By coinnews 
00:00 Speaker A
The other focus for investors has, of course, been earnings. This slew of companies warning or pulling guidance. Here to break down the winners and losers of earning season, we’ve got Barbara Duran, BD8 Capital’s partner, CEO, and CIO. Great to speak with you this morning, Barbara.
00:16 Barbara Duran
Good morning.
00:16 Speaker A
I want to start on an optimistic note. What is your headline takeaway from this earning season that is positive? What’s the biggest winner been?
00:25 Barbara Duran
Well, it’s been a very good, um, earnings reports, um, coming in. We’re almost done reporting for the S&P 500 and some, um, 80 plus percent, you know, have beaten on the EPS number. So I think that’s a very good sign. And the average growth rate, um, and still a few companies left to report, is about 13.5%. So it’s been good. Of course, that is the past, you know, and the tariffs had not yet taken, um, impact at that point. So, and we’re seeing a lot of companies that are either, you know, keeping their guidance or suspending their guidance, or very few have, um, incorporated tariff impact because we don’t know. You know, as Josh was talking about earlier, in tariffs, there’s still more to come. In the next two to three weeks, we may get something, um, from the administration as to what it will be. Right now, the blended rate, depending what you’re reading, is anywhere from 14 and a half to 17 and a half percent. That’s still four to six times greater than it was at the start of the year. Tariff rates then were two and a half percent. And you heard yesterday Walmart when they reported saying they’re going to have to be increasing prices. Right now, they’re absorbing it, they’re working with their suppliers, but if Walmart, who is the biggest, you know, um, in the world in terms of sales, you know, is saying they’re going to have to increase prices, that means a lot of other retailers and other people will be. So the tariff impact is just starting to flow through and so we don’t know what’s going to happen with earnings, but they are likely going to come down. And also one other point, um, on the PPI yesterday, which was a good number, CPI was even better two days before that, but the PPI, which is wholesale, for the first time, you really saw margins contract, which tells you, it may be tell you that companies are already starting to absorb some of the higher costs, which are clearly flowing through. So it’s a question when it starts to show up, and that’s what, you know, Josh was like, well, we’ll see if it starts in May, June, later in the summer, but it will show up. So I think right now, you know, earnings have been great. We’ve got jobless claims yesterday were good, inflation numbers are good, but that’s probably the peak in terms of of good news. So I think we’re in a trading range, the market’s back to a 21 times PE versus just 18 last month. So, you know, we may have more to go just out of sheer momentum, but I think you’ve got to be careful here in terms of adding new positions.
04:05 Speaker B
Barbara, I’m glad that you hit the good and also the bad because I didn’t want to have to be the Debbie Downer and ask for the potential bad here. But perhaps I’ll ask for where the relief could ensue because we’ve had some companies either reaffirmed their guidance for the full year, or some of them pull the guidance in entirety for the full year. And then we’ve also seen a range. So it’s it’s it’s kind of a differing of strategies that we’ve seen over the course of the earning season. But does that actually set the environment or set the stage for potential relief if things aren’t as bad as some of the companies were laying out or pulling their guidance around because of that lack of clarity, and then things, you know, don’t end up as dire as could have shown up in their data. How might we see portfolios position around that relief?
05:05 Barbara Duran
Yeah, well, it’s a good point. And I think right now what we’ve seen, I mean today, as you pointed out earlier, if today is, uh, closes on up, it’ll be the fifth day in a row. And we’ve already recovered some 75% of the drawdown that we had after the April 2nd tariffs, which shocked everybody, you know, in terms of the size there. You know, so I think that, um, we will just have to wait and see. It’s going to be, take time for things to flow through. It’s not going to be positive. One thing, this has all been driven by policy out of out of Washington. So suddenly they decided tariffs wouldn’t be 5%. I mean, that would be monster for the market because, you know, we entered the year in good shape in terms of earnings and inflation coming down, and you continue to see inflation coming down in the soft good side. You know, what we’re seeing now, the tariffs really have to do with hard goods, which have been in inflationary mode. So that’s really where the surprise could be. We don’t expect that, so that would be a real positive. I think the Fed is not in play right now. They really are like us going, we don’t know. We don’t know. We expect the economy’s going to slow. I mean, people out there at 1% growth for the year, down from the beginning, and inflation, um, coming down, you know, what is coming down? But they don’t know isn’t how much inflation will up. Will it be one time, a price adjustment, or will it be embedded? And that’s where the Fed is just waiting to see. So I don’t think we’re going to see any relief from the Fed cutting rates, um, in the next few months and maybe longer.