Corporate America Has Never Been More Confident, Even As Trump's Ever-evolving Policies Make Planning Almost Impossible

Michael M. Santiago/Getty Images

• Business leaders are overwhelmingly positive about the year ahead.
• Fourth-quarter earnings have been even stronger than anticipated.
• Here's why companies are so optimistic, despite uncertainty about US political policies.

Big businesses sound increasingly confident about the future under President Donald Trump, even though no one knows exactly what it will look like.

Companies are as upbeat this quarter as they've ever been, Bank of America researchers recently said. The firm scanned fourth-quarter earnings call transcripts for negative words and found that their commentary is more positive than at any point in at least the last two decades.

Bank of America

Self-proclaimed optimism on earnings calls also surged to the highest level in 20 years, other than the pandemic recovery. Fewer companies mentioned weaker demand and more than ever spoke about a trough or bottoming in their businesses.

Bank of America

All of this sentiment has historically been highly correlated with corporate earnings growth, which already looks robust.

Bank of America

Profits are up 12% so far this quarter compared to late 2023, which would easily top the consensus estimates for a high-single-digit gain. Notably, sales are only up by 5%, which suggests that companies are finding ways to grow their profit margins.

Goldman Sachs

But there are no guarantees in markets — especially not in this constantly changing backdrop.

Uncertainty abounds under Trump, and companies are unconcerned

Both critics and allies of former President Joe Biden may agree that he was rather predictable. His successor is anything but, though the uncertainty he creates is a feature — not a bug.

With Trump in office, business leaders must contend with constantly shifting trade policies, a lack of clarity about the corporate tax rate, and unprecedented cuts to government agencies, which could shake up the job market. Trump keeps moving the goalposts, specifically on tariffs, so that he can maximize his leverage and log political wins.

It's anyone's guess as to what the coming months hold. The US could play hardball on tariffs and get embroiled in costly trade wars, or reach mutually beneficial trade deals. Corporate tax cuts could get extended or expire, and the job market could stay on solid ground or weaken.

Despite this volatile setup, veteran market strategist Steve Sosnick of Interactive Brokers sees why companies are upbeat. The economy seems far from a recession, with steady GDP growth, persistent but under-control inflation, and a 4% unemployment rate.

"The ingredients are there for optimism," Sosnick said in a recent interview. "Especially if some of these companies believe there's some tax or tariff policy that could benefit them."

Some CEOs surely see the change in administrations as another catalyst. Trump's win last fall led to a postelection pop in markets that carried on for about a month as investors prepared for lower corporate taxes and deregulations. And while most economists dislike the tariffs that Trump campaigned on, Sosnick noted that import taxes could give a substantial edge to US-based companies that already sell most of their goods at home.

"Tariffs create winners and losers," Sosnick said. "It's easy to come up with circumstances where protectionism would help other companies, particularly those that are domestically focused."

The honeymoon between Wall Street and Trump didn't last forever. Stocks stalled and reversed as fears about tariffs, elevated inflation, and higher-for-longer interest rates became top of mind.

But US equities found their footing again in mid-January and are retesting record highs, thanks in part to encouraging fourth-quarter results. Corporate earnings calls were surprisingly upbeat about the year ahead considering how much is up in the air — almost enough to make one wonder whether business leaders feel pressure to extol the virtues of Trump's economy.

Instead of focusing on what companies say or do, Sosnick said investors would be wise to watch where the proverbial hockey puck is headed by studying their earnings forecasts.

"Earnings season, to me, is less about the actual earnings than it is about the guidance," Sosnick said. "In general, nobody is saying anything particularly dire about the future."