Hi, Miriam. Hi, Tellus. So we've got an episode about earnings. Earnings are happening this quarter, which should not be news to people. They happen like clockwork four times a year every quarter. So on the one hand, you're like, why are these guys talking about earnings? What are we really going to learn? But I think this is actually a really, really interesting quarter to look at this because earnings growth has been extraordinary. outside of periods where we are recovering from something horrible happening. And so earnings growth is really high because we're coming out of a low base. Talking about COVID, talking about the 2008 financial crisis. Earnings are growing at a level or expected to grow at a level that you associate with those periods, but we're not coming out of some immediate crisis. So what's going on? Are companies really just becoming dramatically more profitable right before our eyes? Or are, and here's a term that people have started using, are we in an earnings bubble? We're used to talking about bubbles being like the prices are too high. Maybe the earnings are too high. And we're going to bring back a guest that we've had before in this show, and she was terrific, Christine Short. She's the head of research at Wall Street Horizon, which is a TMX company. And we're going to talk through some of the question marks around the corporate earnings trend that has really been a huge driver of the market. But before we get to that, let's talk about a couple of things that are really on our, specifically on our radar that I think the market will be very reactive to this upcoming week on the earnings calendar. And one of those I think has got to be TSMC, the Taiwan semiconductor giant. Yeah, everyone is, as we've talked about, obsessed with semiconductors right now. We're seeing a huge inflection in their profitability. They're all like reporting massive increases in profitability because they have so much pricing power right now because there's a shortage of these semiconductors and they're all needed to power the AI revolution. There was an incredible chart from Bank of America that that talked about. I saw that. Yes. What did they call it? Called it a generational transfer. We usually talk about the generational wealth transfer of like boomers to to millennials or whatever. But this was a generational wealth transfer or cash flow transfer from hyperscaler companies. That is your metas and alphabets and Amazons of the world to semiconductor companies. And so basically, you know, they're spending all their money buying chips from these guys. And so you see this chart where it's like one line is like free cash flow like this and the other line is free cash flow like that. Yeah. For those of you who can't see TELUS's gestures, one is pointing way up in the air and the other one's pointing straight down. But prior to that, of course, the situation had been reversed, right? Because the hyperscalers were generating all this free cash flow and the semiconductor manufacturers, as we've talked about, had been in a much more volatile situation where they were sort of at, you know, at, you know, operating at the behest of the hyperscalers as opposed to being the ones with the pricing power. Well, although as the market is a forward-looking mechanism, everyone knows this is happening. But where it's headed from here is, I think, a great uncertainty at this point. Because just watching the price action lately in semiconductors has been a bit wild. Because for all that we know, the incredible business they're doing. So Samsung recently reported earnings. And they were terrific. They were talking about record operating earnings and things like that. Well, they didn't report earnings. It was like a preview. Preliminary earnings. Preliminary second quarter earnings. That's something that Korean companies do, which I learned about, is they provide preliminary earnings and then they provided their audit results later in the quarter. Now you know. Yeah. And so – but the market was like – the stock went down a ton. It was like an 1,800 percent increase in profits, I think. Yeah, it was met with like a 7 or 8 percent decline in the share price. And the Korean market in general, the South Korean market, if you think the U.S. market has been AI driven, you should check out the COSPI index. And that fell enough at one point last week that it was dragged into a bear market, technically speaking. But yet profits are at all time highs. Why do you think that is? Well, we were debating this, right? You were kind of of the school of thought, like, look, like what comes up must come down, right? Well, I think that, you know, when you have profits rise this much, I think there's this sense that they can't keep going forever. Right. I mean, usually this kind of a profit increase would be spread out over many years if you've seen it, you know, historically for other companies. And so to have it go up so quickly, I think it makes people nervous. And it means that, you know, someone is paying for these profits. The profits, as we've talked about, are being paid by the hyperscalers like it's coming out of their cash flow. And there is a limit to how high prices can go because there's a price at which they won't be able to pay it anymore. Well, and that was on full display when Amazon came to the market with a bond offering last week. And it was like only so-so received by the market, I think, because people are starting to really wonder. And viewers of this show certainly know that the free cash flow, the actual dollars that these hyperscaler companies have coming in, are being sent back out the door as fast as they come in. And there's a real question mark of just how long can they sustain this level of investment. There's one other thing that I think is on the