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- Bellwether stocks like UPS can be a good guide to the health of the overall economy and consumer trends
- The tech sector makes up 31% of the US market but has contributed to 43% of the returns of the index1
- Some of our largest holdings in TSMC, Meta and Microsoft have surpassed analyst expectations this earnings season and enjoyed a significant uplift in share price
Earnings season is a period in which publicly traded companies release their quarterly financial results. It’s a key time for investors as it provides insight into how companies are performing, but also the wider economy. Whilst public companies all over the globe have to report their earnings, earnings season tends to refer to the US stock market. It happens four times a year, running for about a month after the end of each quarter.
The season unofficially starts with the big banks (JPMorgan, Citibank, Wells Fargo) and ends with the big retailers (Target, Walmart, Home Depot). The Q2 earnings season is happening at the moment and spans July and August – JPMorgan’s results were announced on July 15, and Walmart’s results are on August 21.
The Bellwether StocksBellwether stocks is the nickname given to companies who are good indicators of the overall economy. Good examples are:
- UPS – a global package delivery company. Quite simply, when the economy is healthy and growing, consumers are ordering more goods and businesses are shipping more goods. It is therefore a good indicator for economic activity but also global trade as UPS operates internationally too. Interestingly, UPS’ Q2 revenue came in slightly ahead of expectations this week but their share price is down over 15% since Monday. This is because they refused to offer an update on revenue expectations for the rest of the year citing ‘macro-economic uncertainty’.2
- Caterpillar – a farm and construction machinery manufacturer. It is a strong indicator of the construction industry which is inextricably linked to the wider economy. When CAT sees strong sales, the economy is typically expanding, whereas when demand for heavy equipment falls, the economy is typically in a slowdown. CAT announces its results next week on 05 August so is something we will have a keen eye on.
- PayPal – an online payment system. This is much the same as UPS, in that PayPal’s results reflect broader trends in e-commerce and consumer spending. PayPal beat earnings and revenue forecasts this week but the share price, like UPS’, is down double digits. This is based on tariff uncertainty driving slower growth in their branded checkout.
