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Muddied earnings

Investors aren’t just worried about tariffs. It’s the silence that follows. 

President Trump’s tariff retaliations and pauses have dragged markets through a string of historic gains and losses. By the end of Thursday’s trading session, the S&P 500 remains 14.3% lower from its record high.

In a market where volatility seems to be the only certainty, a quieter risk may already be unfolding — the collapse of forward guidance.

With Trump’s 90-day tariff pause raising more questions than answers, corporate executives are increasingly opting out of speculation.

That’s not just frustrating for investors, it’s dangerous for price discovery. The stock market, after all, is built on earnings expectations. 

If there’s suddenly a blackout on earnings guidance, what exactly will investors be pricing?   

We saw during the pandemic. In the second quarter of 2020, only 10% of companies issued annual guidance, down from an average of 40% in the four quarters prior, according to Bank of America strategists. 

As of March this year, guidance has already deteriorated significantly.

BofA’s 3-month guidance ratio — which tracks the number of companies above versus below consensus guidance — has fallen to 0.4x, its weakest since April 2020 and below its historical average of 0.8x.

In effect, more companies are going radio silent on what they think will happen next.

“As tariffs are implemented, they will have negative consequences for corporate earnings over the coming months,” Torsten Slok, Apollo’s chief economist, wrote in a note.

“Combined with uncertainty about retaliation, lower consumer sentiment, lower corporate sentiment, and the negative wealth effect of the $10 trillion decline in the stock market, we continue to worry about downside risks to markets and the economy.”

What Slok describes isn’t so obviously captured in a P/E ratio. Confidence can take a hit when pricing power shrinks and planning cycles shorten.

BofA’s math on tariffs paint a bleak picture. If US-China trade tensions don’t resolve, S&P 500 operating income could take a 15% hit. Add in a 1.5-percentage point drag on GDP and things look even worse.

Historically, every 1-point drop in real GDP shaves 5 to 6 points from S&P 500 earnings growth. 

As is, consensus earnings estimates have already wobbled to start 2025, before the impact of tariffs is even known. 

Importantly, during times of uncertainty, markets don’t just dip. They scramble for footing. Multiple trading sessions in the last week have been an instructive reminder of this. 

Indeed, forward-looking multiples have started to reflect that weakness. 

To be fair, even with the recent turmoil, the S&P 500 is still trading at about 19.6x forward earnings, which is hardly cheap compared to history. 

Nonetheless, when valuations outrun visibility, narrative matters more than numbers. 

But in a moment when earnings estimates are falling and companies are trimming guidance, the numbers aren’t much help either. 

It seems increasingly true that Wall Street is valuing stocks based on what it hopes will happen in 2026, not what it knows about 2025. 

Market snapshot

Elsewhere:

📊 Asia markets tumbled overnight. Major stock indexes across South Korea, Japan, Hong Kong and Australia turned red as they opened, while the US bond market endured a steep overnight sell-off.

📉 Inflation fell for the first time since 2020. The March CPI print hit 2.4% year-over-year, and saw its first month-over-month decline since May 2020. The drop was a surprise, below the 2.6% estimate. Some market-watchers have pointed to this as reason for the Fed to cut rates, while others have shrugged it off as outdated data given the tariff uncertainty. (WSJ)

⏳️ Treasury Secretary Scott Bessent expects clarity on tariffs. He told reporters on Thursday that he anticipates the Trump administration to be “in a place of great certainty over the next 90 days” as more countries come to the table to make trade deals. (WSJ)

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Interview:

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Last thing:

About me:

📰 I’m Phil Rosen, co-founder and editor-in-chief of Opening Bell Daily. I’ve published books, lived on three continents, and won awards for my journalism, which has appeared in Business Insider, Fortune, Yahoo Finance, Bloomberg and Inc. Magazine.

I write our flagship newsletter to prepare you for each trading day, unpacking markets, economic data and Wall Street with analysis you won’t find anywhere else. Feedback? Reply to this email, ping me on X @philrosenn, or write me directly at phil@openingbellmedia.com.