market's mind, and it's a story I've been following for a couple of months, and I'm far from an expert in this, but I think it's very interesting and makes sense if you think about the laws of supply and demand, So the world of memory is dominated by a handful of companies. There aren't that many people who make the DRAM and other chips that are needed in all these applications. And China has not really been a big participant in that market historically for various reasons, including export controls and things like that. Governments have big interest in this stuff. But there is an increasing belief that like maybe, you know, the Chinese companies that produce these types of chips are going to ramp up and start to bring their own stuff to market. And so presumably at a lower cost, presumably at a lower cost. And so I think that's also on the market's mind increasingly of, all right, if there's so much demand for these things, someone's going to come in to produce. Something's got to give. Exactly. Which makes sense. Yeah. Which makes sense. So maybe what we're seeing now is the market, you know, I know people like to think, oh, is there bubbles that are going to burst? You know, it's not always so clean. And what we might just be seeing right now is just some of this being priced in kind of in fits and starts. Profit taking, perhaps, as the analysts love to call it. Well, profit taking, but also, but you take profits when you think, you know what, I don't see a clear path up from here. And so maybe that's just kind of where the market's head is at at the moment. Yeah. I mean, if there's another driver that becomes apparent through these earnings, there could be another leg of growth. But I think people are kind of saying, I don't see where the next leg comes from yet. And another group of companies that will start reporting earnings this upcoming week are, and as you'll hear about shortly, expectations are very high for pretty much every type of company. Every sector. Every sector except for one, and that's healthcare. And so we're going to get earnings reports from a couple of companies including J&J, Johnson & Johnson, United Health Group, Abbott. And the healthcare sector, according to FACSA, is expected to report the largest decline in earnings in the second quarter year over year. I was kind of confused because I thought health care was like the stalwart of this economy. Yeah, GLP ones and all that. Right, exactly. It's something that we always need to pay for. So what do you think might be going on? Well, some of it I think is technical. We actually checked in with David Wehner, who if the audience doesn't know, is Heard on the Streets, ace health care writer. You should read everything David writes. He was explaining that some of it is related to just like one large company, actually Gilead, a big biopharmaceutical company. They're taking some accounting adjustments related to M&A that they've done. And that actually just might be – It's just a one-time charge. It's a one-time charge. It's not really related to like what you think of as the core business drivers. And that might be enough to kind of be changing the trajectory of the quarterly results for biotech and therefore overall for health care. So maybe we'll learn something more about health care this quarter. But the sector that I'm really looking forward to for this coming week is banks. Yeah, here's the thing about banks. Banks are often talked about as like an economic bellwether because, you know, they lend everybody. Everybody's credit card comes from a big bank. And we'll hear this upcoming week from JPMorgan Chase and Bank of America and Citigroup and all the usual suspects. But I don't think that that's going to be what's really the big driver for banks this quarter. I think it's going to be on the Wall Street trading side of the business. And I think all the things we've talked about on this show where there's a lot of borrowing happening. You heard about you know more AI bonds coming There are big IPOs happening the SpaceX IPO Margin lending is at an all high You heard everything about what going on in private credit and how they borrow all this money That's all very lucrative for banks. All that stuff accrues to the Wall Street business at banks. And so that's the business I think we're really going to be focused on. And actually, that's what we talk about with Christine as we kind of preview what we might hear from bank earnings. And Christine will take us through really all the sectors, but also talk about some of the things that we've been worried about, which is, you know, how real are all these giant kind of earnings that we're seeing? What are some of the maybe one-offs or things that are a little elusive, illusory, that have been driving this big earnings boom? And is it an earnings bubble? We're going to get into that after the break with Christine Short. Well, welcome back. So earnings season is about to kick off. We've got J.P. Morgan and the big banks leading things off this coming week. And I think it's fair to say that the market is exuberant about the upcoming season. Expectations are sky high. Christine, how high are expectations and why are they so high? First of all, thank you both for having me back. And it's a great question. You've set the stage nicely. Facts that right now, their consensus estimate for S&P 500 EPS growth is 23.3%. That's a lot. That's a lot. That's July 2nd. And by the way, just to clarify, that's earnings per share year over year. Year over year, yes. And it would be the second consecutive quarter of 20-plus growth. If you recall, we ended Q1 with 27.7% growth. We started the season with 13%. So we more than doubled that over the course of those reports, right? And it would also be the seventh consecutive quarter of double-digit growth. So this is really driven by almost all the sectors. 