In this month's issue:
What Is Corporate America Saying?
Mark Luschini
Every three months, publicly traded companies publish their results, with a few announcing just days after the quarter’s close and most all within two months. In these releases, management will speak to the company’s preceding quarter’s revenues, earnings, and other financial metrics and, most often, lend color on general levels of activity within their company and the industry at large. Many will also use the occasion to make forward-looking statements, often referred to as “guidance,” about how they foresee the next few quarters or even year unfolding.
The analytical community tunes in to hear these quarterly earnings calls or read the transcripts posted, to help reinforce or establish new projections about a company’s prospects. Some companies are viewed as bellwethers for domestic activity, like big-box retailers, while others serve as more of a read on global activity, such as large industrials. Banks are very important and of interest to everyone because they provide unique insights into the economy and consumers, since their credit facilities, deposits, and loan performance reflect the pulse of the economy. Consequently, discussions among bank executives about their outlook are often regarded as “must-see TV” for a broad audience of market participants. Collectively, these quarterly presentations help to frame a view of the macroeconomic conditions we see today and those we might expect going forward. Listening to the aforementioned categories of companies outline their business activity is almost always helpful, but it is particularly crucial now, given the elevated level of trade and economic uncertainty.
Trade Balance, Federal Deficit, and Interest Rates
Guy LeBas
The trade balance—the net of United States imports from and exports to the rest of the world—launched onto the stage in 2025 as a matter of public and political debate. Government statistics agencies have been collecting monthly data on the topic since 1992. For each month in that entire history, through boom and recession and pandemic, the trade balance has been negative. The U.S. has imported more than it has exported for all of contemporary history. While new policies might marginally change the size of the trade deficit, they will not turn it positive in the foreseeable future.
“Balance of payments” is an immutable accounting identity with three components: the trade balance, capital flows, and financial flows. These three things measure all the dollars coming in and leaving the U.S., and they definitionally add up to zero. If one is negative, the others must be positive to add up to zero. For our purposes, that means if the trade balance remains negative and dollars flow away from the U.S., there are equal and opposite dollar flows back into the U.S. in terms of physical or financial investment. Another way to think about it is that when the U.S. net imports goods and services, we net export U.S. dollars, and those dollars get recycled back into the U.S. economy and financial markets.
How Much Is a Picture Worth?
Gregory M. Drahuschak
It is said that a picture is worth a thousand words. However, in a stock reference, a picture can be worth millions.
The stock market grinds out billions of statistics every day, all of which can be useful in divining potential movement. Research analysts wade through mountains of data from income and balance sheets in their effort to find ideas worthy of committing potentially substantial sums of money.
There are others, however, whose view of an investment approach centers on a simple snapshot of a market index or an individual stock.
This last group, of course, is typically referred to as technicians, whose methods often are viewed with disdain by traditional research analysts. What some people might call a narrow-minded and overly simplistic approach, in fact, recognizes a most basic instinct that what we see provides the basis for rationally determining what we should do.
You can read the full Investment Perspectives here.
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