Earnings season isn’t setting the world on fire, but overall, it seems to be coming in about where most analysts expected. Here is what our earnings expert and market strategist Jeffrey Buchbinder had to say about earnings season so far:
Generally, Q1 results have been in-line with expectations so far and guidance has been good enough to prevent forward estimates from falling much. However, it is frustrating that currency continues to weigh on forward guidance despite the likely year-over-year declines for the U.S. dollar in Q2.
The majority of the economic data have shown some improvement over the past two months, but one recent bit of economic data that is looking very strong is the Economic Cycle Research Institute’s (ECRI) U.S. Weekly Leading Index, which has surged the past two months.
This proprietary indicator uses 50 different time series from various categories, including the Corporate Bond Composite, Treasury Bond Composite, Stock Market Composite, Labor Market Composite, and Credit Market Composite. This indicator looks at change in the U.S. economy, rather than calculating an objective measure of economic health. As such, a rising year-over-year change could be interpreted as improving economic condition, on a relative basis. As you can see here, it has spiked higher and is now near its highest level since late 2014.
Lastly, the year-over-year change has been steadily improving and is now up to 1.5%, the highest reading since late 2014. But, unlike in 2014, the trend is currently higher. Adding a trend line that would make our in-house technician David Tonaszuck, CMT, proud, the year-over-year change appears to have broken the downtrend and is now moving firmly higher.
Our odds of a recession in the next 12 months are 15–20%. Overall, the ECRI U.S. Weekly Leading Index is just one piece of data, but it does suggest the odds of a recession should continue to be relatively low.