10 of the 11, with the exception of health care, are expecting growth. Revenues aren't too shabby either. 12.2% on top-line growth. And that's driven by all 11 sectors are expecting positive growth. So overall, like you said, expected to be a very robust season. I think one of the most interesting data points going into this quarter is how much analysts have ratcheted up those estimates by 3.4%. As anyone that follows earnings knows, that's pretty rare, right? Usually analysts ratchet down based on company guidance, which always tends to be very conservative. That's the game, right? You lower the bar so that it's easier to jump over. Absolutely. So this is the most analysts have ratcheted up since Q1 2021. So five years. What's driving this? I mean, are they setting the market up for disappointment? Well, OK, what's driving it? Companies are issuing higher guidance, right? So facts that tracks guidance for Q2 of the S&P 500, 111 companies have given guidance. 63 have given positive guidance, 48 have given negative guidance. And this lines right up with that 3.4% increase we're seeing with analysts because those two numbers, the 63 giving positive guidance, that's the most positive guides we've seen in five years. And then the 48 on negative guidance, that's the least amount of negative guidance we've seen in about five years as well. So then let's back out a little further. What are companies seeing? Why are they being so positive coming into this season? Well, look, I think a lot of it has to do with the efficiencies around AI. I think a lot of this is operational resilience as opposed to revenue growth is still very robust at 12 percent. But they're finding ways to manage the supply chain perfectly, manage inventory, cut unneeded costs, more or less cut the fat, right? There has been a lot of overhiring during COVID that a lot of these companies have taken care of. And so it's an efficiency game. And I think what these companies are seeing is AI is just going to continue to drive that for this year. We see analysts expecting calendar year 2026 earnings growth at 24%. And so for a yearly growth number, that's quite exquisite, right? So a lot of these operational resiliency metrics that you've referenced, I just wonder how sustainable can those things be? Like once you've cut the fat. Is there more fat to cut? How lean can you be? And is the market getting too excited about that as a sustainable method of earnings growth? I absolutely agree. How many quarters can you continue to cut? I think there's another theory and it comes down to accounting. Spencer Jacob wrote about this. Our great columnist here at the Wall Street Journal. Yes. We know companies when they do their adjusted earnings, they're using all sorts of one-time charges that we see show up again next quarter. All those shenanigans that we kind of have to look through. Accounting magic. You know, it's not it's it's fine. It's it's legal. It's up to standard. But it's is it really a one time charge? No, sometimes we see those happening quarter and quarter and it does pad the bottom line. Right. So two kind of things out there for debate right now. One is that many of these mega tech companies that have large stakes in these unlisted AI unicorns such as Open AI, Anthropic, they have operating income that is coming from those unlisted companies raising at higher valuations. And I think in Spencer's article, he interviewed a professor, Professor Wang from the University of Florida that called it like the circular evaluation loop or something, right? And so better than expected earnings gets people excited about these unlisted companies, right? And then it continues to feed itself. is this being counted properly? Should it be more of a one-time charge? Should there be a depreciation attached onto it? That's what we don't know, right? And so that's kind of one theory about how some of these earnings might look a little inflated. The second, and I think you just before the interview, we spoke about your colleague John Weil, and he wrote about the depreciation of fixed assets. And, you know, Michael Burry was very vocal about this a few months ago about how are we depreciating these AI chips? It's sort of left up to management teams. We don't quite know the useful life of some of these new fixed assets that are being created on these chips. And it seems like some companies are moving the bar a little. Meta, for example, they had some of their servers and other fixed assets with a useful asset life or a useful life of about five years. They just ticked it up to 5.5. And then you saw a depreciation expense of $2.3 billion knocked off of that. So that helps the bottom line, right? But I want to also highlight the significance of this depreciation phenomenon you just referred to, which is that companies today are buying these things. That shows up as immediate revenue for someone like NVIDIA. They sold a chip to you. NVIDIA gets the money. Boom. That's revenue that translates into profit for them. For the company who bought it, though, that does not show up as a expense in their net income right away because, like you said, they're treating it like a capital asset, right? Which makes sense. You're not just like spending money. You didn't just, you know, buy a coffee, drink it, and you move on. No, you bought something that now is an asset. You have this chip. But they will have to depreciate that over time, meaning that bleeds out of their earnings over what is an unclear time horizon. And so I think what John Weil and others have asked is like, where's the comeuppance? Right. And like you said, it breaks down those depreciation expenses. You break it down over time. And if you dictate that this is a five year as a useful life of five