recovery, commentary in Q2 earnings suggests many of the persistent challenges observed over the past few quarters have remained just that — persistent.
Peak earnings season shaped out to be a dynamic one, and today’s jobs data has added to investor concerns we identified in our most recent Q2’24 Inside The Buy-Side® Earnings Primer® publication. As a result, the S&P 500 saw its worst decline today since 2022, and the Fed-funds futures now sees a 71.5% chance of a 50 basis point cut in September.
This quarter, companies across sectors are feeling very similar trends: slowing top lines; customer decisions being pushed out; an anemic consumer; labor issues, including wage inflation, unionization, and inefficiency; and continued or emerging supply chain issues.
While overall U.S. Bank performances were largely in the black, executives refrained from declaring a definitive turnaround. Many injected a sense of caution in their macroeconomic commentaries, commensurate with our observations from our prior Commencing the Quarter Thought Leadership report. Still, increased confidence amid continued capital market strength and percolating M&A deal activity is notable.
Leverage the experience and expertise of our team
Access insights in our regularly published research, which captures trends in institutional investor sentiment globally
A strategic consultancy accelerating value realization globally