Why this economist is 'really bullish' on Q3 earnings

00:00 Speaker A

Start with earnings. Big names on deck this week, including Tesla. Bloomberg noting here about 85% of companies in the SPX have beaten profit estimates so far. What do you make, uh, Eric so far of what you’ve seen and heard during this earning season? Do you think this earning season is it the next catalyst to move the stock market higher, Eric?

00:26 Speaker B

Yeah, you know the old saying, uh, it’s the earning stupid, right? And uh, here we are with uh three quarters in a row of double digit earnings. Um, the economy just seems to gain momentum. Um, you’ve just got a huge day today from Apple, right? Apple’s been like a thorn in the side of the market for a long time. iPhone 17 sales looking great. Um, the bank earnings that came out so far, really strong across the board. So, um, you’ve got to be really bullish coming into this uh earning season and then you know, just tack on a, you know, an accommodative Fed and the cap X coming out of the Mag 7 of literally over half a trillion dollars, things we’ve never seen before. Um, it’s hard to make a bearish case here.

01:31 Speaker A

All right, Jose, I want to bring you in here as well. I want to get your take on the earning season through your lens as an economist. Now you you read through these earnings reports, you’re listening to these CEOs and CFOs. What have been the takeaways for you so far? What is in terms of what it meant for the US economy, the US consumer.

01:52 Speaker C

Yeah, generally speaking, earnings have been great. There have been some soft patches, however, when you consider those firms that cater more to the lower and the middle income. So for example, the auto delinquencies that we’ve been hearing about, the regional bank issues, those financial institutions that have more exposure to the lower end households, they are in more trouble. As far as the markets, you know, October from a seasonal perspective, it’s pretty down. It’s a mixed month. It’s not one of the best months. But today Josh, what we saw in the morning, Wall Street wants to make October positive. And like the former guest was saying, going into November and December, when you’re looking at a rate cut this month and a rate cut in December, you know, uh, prospects are really bullish. When you look at what risks we saw last week, we were all concerned about last week, we were worried about US and China. That looks like it’s simmering down. You know, last night Chinese data came out really awful. Retail sales was bad, GDP deceleration, fixed investment, the first contraction since 2020, the pandemic year. So last night’s data from China, I think gave the US a little more leverage going into these negotiations, you know, and raises the likelihood that we’re going to have less hostility on the trade front and more cooperation.