years and that it ends up not being that, you know, where does that leave you? So you're absolutely right that we're still sort of figuring some of this out. And there are questions out there about whether it's being done correctly and whether that's sort of creating this bubble that we're seeing in earnings. Though, as John also pointed out, and I know we on the show have talked a lot about cash flow, these things do show up in free cash flow. So you can see it, just not in that market P.E. ratio. Not in the EPS earnings per share that everybody looks at. And so this brings me to something, Christine, I wanted to ask you about, which is that if you look at the market's valuation right now. If you look at the P.E. ratio of the stock market, you look at numbers that Yardini research has compiled and the market looks a little cheap at the moment, right? Like as these earnings have grown, prices have risen, but not as quickly. And so, you know, on a forward basis, the MAG 7 are now trading at around 24x, according to Yardini's latest numbers. You know, So in the recent past, they've been trading at 30x. Right. Oh, are these a discount or is the market kind of worried about this phenomenon? Right. What do you think is the right way to look at it? Yeah, I think, look, the market's taking a bit of a breather. We were all sort of shocked with the CapEx numbers that were offered up by the hyperscalers last year. And I think what we've seen over the last couple of reporting seasons is investors are in there. Show me the money stage. OK, we've made the investments. They were past the AI hype. Now we want some sort of proof that there are returns on these investments Is it showing up in cloud revenue Is it showing up in software subscriptions We want to see the proof is in the pudding right? And so I do think investors, as we've seen over the last couple quarters, are judging these companies even harder. It used to be like in 2024, if you mentioned AI investment, it was like stock pops, you know, it's like great. Like, and if you didn't have an AI strategy, you'd sell your stock go the opposite way, right? 2025 was a bit of a reckoning towards the end of the year where it's like, all right, now we want to see where we keep announcing more and more AI infrastructure investments. When are we going to see something here? You know, I know we're only in like the second, third inning of this whole AI cycle, but I think investors are looking for something tangible to see that this investment is worth it. So is this a good thing or a bad thing for investors? Like, is it, what kind of spin would you put on it? Yeah, you know, if you look at forward-looking estimates, and you believe those. Like I said, 2026, we're looking at 24%. That's kind of the peak. They start to fall off. They're still very good. 2027, the estimates I'm seeing are anywhere between 12% and 16%. That's for S&P 500 earnings per share growth for the calendar year. That's as we kind of settle into this AI structure or a cycle and infrastructure build out. 2028, they dip a bit to 10% to 12%. And by 2029, that's really the year and then heading into the 2030s, which feels too far to be thinking about. But they sort of level off. Yeah, when is that? That sounds so far in the future. But they kind of seem to settle down into the high single digits. And that's when this whole cycle has realized itself. And given, you know, with the absence of any sort of black swan events, that's where analysts are thinking we're going to settle high single digits. So still great numbers. But I think we're at the peakiest point this year as far as earnings growth is considered. How does this compare to the past? Have we seen this before? This, yeah, it sounds like, wow, this is incredible. But, you know, I looked back to 2000 and it's everything that you would expect, right? After every major crisis, you're going to see earnings run up because your comparisons become easier. So after the dot-com bust. Yep, I looked after, you know, 2001 to 2002. At the end of 2002, you start to see a run up. After that crisis settles down. We had 18 quarters of double-digit earnings growth after the dot-com crisis. And then you start to see that sort of settle down in Q4 2006. So, of course, we're preparing now for the next financial crisis. But this is the first time I've seen us have so many back-to-back quarters of double-digit growth. That wasn't because of, you know, really poor numbers in the year-ago quarter. So, it is different in that sense. But as far as runs go, it's not the longest, you know, run of double-digit growth we've seen. I think it's notable to call out that this isn't a post-crisis recovery period, right? We're not benefiting from some favorable comparison to a year ago. Things were pretty good a year ago, too. But not only that, we're also in a market, as we've talked about a lot on this show, where the consumer isn't doing very well. Like, real wages are not keeping up, you know, and people are struggling who do not have exposure to the booming stock market. So typically our economy is driven by the consumer, but in this case, it seems like something else is driving it. But Christine, you did mention, though, the breadth. Like you said, only one sector was expected to have negative earnings growth, health care. So that means that consumer companies are expected to see positive earnings growth. Yes, but this is one thing I ponder a lot because, as you said, the consumer is 70% of GDP in the US. They are not fully engaged now, Yet we continue to see this resilient consumer kind of pulled along by a higher income cohort. The luxury consumer is dragging along the rest of the consumers. Absolutely. And so as long as I've been following the story really out of COVID, I'm like, this can't last. And it continues