Now more than ever, realism, agility, and transparency are paramount. Executives who have a clear-eyed view of risk exposure, scenario planning, and the potential duration and depth of downstream effects will be best positioned to execute and win investor trust until the tsunami-sized wave settles.
Overall U.S. bank commentary reflects a marked downshift from the largely upbeat tone executives expressed at the start of the year, with tariffs and heightened uncertainty clearly weighing on sentiment and business activity.
In the interim, companies should expect order books to slow and decision-making hesitancy to rise. Countries will respond with tariffs of their own, engage in dialogue with the Trump Administration, and jockey for position.
As we wrap up our coverage of Q4’24 earnings season, it’s clear that despite the spurts of market volatility induced by policy uncertainty, companies have continued to put together solid earnings results.
Year to date, the S&P 500 has gained 4.0%, with most of the increase occurring in January. Since then, performance has remained relatively flat, with an uptick of less than 1% this month. Notably, only two of the ‘Magnificent 7’ companies — Meta and NVIDIA — have posted gains for the year, and the overall lackluster performance of this group, which accounts for roughly 30% of the benchmark, has weighed down the S&P 500.
Our analysis reveals the fundamentals of the Materials sector remain challenged albeit at uneven levels, characterized by general consumer caution, mixed volume trends, and anemic earnings growth. While certain pockets of strength exist — particularly in areas tied to technological and infrastructure-related advancements, as well as onshoring efforts in response to tariff concerns — a broad-based recovery remains elusive.
Demand trends continue moving up and to the right across most end markets, while capex commitments remain stable to improving, even as the pace of AI advancement raises questions about long-term spending efficiency. Some industry leaders marveled at the speed of innovation, particularly with regard to the latest developments out of China, while others pounded the table over the need for U.S. exceptionalism to prevail.
The Consumer Discretionary sector continues to face challenges, with macro commentary remaining conservative across the board. However, a sense of cautious optimism is building among executives who anticipate improvement over the course of the year — a theme we are hearing across sectors.
Post-election clarity has bolstered customer sentiment across several end markets, with demand and order trends taking center stage during earnings calls. However, evolving policy directives continue to command attention, shaping both investor discussions and, no doubt, your schedules over the past week!
Overall U.S. Big Bank commentary reflects optimism toward the year ahead and the potential to build on solid momentum seen post-election, though enthusiasm remains somewhat tempered by ongoing geopolitical risks and unknowns around how policy will unfold under a Trump 2.0 administration. As observed in our Q4’24 Inside The Buy-Side® Earnings Primer®, the heightened election uncertainty that prevailed in the Fall has been replaced by policy uncertainty.
