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We look ahead this morning to next week’s Q1 earnings season heating up. After a couple weeks of economic data detailing recent and current levels on inflation and employment, this week was a bit of a breather. It also became a bit rudderless, with not much but anecdotal stories in the stock market — like Elon Musk buying a big chunk of Twitter ( — pushing and pulling market sentiment.
As with the heart of any earnings season, the big banks will be among the first to put up Q1 numbers. According to Zacks Director of Research Sheraz Mian in his latest Earnings Trends piece this week, all the big banks, including JPMorgan Chase ((JPM - Free Report) , Bank of America ((BAC - Free Report) , Citigroup ((C - Free Report) and Wells Fargo ((WFC - Free Report) , have seen lower revisions ahead of the reports. This is especially true with Citi, which has higher exposure to Russia.
Beyond the banks, we expect Energy companies to lead earnings season; in fact, the Energy sector may be what pulls Q1 into positive territory overall when all is said and done. Higher oil and gas prices, again stemming from the Russian invasion of Ukraine, have passed along price hikes to consumers pumping gasoline into their autos. Aside from the Housing market, Energy has been the biggest benefactor of inflation metrics tumbling upward of late.
Construction, like Energy and Housing, has also seen upward revisions ahead of Q1 earnings releases. This is based partly on pent-up demand in Housing going back to the early months of the pandemic and now the post-Covid outlook (assuming we are truly “post-Covid,” but that’s another story). Higher savings rates over two years of the pandemic also has given the consumer added buying power, although this is quickly being absorbed by inflation giving us less bang for the buck.
Comps in Q1 will also be difficult, especially when we look at Q1 2021 numbers over Q1 2020. Gone are the days of easily leaping year-over-year revenue gains; while we may see positive earnings surprises in Q1, these would likely be more the result of having ratcheted down expectations ahead of time than unforeseen robust sales. And, as Sheraz reminds up in his Earning Trends article, earnings estimates overall are still going up.
Clearly, the war in Ukraine is aggravating supply-chain issues economists thought would have otherwise worked their way through by now. The war also keeps global economic outlooks murky, especially in Europe. Certainly, the longer the battles trudge onward, the more likely recessionary economic conditions manifest, even eventually in the U.S.
But for now, the good news is twofold: employment levels are back to historic highs, and even slight interest rate activity from the Fed is already showing up in things like mortgage data. The chances for a “soft landing” in the U.S. economy increase as long as cause-and-effect measures behave as expected. Q1 earnings season will help clear the thickets in our economic outlook, and if the expected 50 basis-point hike from the Fed in a few weeks helps curb inflation in the near-future, perhaps our expectations may improve as well.
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Markets Await Q1 Earnings Reports From Big Banks
We look ahead this morning to next week’s Q1 earnings season heating up. After a couple weeks of economic data detailing recent and current levels on inflation and employment, this week was a bit of a breather. It also became a bit rudderless, with not much but anecdotal stories in the stock market — like Elon Musk buying a big chunk of Twitter ( — pushing and pulling market sentiment.
As with the heart of any earnings season, the big banks will be among the first to put up Q1 numbers. According to Zacks Director of Research Sheraz Mian in his latest Earnings Trends piece this week, all the big banks, including JPMorgan Chase ((JPM - Free Report) , Bank of America ((BAC - Free Report) , Citigroup ((C - Free Report) and Wells Fargo ((WFC - Free Report) , have seen lower revisions ahead of the reports. This is especially true with Citi, which has higher exposure to Russia.
Beyond the banks, we expect Energy companies to lead earnings season; in fact, the Energy sector may be what pulls Q1 into positive territory overall when all is said and done. Higher oil and gas prices, again stemming from the Russian invasion of Ukraine, have passed along price hikes to consumers pumping gasoline into their autos. Aside from the Housing market, Energy has been the biggest benefactor of inflation metrics tumbling upward of late.
Construction, like Energy and Housing, has also seen upward revisions ahead of Q1 earnings releases. This is based partly on pent-up demand in Housing going back to the early months of the pandemic and now the post-Covid outlook (assuming we are truly “post-Covid,” but that’s another story). Higher savings rates over two years of the pandemic also has given the consumer added buying power, although this is quickly being absorbed by inflation giving us less bang for the buck.
Comps in Q1 will also be difficult, especially when we look at Q1 2021 numbers over Q1 2020. Gone are the days of easily leaping year-over-year revenue gains; while we may see positive earnings surprises in Q1, these would likely be more the result of having ratcheted down expectations ahead of time than unforeseen robust sales. And, as Sheraz reminds up in his Earning Trends article, earnings estimates overall are still going up.
Clearly, the war in Ukraine is aggravating supply-chain issues economists thought would have otherwise worked their way through by now. The war also keeps global economic outlooks murky, especially in Europe. Certainly, the longer the battles trudge onward, the more likely recessionary economic conditions manifest, even eventually in the U.S.
But for now, the good news is twofold: employment levels are back to historic highs, and even slight interest rate activity from the Fed is already showing up in things like mortgage data. The chances for a “soft landing” in the U.S. economy increase as long as cause-and-effect measures behave as expected. Q1 earnings season will help clear the thickets in our economic outlook, and if the expected 50 basis-point hike from the Fed in a few weeks helps curb inflation in the near-future, perhaps our expectations may improve as well.