Jon Sindreu

Mon, May 12, 2025, 1:31 PM5 min read

Economist Burton Malkiel might have called the stock market “a random walk,” but investors could at least use earnings guidance by companies as road signs. Now they are largely walking blind.

Last week, BMW reiterated its 2025 financial guidance from mid-March, but included the assumption that the Trump administration would roll back some of the more-recent tariff increases starting in July.

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Though it will take a while, free trade across the U.S., Mexico and Canada “will be restituted once again,” BMW Chairman Oliver Zipse told analysts last Wednesday. “The disadvantages are far too big for everybody.”

Given that the U.S. and China agreed Monday to suspend most tariffs, following the announcement of a deal with the U.K. last week, there may be some ground for Zipse’s optimism. But equity analysts at Deutsche Bank weren’t as certain following the earnings report. “Obviously not everyone shares BMW’s optimism,” they wrote to clients.

While unorthodox, the German carmaker’s predictions are one way to cope with the fact that nobody knows what the economy will look like in a few months’ time.

Ford, Jeep-owner Stellantis, Delta Air Lines, and UPS took another route, scrapping their 2025 guidance altogether. Others, such as General Motors, PepsiCo and Procter & Gamble, have lowered targets, while Volkswagen excluded tariffs from its outlook. United Airlines, creatively, offered one scenario for a stable environment and another for a recession.

The current median expectation by Wall Street is that the S&P 500’s earnings-per-share growth over the next 12 months will be 8.9%, which amounts to a forward price/earnings ratio of 20.6—historically elevated but in line with the average of the past five years.

Here is the problem: Analysts take their cues from the same corporate executives who are now issuing meaningless forecasts. In reality, the index could be much more expensive than it looks.

Goldman Sachs’s latest forecast, which dates from before the accords with Britain and China, estimated a 45% chance of a recession over the next 12 months. Yet, after almost entering a bear market on April 8, the S&P 500 is now only about 0.6% below where it was at the start of the year.