LIVE MARKETS-Earnings season "market's moment of truth" - Saxo

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EARNINGS SEASON "MARKET'S MOMENT OF TRUTH" - SAXO

The upcoming earnings season will deliver clarity one way or another, says Saxo’s global head of investment strategy, Jacob Falkencrone, but whether it sparks optimism or adds more risk is up for debate.

But for him at least, the recent spike in downward earnings revisions is not just a blip.

"It signals deepening concerns about the economy, consumer spending, and corporate profitability in the face of rising tariffs, persistent inflation, and deteriorating consumer confidence," writes Falkencrone.

Results, and in particular guidance, will help clarify whether current fears are exaggerated, or if the worst is yet to come.

There are three key aspects Falkencrone suggests investors should watch closely, the first being pricing power and profit margins.

"Trump’s tariffs are raising companies’ costs significantly"

"Watch closely for signs of margin pressure. Businesses unable to raise prices might face significant earnings headwinds.”

Next is sales and demand outlook, with Falkencrone urging close attention to cautious comments on consumer spending and sudden drops in sales guidance.

Lastly, he flags investment and hiring plans as an area to watch.

"Watch corporate announcements carefully. Cuts in investment or hiring often signal management concerns over future growth."

Sector-wise, consumer discretionary and industrials are among the hardest hit, while materials and energy also face pressure amid lower commodity prices and rising costs.

Health and tech seem better positioned, says Falkencrone.

(Lucy Raitano)

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