During every quarterly corporate earnings season, the senior management of most companies will host an earnings call following the release of their latest report to discuss the company’s financial results with analysts, investors, and the media. During these conference calls many officials will comment on subjects that they believe had an impact on their earnings and revenues in the previous quarter and that will have an impact on future growth. A great deal of time and computer code has been devoted to parsing the prose in the transcripts of these calls in the hope of finding topics and trends that could influence future stock performance.
A popular culprit for the recent stingy market response to a relatively positive corporate earnings season has been concern about disruptions in international trade due to increased tariffs. Data provider FactSet has compiled a tally of the tariff talk during the last few quarters of corporate earnings calls, which is charted above. While mentions of tariffs skyrocketed in 2018, there has been a dip in discussions during this most recent quarter (Q3 2018). Is corporate concern about tariffs diminishing? Well, a look at a breakdown of the FactSet data by industrial sector does show that the worry has become more concentrated. For while the Consumer Staples, Materials, Health Care, Real Estate, Energy, and Financials sectors all saw less talk about tariffs, two significant sectors, Information Technology and Consumer Discretionary, registered significant increases in the citation of “tariffs” as an impediment to future growth this quarter. That is why many market analysts are eager to see what progress will occur in U.S.-China trade relations during the G20 trade meeting in Argentina at the end of this month.