S&P 500’s earnings momentum brightens as tariff-induced plunge runs out of steam
There’s a newfound calm on Wall Street, with few analysts changing estimates up or down.
With a red-hot rally erasing the S&P 500’s 2025 losses, Wall Street analysts entered “wait and see” mode when it comes to the fundamental outlook for the companies they cover.
The below chart tracks the number of S&P 500 companies with a four-week average of 12-month forward earnings per share that’s gone up over the past week, less the number of companies in which it’s lower, divided by the total number of revisions. It’s clear that earnings revision momentum has inflected positively.
But a peek under the hood to disaggregate the data shows this isn’t because of any newfound vigor for boosting earnings estimates after tariffs were paused — those are at their lows of the year. It’s simply because analysts have stopped cutting estimates after the initial tariff-induced shock.
A smattering of observations and thoughts about all this:
You can really think of this as “analysts scrambled to take out their pencils and calculate how much large tariffs would hurt companies in their coverage universe, and delivered their first draft very quickly.”
With this first draft complete, no one is going to be rushing to cut estimates again unless given a reason to do so by the economic data, a negative turn in tariff policy, or evidence that what’s on the books is more of a headwind than originally thought. These things take time (and would probably be reflected in prices well before that actually happens).
It is impressive — and a testament to how strong the Q1 earnings season has been — that corporate guidance, in aggregate, was able to relieve rather than accentuate the negative pressure on estimates.
“The recent tariff de-escalation is a positive development to be sure, but there are significant challenges in place to public company profitability today that were simply not there to start the year,” wrote RBC Capital Markets Chief US Equity Strategist Lori Calvasina, who anticipates additional cuts to 2025 estimates will be in the offing. “We also think it will take more time to understand the impacts of the uncertainty around policy that occurred.”
