Inflation and macroeconomic conditions sit as one of the leading themes in this quarter's earnings season. How are markets and consumers responding to these trends?
"We have seen a real rebound in the economy or stabilization in the economy at least alongside the stabilization happening in capital markets," The Transcript Editor and Avondale Asset Management Founder Scott Krisiloff tells Yahoo Finance Live. "We're seeing a stronger economy this season."
Krisiloff cites the Fed as a driver behind this economy that may limit growth potential to the upside that interest rates don't seem to be going any higher.
RACHELLE AKUFFO: Earnings season is well underway.
The past few weeks have been inundated with numbers from banks, big tech, and a variety of other companies.
Wendy's, PENN Entertainment, and Wynn Resorts, along with Disney, of course, all reported earnings yesterday.
And the much anticipated big name retailers are going to start rolling out next week, starting with Home Depot on Tuesday.
Related Videos
But what can investors take away from results season and what insights can we garner about the state of the economy?
Well, let's bring in Avondale Asset Management founder and editor of "The Transcript" Scott Krisiloff to give us his insights into what we've seen so far.
Good to have you on the show here.
So talk about some of the key themes that have really stood out to you so far this earnings season?
SCOTT KRISILOFF: Yeah, I mean, I think recently we've seen a real rebound in the economy or stabilization in the economy, at least, alongside the stabilization that's been happening in capital markets which I think makes sense here.
So especially in the last week, we saw a commentary around that.
I think, at the same time, we saw a commentary about inflation starting to come down, really starting to, at least, get into the psychology of inflation coming down rather than being concerned about inflation persisting.
So I think we're seeing a stronger economy this earnings season.
RACHELLE AKUFFO: So let's break some of that down as we talk about economic stabilization, seeing inflation start to come down.
Still seeing consumers willing to spend that money on Beyonce and Taylor Swift tickets.
What are some of the things that you're seeing from different CEOs on these earnings calls as they really think about the state of the consumer?
SCOTT KRISILOFF: Yeah, I mean, I think the word of the last 18 months has been resilient to describe the consumer.
And it's still the case that people are describing the consumer as being resilient.
And I think, given what happened with interest rates rising, what the Fed has tried to do to the economy, I think everyone is still a little bit surprised that we haven't had a recession that people have expected.
But still the consumer is very resilient, continues to spend, continues to want to have the experiences that the consumer wants to have.
And balance sheets are healthy at the consumer level.
And so we're really seeing that continue in the economy.
RACHELLE AKUFFO: And we have seen you-- we've seen some optimism when you talk about some macroeconomic conditions coming on these calls.
Not always raising that guidance, but we do see analysts somewhat raising their price targets.
But we're not always necessarily seeing a lot of this guidance being raised as well.
Talk about that dynamic as we're in earnings season, especially.
SCOTT KRISILOFF: Yeah, I mean, I think really I would attribute that dynamic probably to the fact that we have this very large inflation that was coming through the economy that helped push top-line growth along with price increases.
And I think as we have basically seen that inflation come out of the economy, comps are going to start to get harder.
It's going to be a little bit harder to have growth.
But the flip side of that is the good news that interest rate increases don't necessarily need to increase, so the cost of capital doesn't necessarily need to go higher.
So even though the economy, I think, is stabilizing from being scared of a recession, it doesn't necessarily mean that we're ready to just be off to the races from a growth standpoint.
RACHELLE AKUFFO: And we're going to talk some of the big bellwethers so far this earnings season, obviously, just heard from Disney there.
A bit of a mixed picture there when it came to Disney, obviously, in the middle of their turnaround story.
But what have been the big bellwethers for you that you've been keeping track of?
SCOTT KRISILOFF: Yeah, I think, to me, some of the biggest companies that I've been looking at are in the freight and logistics space.
And so we had a company last week-- I can't recall who was saying that the freight recession is basically over here.
But it was an important quote to me to see the company talking about how for a long time.
There have been a big slowdown in the logistics market as supply chains have healed post-COVID and volumes have come down.
I think between them and also Amazon having a pretty strong quarter and talking about AWS starting to stabilize, those are two pieces of commentary that have really stood out to me this earnings season.
RACHELLE AKUFFO: And especially for this narrative that we're still hearing about rates being higher for longer.
And then when you look at especially Nvidia's performance and the sort of investments that companies are trying to make, what does that mean then for the rest of earnings season and some of the companies that we're going to hear from?
SCOTT KRISILOFF: Yeah, I mean, I think you guys were talking about it just as we were leading in that the retailer's coming up next week will be an important indicator on the health of the consumer.
It's obviously interesting retail has changed the dynamic of it over the last 5 or 10 years as we've gone more to an e-commerce basis.
And also consumers are just swinging back to more experiential spending instead of goods spending.
So retailers kind of are de-emphasized even in terms of the health of the consumer.
But still looking forward, I think AI and technology have still been such a driver of this market, capital markets at least.
Those still are carrying capital markets on their back.
So I actually am thinking as well just wondering, what's the next kind of growth wind, tailwind behind capital markets here?
What's the next exciting space to be investing in?
I don't have an answer to that quite yet.
But one of the things that I'm looking at is just as the Fed is likely to stop raising interest rates here or at least moving out duration and fixed income assets, maybe that's a place where there's some sort of catalyst, although not a lot of money to be made there probably.
RACHELLE AKUFFO: You need a lot of people looking for that next catalyst and, obviously, trying to take that cash off the sidelines but have that fear of missing out.
Always great to have you on, Scott Krisiloff, "The Transcript" editor and Avondale Asset Management founder.
