Earnings show ‘uncertainty' is only sure thing for investors
(Bloomberg) — Earnings season is finally over, and for investors one thing is certain: Corporate executives and Wall Street analysts are deeply concerned about the 'uncertainty' sparked by President Donald Trump's combative trade plans.
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'As we look to the rest of the year, there is still uncertainty related to tariff levels, timing and countries involved in addition to the potential actions of others in the industry, as well as the potential reaction of American consumers,' Corie Barry, chief executive officer of Best Buy Co. (BBY), said during the company's earnings call Thursday.
She's hardly alone. Deckers Outdoor Corp.'s (DECK) chief financial officer said last week that the company can't give full-year guidance due to 'macroeconomic uncertainty related to global trade policy.' And AT&T Inc. (T) is leaving flexibility in its balance sheet so it can respond to 'a competitive environment or any uncertain things that occur in the macro environment,' CEO John Stankey said.
Since the beginning of April, the words 'uncertain,' 'uncertainty' and 'uncertainties' have been used about 3,100 times during companies' earnings calls and other events, according to an analysis of transcripts compiled by Bloomberg. That's the most in any quarter based on records going back more than two decades, topping even the height of the global financial crisis in 2008 and the beginning of the Covid-19 pandemic in 2020.
The level of uncertainty is rising as the courts challenge Trump's sweeping global tariffs. On Wednesday, a three-judge panel for the US Court of International Trade declared that the Trump administration had wrongly invoked a 1977 law in imposing levies on dozens of countries and that the move was therefore illegal. Then on Thursday, a federal judge in Washington ruled that a number of Trump's tariffs on China and other countries were unlawful.
Finally, on Thursday afternoon a federal appeals court temporarily paused the Court of International Trade's ruling on Trump's tariffs so it can weigh a longer lasting stay sought by the government. For its part, the Trump administration has vowed to appeal the decision to the Supreme Court if necessary.
All of this lack of clarity on trade and the impact on the economy is weighing on stock-market investors, even as the S&P 500 Index (^SPX) has rebounded from its April lows and is now less than 4% from the all-time peak it hit in February.
'It's really hard to feel confident that we're going to surge higher to record highs with this overhang,' said Mark Hackett, chief market strategist at Nationwide.
Meanwhile, a measure of chief executives' confidence has plunged to the lowest level since 2022. More than 80% of executives said they expected a recession within the next year-and-a-half, according to a May survey by the Conference Board in collaboration with the Business Council.
On Goldman Sachs Group Inc.s (GS) April 14 earnings call, CEO David Solomon said a lack of clarity had constrained clients' ability to make 'important' decisions.
'This uncertainty around the path forward and fears over the potentially escalating effects of the trade war have created material risks to the US and global economy,' he said. 'We are hopeful that feedback from companies large and small, institutional investors and ultimately consumers will support an approach that will lead to greater economic certainty and long-term growth.'
Six weeks later, US trade policy is still in flux. Countries are racing to strike deals before Trump's tariff pauses end, while the president keeps rattling markets with threats on social media.
Meanwhile, the US economy shrank in the first quarter, but other economic data has largely held firm. Companies have by and large kept capital spending plans intact despite fears of a pullback, which is encouraging to investors. However, for corporate executives, the risk of the unknown remains the biggest fear.
'In the longer term, the secondary effects of tariffs, like impacts to global GDP growth and energy demand, are much more complex and remain a source of uncertainty,' Exxon Mobil Corp. (XOM) CEO Darren Woods said Wednesday. 'We're staying focused on the things we can control.'
(Adds CEO confidence survey in ninth paragraph.)
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