What To Look Out For In Q2 Earnings Season - Jonathan Corpina, Senior Managing Partner, Meridian Equity Partners
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00:00Uh, what about the start to Q2 earnings season here? Delta yesterday, Delta, who always sets a
00:06really high bar for itself, last quarter comes under that high bar. It doesn't have a that good
00:12of a day. You're looking kind of a, uh, mixed here in the bank earnings, uh, Wells Fargo trading down
00:18substantially, Citigroup up substantially, uh, Fastenall, the nuts and bolts of the economy,
00:24that's trading up, uh, kind of a mixed start here to Q2 earnings season.
00:29Yeah. And I think that's what we're going to get and that's what we should get, right? The
00:32uncertainty of what's in front of us, uh, is a reality. When we talk about what the Fed is going
00:38to do, that uncertainty has been there and it's going to continue to be there until we get some
00:43more clarity from them. The geopolitical risks that are out there are going to continue. Our
00:49own election cycle, um, uh, impact is going to be there and that's going to, that's going to
00:54continue. So I think we are going to get somewhat of a mixed bag, um, and, and appropriately so. I
00:59don't, I don't think we're going to get a real, um, you know, gung-ho speeches from CEOs and CFOs
01:06that everything is rosy and the outlook is rosy because we're all, we're all kind of fighting in
01:10this, in this same trench of, of what's in front of us. Uh, you had, you know, Jamie Dimon talking,
01:16you made a comment today that, um, you know, M&A activity should really pick up as we get towards
01:21continue throughout this year here. But from the regulatory element side of it, that's going to be
01:27somewhat of a headwind, uh, that gets in front of that there. So we're going to hear this, this
01:31hedging comments coming out of these, these earning calls. Um, and, and I think it's right. It's
01:36rightfully so. No one can really pinpoint what the Fed is going to do and when they're going to do
01:40it. Yes, economic dent data is kind of showing us where this might go, but you never know what the
01:45Fed's going to do. We continue to watch what's coming out of Washington and, and, and that,
01:50not that the election has a overall impact, um, on, on individual companies. I just think from a,
01:58from a economic point of view, the outcome of this election is going to be very interesting.
02:02And the position that we're in right now, where you have an incumbent president who is struggling
02:06in the polls, um, and the other ancillary issues that are coming, coming along with that, I think
02:11that's just going to force a lot of lack of participation into our markets here. So, uh,
02:18for, you know, second quarter earnings, they should be decent, they should be tepid, but I
02:24don't think we're going to get real, um, real, you know, positive outlook, forward-looking comments
02:31coming out of the C-suite offices. And again, rightfully so. The, the, the headwinds that are
02:37in front of us, um, are, are real and they're going to have to navigate these very, very gingerly.
02:44So what sectors, uh, would you be looking towards here? It seems like we're kind of
02:49in a stalemate here, uh, with the, uh, uh, with, on the rate situation, something I've
02:55talked about, like, you know, why do rates hit necessarily? I mean, well, they pretty much
02:59established that they're not going up, you know, why not, you know, why do they substantially have
03:04to, you know, go down? Where do you go if it just rates are just, are muddled in this area
03:11six months from now, you know, new, uh, you know, change, perhaps a change in administration,
03:16interest rates are still where they're at, you know, what, you know, where, where do you go?
03:21Yeah. So I, I think in this interest rate environment that we are in, um, we're not
03:26going to see, we're not going to see the pendulum swing back as fast as everybody wants, right? If
03:31you look at, if you look at how long it took us to get to this point, it's not going to,
03:36it's not going to swing back. So we are going to remain in this interest rate debate and move
03:44for quite some time. Uh, it's going to take us a long time to get back to somewhere where I think
03:49people feel, feel comfortable. So that being said, I think, you know, financials have been
03:54relatively been doing well throughout this, uh, throughout this timing. Um, and I think as we
04:00continue that this is going to take a longer period of time than people would like, I think
04:03financials certainly, uh, remain in play. When you look at the tech sector, it's hit or miss,
04:09right? I mean, you, you're either going to be really right or really wrong. And when the swing
04:14is, when it, when it's swinging up, you're, you're, you're, you want to be on that board.
04:18You're not going to be able to pick the timing, right. Of when that rotation occurs as we,
04:22as we noticed yesterday. Um, but I think overall, again, that two steps forward, one step back,
04:28if you're, if you're in that tech sector, uh, I think overall you're going to do well.
04:32Uh, I do think people are becoming a little bit more comfortable, um, with real estate interest
04:38rates, mortgage rates of where they're at. We've seen some activity continue to pick up in, in that
04:44sector there. Um, again, as, as it's going to take quite some time for interest rates to come down,
04:50people do need to buy houses. People will want to sell houses that transactions are going to
04:56continue to occur. You find that in this, you know, six to 7% range at this point where people
05:03do feel comfortable, even if rates come down, we're not going to see an initial pickup in that
05:07area. Uh, but I think as we get to get a couple of cuts, we'll start to see that area certainly,
05:14certainly start to pick up. Homebuilders have had, uh, have had a lot of struggles,
05:18um, within themselves. People are watching, uh, you know, people are watching what they're doing
05:23on home improvements and, uh, and, and home builders are being very careful about what
05:29they're doing moving forward. So we're going to have to, we're going to have to continue to watch
05:32that. And the last sector I just think we need to keep an eye on is the, you know, travel and leisure.
05:36I think people are, um, you're really watching what, where they're spending money, where their
05:41discretionary spending is coming. Are they overspending? Are they splurging on those
05:45vacations? They're thinking twice about that. Yes, we've seen airline tickets come in,
05:50uh, pricing come in due to, due to fluctuations in oil prices. Uh, but I think, you know, travel
05:55and leisure is one that we're going to have to keep an eye on as, as discretionary spending
05:59continues to be tight.