Corporate resilience

Despite tariffs and geopolitical events, corporate earnings continue to show incredible resilience. With the first 20% of companies results already out, 87% of them have beaten expectations, revenue is up 6.3% and earnings are up 9.2% YoY. Technology continues to lead the S&P500 in growth, but also in concentration, being responsible of 34% of the index behavior, followed by financials either 13%. Energy continues to be a laggard and a detractor from earnings growth, being also the only sector with negative revenue growth so far. Of course these results were not “made” during the quarter, and are the result of years of work, but problems can arise quickly, such as credit defaults for banks, or sales slowdown for consumer oriented companies. But the bottom line so far, is that companies have been able to deal with those problems. They have not been able to lower price to earnings valuations though; the market is expensive in absolute and relative terms, and that’s creating anxiety, but the resilience is there.

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