Esha Dey and Sagarika Jaisinghani
5 min read
In This Article:
(Bloomberg) -- One thing is clear as the first-quarter earnings season draws to a close: The uncertain outlook for the global economy is superseding better-than-feared results even as stocks rally on signs of easing trade tensions.
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Corporations across the US, Europe and China are pulling their forecasts for the year or providing grim outlooks, citing rising costs, weak consumer sentiment and a lack of business confidence as a result of President Donald Trump’s worldwide trade offensive.
“This earnings season wasn’t about the numbers, it was about the narrative,” said Scott Ladner, chief investment officer at Horizon Investments LLC. “Nobody cared what you did in the first quarter other than to determine the jumping off place for the new tariff economy.”
In the US, a measure that reflects the proportion of S&P 500 Index members that raised their earnings outlook compared to those that held or reduced, the so-called profit guidance momentum, fell to the lowest level since at least 2010, according to an analysis from Bloomberg Intelligence’s equity strategists Gina Martin Adams and Wendy Soong. That is in spite of S&P 500 companies delivering double the profit growth that was expected in the first quarter, according to BI.
Meanwhile in Europe, analysts’ expectation for 2025 earnings growth has slowed by the sharpest since the Covid pandemic, BI found, even as MSCI Europe constituents posted a 5% earnings increase, beating an expected 1.5% decline.
Bloomberg Intelligence strategist Kaidi Meng said shares of European firms that issued gloomy outlooks this earnings season tended to trail the broader Stoxx 600 on the day, suggesting the tariff impact hasn’t been fully priced in yet.
And in China, earnings projections for the benchmark CSI 300 Index have fallen 1.7% from a peak around the end of March, data compiled by Bloomberg show. Investors were in for a rude awakening as they were expecting outlooks to turn around in the first quarter, but Trump’s tariff blitz complicated the nascent recovery in corporate profits.
“We are in a more wait-and-see mode for China’s earnings picture, especially since domestic inflation is still quite low and suggestive of continued downward pressures on corporate pricing power,” said Homin Lee, senior macro strategist at Lombard Odier.
