Goldman Sachs to investors: look out for these two warning signs as earnings season arrives

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Good morning.

It’s a grey Monday here in Rome, and investors seem in a bleh mood. They’re pressing pause on what’s so far been an impressive April stocks rally. The benchmark S&P 500 gained 2.7% last week as Treasury yields stayed relatively flat. Alas, futures point to a weak open today.

Meanwhile, there’s a lot on the calendar this week, including the first big batch of earnings calls. In today’s essay, I spell out what the Wall Street pros are looking for in the avalanche of data to come… Scroll down from there for a new Postscript entry.

But first…let’s see what’s moving markets.

Markets update


  • The major Asia indexes are sharply lower in afternoon trading with the Shanghai Composite down 1.1%.
  • A recent sell-off in Chinese stocks has dented optimism for Asian equities across the board. The MSCI Asia Pacific index came into today trading up 3.1% for the year, trailing stocks in much of the rest of the world.
  • There are no such worries for Alibaba today. The tech giant jumped 7.5% in Hong Kong on Monday despite getting hit with a $2.8 billion antitrust fine from Chinese authorities.


  • The European bourses were mixed with the Stoxx Europe 600 off 0.1% at the open. Travel stocks, last week’s big winner, were taking it on the chin.
  • Shops and pubs (those with outside boozing space, anyhow) in England are set to reopen today, ending a near 100-day COVID-enforced shutdown. The pound sterling was trading up a tick after a rough week, while London’s FTSE was lower at the open.


  • U.S. futures are down, but are trading off their lows. That’s after the Dow and S&P closed at fresh records on Friday.
  • Shares in Microsoft were up nearly 0.2% in premarket trading as the tech giant is reportedly on the verge of buying healthcare A.I. specialist Nuance Communications in a deal valued at $16 billion.
  • It’s a busy week for earnings calls and AGMs. On the calendar are: JPMorgan Chase, Wells Fargo and Goldman Sachs (all on Wednesday) and PepsiCo, BlackRock and Citigroup (on Thursday).


  • Gold is down, trading around $1,740/ounce.
  • The dollar is flat.
  • Crude is up with Brent trading above $63/barrel.
  • Bitcoin is trading higher, topping $60,000.


What to watch this quarter

So far in 2021, three issues have dominated the markets chatter. They include: interest rates, inflation and…care to guess the third?

Yep, taxes.

Well, a fourth horseman is about to enter the fray: earnings.

As I previewed in this space a week ago, earnings season is upon us in a big way, starting tomorrow. According to Goldman Sachs, 77% of S&P 500 firms report between April 19 and May 7. This week, we have the big banks and Fortune 500 mainstays PepsiCo and Delta Air Lines. Pharma and tech follow after this week.

It should be a knock-out quarter for earnings. According to FactSet’s April 9 report, the S&P is likely to report the highest earnings growth in more than a decade, a sign of strong economic growth (and a reminder how bad things were a year ago).

Meanwhile, Wall Street firms continue to tweak their models, but so far they all agree: this will be a quarter for the record books. According to Goldman, consumer discretionary and financials will lead the way.

That’s the good news. The glass-half-empty scenario is this: investors haven’t been all that impressed with performance metrics lately, a trend that dates back a good year.

In Q4, for example, a stellar 62% of S&P firms reported EPS beats, Goldman says. “However,” the firm adds, “the median stock beating estimates actually lagged the index by 85 bp on the subsequent day.” To put that in layperson’s terms: the stocks didn’t move all that much, if at all, the day after a big earnings beat. Tough crowd.

There’s a perfectly reasonable explanation for that. Investors are looking forward, not backwards. The most important thing is what will happen next, not what just happened.

With that in mind, Goldman suggests we should be looking for these two things from management on upcoming earnings calls: the margin outlook (how macro factors such as pricing and cost pressures will impact the bottom line) and “the potential negative EPS impact if the new tax reform proposal by the Biden administration is adopted.”

Both indicators are forward-looking, and both data points tell us how to think about what’s expected to be a huge, but uneven, period of economic growth.

If Goldman’s theory is correct, these are the matters that will move stocks in the coming days.



Thanks to the most expensive alarm clock on earth—our puppy—the weekends start bright and early at Casa Warner. I’ve typically walked the dog, picked up cornetti for the girls at the bar, made a pot of caffè mocha for me and my wife, blended up a big pitcher of fruity spremuta for all and sundry, responded to the occasional reader email (I’m always thinking of you), and grumbled about the latest stumble in the Draghi government or the Mets bullpen—all by 8 a.m. 

A half-hour later, I’m out the door to buy supplies. First stop: fishmonger and/or butcher. Then I hoof it to the pasta fresca shop, bakery and fruit-and-veg stand. They’re all in the neighborhood. By the time I get back from my appointed rounds, the girls are doing homework, and my wife is multi-tasking, wearing one or all of her CEO/tutor/nurse/fundraiser/justice-of-the-peace caps.

That often means I’m in charge of lunch. Because these are Italian kids I cannot slap together peanut butter and jelly sandwiches, and call it a day. They expect the whole primo-secondo-dolce trifecta. For example, this weekend I made lasagna as a primo (thank you Renzo e Lucia for your prepared pasta wonders) and a lovely sea bass on a bed of roasted potatoes for secondo. On Sunday, it was a spinach+ricotta ravioli and roast chicken with roasted potatoes. (An astute reader may be able to detect the Irish in me.)

These dishes are mainstays in our house. The kids gobble them up. 

My wife though isn’t impressed. 

“It’s a pandemic,” she’s reminded me more than once. “You really ought to learn to cook.”

Before I can defend my culinary honor, she adds: “something new.”

There are a lot of things I ought to accomplish in a pandemic. I ought to learn French, for example, or the art of hostage negotiating. I should finish that screenplay. I should teach the dog to play poker, or at least repair the furniture she’s gnawed.

That said, learning to cook a new dish or two sounds like the kind of thing an old dog like me can pick up fairly quickly.

You’re on, I informed her.

When the kids heard I’d agreed to a new challenge, they wanted in.

They chose the first dish.

Which will be… chicken curry. 

I looked up the recipe in Giallo Zafferano, and ordered a bunch of spices. So, I’m set from that standpoint.

But here’s my question to you, dear readers. I know a fair number of you hail from lovely India. (In all my travels, I’ve never eaten better in my life than during my jaunt through Andhra Pradesh.) Any suggestions on how I should approach such a blessed dish? Any tips for me?

My inbox is open.

Bernhard Warner

As always, you can write to or reply to this email with suggestions and feedback.

Today's reads

The land of unicorns. India crowned last week a staggering six new unicorns—shorthand for startups with valuations above $1 billion—as the India tech boom kicks into another gear. In 2020, there were all of seven Indian firms to achieve unicorn status.

Jail cell admission. If you're a fan of the true crime genre, here's a book recommendation for you. Fortune's Geoff Colvin reviews Madoff Talks, a new book that comes out on April 27 about Wall Street's gentleman Ponzi schemer, Bernie Madoff. It opens with a great scene, as told by Madoff's longtime attorney. 

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