Key Insights:

• The number of S&P 500 companies citing ‘recession’ in their second-quarter earnings calls has plummeted from 124 to just 16.
• In spite of concerns regarding the impact of President Trump’s tariffs, markets have largely overlooked recession fears, with the S&P 500 up 28% since April.
• Over 80% of S&P 500 firms exceeded earnings forecasts in the second quarter, achieving their best performance in four years.

Corporate America seems to have shed its recession worries as swiftly as they appeared earlier this year. The S&P 500 companies’ mentions of the word ‘recession’ during earnings calls have drastically reduced, now only mentioned 16 times—down from 124 in the prior quarter, based on data provided by FactSet. A recession, by definition, involves two consecutive quarters of negative economic growth evaluated by the gross domestic product.

Corporate America dismisses recession fears. Corporate America dismisses recession fears. (ZargonDesign)

The current state of the economy suggests a starkly contrasting narrative: corporate leaders may anticipate that elevated tariffs from the Trump administration will be negotiated down and not persist long as an economic strain. Following the release of substantial tariffs, the average U.S. tariff rate has surged to 20.1%, marking the highest sustained levels since the early 1900s, as noted by the World Trade Organization (WTO) and the International Monetary Fund. It appears that traders are shifting their focus onto solid corporate earnings and the anticipated economic recovery following the temporary economic slowdown.

In conclusion, the corporate earnings season has exceeded expectations with over 80% of S&P 500 companies beating both earnings and revenue forecasts, the strongest showing in four years.