Jamie Dimon, the head of JPMorgan Chase, recently acknowledged that change represents a huge sea change. Already, analysts have cut their forecasts for S&P 500 earnings by some 5%. This amendment is an example of a larger shift occurring within companies. When looking at companies like Walmart, Delta, Frontier Airlines, and others with heavy exposure to American consumers, companies have sharpened the pen on all facets of their guidance to investors.
Dimon observed that the economic circumstances around the world today have forced companies to focus on short-term solutions rather than being long-term oriented. He stated, “I would just add companies, some have taken away their guidance. I expect to see more of that.” This pivot reflects a new level of hesitance from firms. These businesses are struggling with a rapid rate of change, exacerbated by recent trade tensions and market volatility.
The volatility and uncertainty created by protracted trade negotiations spearheaded by President Donald Trump has now taken a serious toll on market stability. Markets have whipsawed since Trump announced a series of tariffs on America’s trading partners last week, contributing to heightened investor anxiety. Dimon went on to share his view that corporate earnings estimates will probably keep going down because of this volatility. “Analysts have generally reduced their S&P estimate earnings by 5%,” he remarked, adding, “I think you’ll see that come down some more.”
In addition, this environment of instability has forced clients to be risk-averse. CEO Jamie Dimon and CFO Jeremy Barnum pointed to clients’ reluctance to make acquisitions. They’re pulling in their horns on their investments. “You know, people are pulling back on doing deals, not just big ones, but middle market companies are being very cautious about investment,” Dimon explained.
Barnum agreed with these sentiments, explaining that the degree of policy uncertainty involved renders long term planning nearly impossible. “This level of policy uncertainty is one that makes it hard to plan for the long term,” he stated. As daunting as these challenges are, Barnum said that consumer spending has surprised to the upside during the first quarter. He pointed to early signs that suggest consumers are front loading purchases due to fears that tariffs might increase costs.
Withstanding all of this, companies are preparing to report their earnings in the next few weeks. Yet, this will be their first opportunity to provide an update on their outlook to investors in this tempestuous climate. The next quarter’s earnings reports will hold key clues on how businesses are adjusting to today’s new and volatile market conditions.