to last, right? And so it's like, when will the other shoe drop? Because you can't have the entire U.S. consumer driven by one income cohort, right? The overall health of the consumer is important. Something I think that is very telling that just happened is you saw Walmart drop prices on thousands of products. They obviously cater to a lower to middle income consumer, but they've started to get the higher income consumer trading down. Then we saw another story on jet fuel costs. They've plunged 40 percent since April. Are airlines lowering prices of airfare? They are not because the demand is so high. Who is flying? It's a more middle income, higher income consumer. And so they're not lowering prices because they don't have to. The travel demand is still there. So I just thought, wow, what a juxtaposition and what an example of the bifurcation we're seeing. The upper part of that K-shaped economy is really so strong. Right. And how long can that last? I don't know. I've always been taught that you need, you know, the consumer needs to be healthy to continue carrying this thing. Right. What it comes down to is jobs. Right. And those numbers have been pretty healthy. Unemployment still historically pretty low. And that's when people start to hold back is when they feel that I could lose my job or if I do lose my job, I won't be able to get another one. I don't know that people are quite feeling that yet. Right. But the psyche is out there. We hear about AI taking our jobs. That's certainly been top of mind. You mentioned one time factors and whether or not the market does a good job accounting for those things. And a couple that you've mentioned just in our conversations in the past that I think are relevant right now are the tariff rebates, the reversal of the tariff costs of last year, and then also some of the other benefits that have come to consumers and companies through tax breaks. How much are those one-timers maybe helping consumers and also driving this investment super cycle that we're seeing? Yeah, no, it's a great point because that look, tax refunds are counted as windfall. People go out and spend those. Right. They don't typically they don't typically save them. And so that has benefit benefited retailers. And maybe that's why they look so positive. That's got to be coming to an end now. We're in July, you know, so like those. Unless there's another one before the midterms, which there could be. That's true. There could be. And so you're totally right. That kind of artificially inflates the situation because we know people are still out there spending. We also know consumer credit card debt is around the highest levels it's been. Right. And we know 90 day delinquencies are at record levels. And so, yes, that certainly helped. But for how much longer can we bank on that? The thing I think that's interesting about the tariff refunds is, you know, we all paid those, right? Like that was passed along to the consumer. And so that has happened. And now they're getting a refund. And are they, you know, giving that back to their customers? In many cases, no. I found a couple examples. BJ's Wholesale said they were reducing grocery costs. So they were passing it back. FedEx, back to their shippers, back to their customers. But then you have Nike, who is set to receive one of the biggest tariff refunds of almost a billion. I think they got a $300 million tranche already. And they said they're going back into offset prices. You know, really, they're not passing it back on to you or I. It's to kind of resettle things with the expenses they paid. Cormac, same thing. They had some supply chain issues. So for the majority, I wouldn't expect many of them. And we'll listen on the calls because that will be a question to ask. What are you doing with those refunds? I don't expect many of them to say passing those on to consumers, although that would be great because then everyone would go out and buy more and keep this thing afloat. But yes, those tariff refunds are coming into play, and we're going to be listening on what every company is doing with those. Interesting. McCormick, the spice trade, still the center of the global economy hundreds of years later. All right. We're going to take a quick break. And when we come back, a few more questions with Christine Short. Welcome back. So, Christine, we wanted to drill down on a little bit of the earnings reports that are scheduled for this coming week. We're expecting the banks, everyone's favorite, JPMorgan, B of A, Citi, among others. What does the market expect from the banks? Yeah. So coming into this, financials as a sector are expecting EPS growth of about 5.8 percent revenues of 8.8%. That's from FactSet. And they're sort of different in that their revenues are actually expected to be higher than earnings. Why is that? Well, I think you can expect a lot in loan loss provisions that hits the bottom line. That means banks are setting aside some money because they expect potentially higher defaults. Yes. We've talked about the consumer. We've talked about credit card debt and delinquency rates. And so they're having to set aside money to deal with that potential risk, right? And so that's impacting the bottom line. Overall, if we kind of look at the headwinds, net interest margins, that's been troubling for some time for some of these banks. The Fed is keeping rates at 3 to 3 That kind of creates this double whammy for banks where customers are looking elsewhere for higher yield products They looking for high yield savings accounts looking for money market products XX Money has launched with a 6 APRN on its accounts And banks have to compete with that. Yeah, that's tough. Right, and they can't. And so there's that issue. So it's not low, but it's not high. Right, right. And so that's one issue. And