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The trillion-dollar question markets are trying to figure out: whether to believe heady 2025 earnings estimates amid the Trump administration’s trade war.
“I don’t think ignore [estimates] is the right word. I think you need to take in some context with them. And what I mean by that is watch the numbers — watch the earnings beats and the revenue beats that we get,” Ritholtz Wealth Management chief market strategist Callie Cox told Yahoo Finance Executive Editor Brian Sozzi on the Opening Bid podcast (video above; listen in below).
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First quarter earnings season is generally going well as it’s the last quarter before the effects of Trump’s tariffs kick in.
S&P 500 (^GSPC) earnings growth for the quarter is tracking up 7.9% year over year, according to data from Barclays. Earnings are surprising to the upside by an average of 10.2%, compared to a long-term average of 5.2%.
Household names in Apple (AAPL), Alphabet (GOOG, GOOGL), and Microsoft (MSFT) have impressed the Street with their results.
But whether S&P 500 companies could hit their estimated 10% EPS growth rate is in question — and so are the outlooks for their valuations.
“I think what worries a lot of people on Wall Street is that it feels like the worst is yet to come,” Cox cautioned.
With tariff-related fallout on the minds of everyone from executives to consumers, stocks have been whipsawed as investors seek out fair value.
Markets tumbled after “Liberation Day” in early April, hitting a bottom on April 7, only to rebound over the month as earnings reports rolled in.
While there have been winners this earnings season, it hasn’t been hard to spot the struggles.
Coca-Cola (KO) chair and CEO James Quincey told Sozzi on Yahoo Finance that cautious consumers are buying less at supermarkets.
“So that’s where the weakness was focused, which I think is partly an indication of some of the affordability pressure for the lower-income consumer and some of the geopolitical reaction,” Quincey explained.
Starbucks (SBUX) CEO Brian Niccol acknowledged consumer weakness in an interview with Sozzi. The coffee giant’s North America comparable sales fell 1% in the quarter.
“We keep coming back to expectations versus reality,” Cox said.
To maintain a more grounded perspective in the volatile backdrop, Cox advised investors to stick to their investment plans instead of impulse selling or buying.