CEOs haven't been this gloomy about the US economy since the global financial crisis

NEW YORK – Not since the global financial crisis has Corporate America been so downbeat about the state of the economy in earnings calls, an ominous sign for investors trying to figure out how much more pain

Mr Donald Trump’s trade war

will inflict on the stock market.

The ratio of positive to negative comments on macroeconomic conditions during this reporting season has dropped well below its average and is on track for the worst proportion since 2009, according to a Bank of America analysis of the first conference calls.

Earnings season is usually a boon for equities, but with the S&P 500 down nearly 15 per cent from February’s all-time high as investors brace for the fallout of Mr Trump’s attempts to rewrite the rules of global trade, the stakes could hardly be higher this time around. That’s especially true for firms with profits more closely tied to vagaries of the economy, like carmakers.

Some chief executives are struggling to gauge the impact of the White House’s rapidly shifting policies on their businesses. That’s further pressuring US stocks that threatened to sink back towards a bear market in recent days on the heightened risk of a recession and a resurgence in inflation from Mr Trump’s levies.

“Almost every corporate CEO is revising down their outlook,” said veteran market strategist Jim Paulsen. “The commentary warnings of the corporate sector have escalated.”

ASML Holding warned it doesn’t know how to quantify the impact of tariff announcements that are threatening to upend the semiconductor industry. Delta Air Lines withdrew its full-year financial guidance on the uncertainty surrounding global trade, while Kimberly-Clark has lowered profit expectations for the year, citing questions on the impact of the trade war on its costs.

So far in the current quarter, 27 per cent of the firms in the S&P 500 Index have cut their guidance for 2025 while only 9 per cent have increased their outlook, according to data compiled by Bloomberg Intelligence. 

Automakers had the grimmest expectations, slashing outlook for earnings over the next 12 months by around 9 per cent on average in April, data compiled by Citigroup show. On the flip side, firms that make necessities like food and consumer staples, which tend to fare better during recessions, were among the most optimistic, raising their estimates by more than 1 per cent.

The companies that have cut their guidance are being punished for it while beats have been met with limited rewards, according to Citigroup’s trading strategy team. Shares of those that slashed their forecasts dropped 4.8 per cent on average the following day, while those that maintained or raised traded up 1 per cent on average, per the bank’s data.

Bank of America predicts “a potential information vacuum” as companies steer clear of providing guidance, much like they did during the Covid-19 pandemic.

“It’s going to be challenging for companies to guide given all the uncertainty,” said Ms Cayla Seder, macro multi-asset strategist at State Street. “What this means for investors is that there is going to be continued two-way risk and likely continued volatility until the tariff negotiations are more definitively fleshed out.” BLOOMBERG