Q1 earnings season kicked off this morning with 5 of the biggest financials reporting, Bank of New York Mellon (NYSE: BK ), Blackrock (NYSE: BLK ), JPMorgan Chase & Co (NYSE: JPM ), Morgan Stanley (NYSE: MS ), & Wells Fargo & Company (NYSE: WFC ).
All 5 beat EPS estimates with MS beating by the widest margin. While 3 of the 5 beat sales estimates, with MS beating by the widest margin there as well.

All trade at forward PE’s below the market average (currently 18.9x), but part of the reason is that all have growth rates below the market average (currently 12.2%).

PEG ratios currently favor BK and WFC, but JPM and BLK are probably going to be the better long term options.

So far the earnings calls are a little somber, reiterating the uncertain environment we face. JPM CEO Jamie Dimon expects earnings estimates to fall as more companies are forced to pull their forward guidance.

This is unfortunate, because we already trade at 18.9x forward estimates. Roughly 11% above the long term average. And its possible those estimates will have to be reduced by some 10% or more.

It’s good to see stocks rise again, but the effective tariff rate only came down from 27% to 24% (compared to the 2% rate to start the year), and its probably back up again after the latest round of retaliatory increases.

It’s hard to believe we can maintain a 19x+ multiple against that backdrop. Which brings me to consumer sentiment and inflation expectations.

The preliminary reading for consumer sentiment in April could not have been worse.

The index fell another 11% to a reading of 50.8 (versus estimates of 54.0), almost back to the all time low of 50.0 back in June 2022. And the 4th consecutive monthly decline.

This is the 1st time the consumer sentiment index has fallen 10%+ in 3 consecutive months since the University of Michigan began tracking the data back in 1978.

“This decline was, like the last month’s, pervasive and unanimous across age, income, education, geographic region, and political affiliation.”

To add salt on the wound, inflation expectations spiked to 6.7%. Levels not even seen during the post pandemic inflation spike in 2022.

“The highest reading since 1981 and marking four consecutive months of unusually large increases of 0.5 percentage points or more. This month’s rise was seen across all three political affiliations. Long-run inflation expectations climbed from 4.1% in March to 4.4% in April, reflecting a particularly large jump among independents.”