the other is lending, right? We've seen both small business loans, mortgages. It's expensive to borrow right now, and so they're losing out on that front as well. So that's certainly one headwind we're going to be listening about on these calls. Another is the consumer loans. How is the loan space doing? So those are two of the big ones, loan loss provisions, of course. And then the tailwinds, though, the deal-making banks, IPOs, M&A. IPOs. Have there been IPOs? Yeah, the door been pushed open on that. Yeah, after a very slow couple of years, SpaceX, Cerebris, we've got OpenAI in the wings, Anthropic. And so expect investment banking desks to be doing well. Wealth management fees, asset values did pretty well in the first half of the year. And then trading desks, trading volume, volatile trading, fixed income especially, I think, will be another bright spot for banks. And we've talked about that on this show. You know, we had a really interesting conversation with Adam Josephson a few weeks ago talking about how, you know, the financial economy can be booming while the real economy is sort of puttering along. And so we talked about banks as an economic bellwether. But I think, Christine, you raised a few points where, you know, their trading desks might be booming. Right. But at the same time, they're looking at higher loan loss provisions and things like that. So I feel like you've got to really read through a bank's earnings report before you, oh, look, the banks are doing well. The economy must be doing well. It's not that simple. High earnings or strong revenues do not necessarily equate to a good economy. Right. And then obviously the CEO commentary, we all love to hear Jamie Dimon. He keeps it pretty conservative. He's not always the most optimistic on the – he's very cautious, right? And so I appreciate reading through that and seeing what his kind of views are on the landscape and Jane Frazier as well. And so you've got to see what management is saying. Take it with a grain of salt, you know, but still important because it does set the tone for the rest of the earnings season. I think Jamie Diamond is like the Alan Greenspan of our times. You kind of have to read through his comments a little bit to see what he's really getting at. That's my two cents. Yes. Give it a second read. I look forward to reading more about what you think he's saying. Tell us. Translation, yeah. Well, but more broadly, though. OK, so we've got a mixed picture in front of us, right? Things are good in the sense that companies are spending a ton of money. They're investing in themselves. But those are making things look maybe a little artificially inflated. We have questions about the real economy. You track another indicator that looks at how companies are changing their expectations. What is their confidence in the future? What is that indicator telling us? Because maybe that kind of cuts through the noise a little bit and says, all right, bottom line, are companies excited about what's ahead of them or nervous about it? Yes. The Late Earnings Report Index is what you're referring to. We call it the LEERI. And it is a measure of outlier earnings dates. So are companies reporting earlier than they typically do? Are they reporting later? Why does it matter? Well, academic research out of MIT shows if a company delays their earnings report, it's highly correlated with bad news being revealed on that call. Seems kind of obvious. Makes sense. If you have good news, you want to – Might not need MIT to figure out. Right. But thank you for doing that work. Now it's confirmed. And if you have good news to share, you want to run out to the world and share it. And so many of these companies have very tight reporting structures. So for some of them, some of the smaller cap, it's like you take it with a grain of salt because they're moving it all over. It's they're highly malleable IR teams and whatnot. But these mega caps, especially if you see one of those, move their earnings date and they delay it even by a day or two. You're like, well, and so there's a lot, you know, they either hide it on a Friday before a long weekend. There's all sorts of things they do to maybe hide in a busy day. In any case, our Leary reading coming into this season, it's still very low, showing that there's some clarity for CEOs. We call it the uncertainty index. Any reading below 100 is good. It shows they have some clarity that there are short-term growth opportunities. We've had record low Leary readings in 2025, like in the 50s, like the lowest we've seen in the five years. Very confident. Very confident. Last quarter, the reading came in at 73. Not bad, but a tick up. And that kind of lines up with what we recently saw from the conference board's reading of CEO confidence and where they saw for Q2, this reading came in May, confidence plunging. They interviewed 141 CEOs, 40 percent were not feeling so certain about the short term prospects of the economy. They were feeling more negative about it versus, I think, 13 percent in the first quarter. So we're seeing those kind of CEO confidence indicators, not necessarily bad, but they're not as optimistic as they were in the last few quarters. I wonder if they're also getting the sense that, oh, the market really needs me to show some productivity gains for my AI investments. And they're feeling nervous about that. It just sort of seems like it would be part of the mood right now. Right. They know they need to show. They know they need to, again, show results. And perhaps you're right. They know they're not going to – maybe it won't be a bad quarter. But as we know, beating EPS estimates by a penny is no longer acceptable. You need to have below. How many below out Nvidia earnings have we seen? And now it's just like, meh, you know, the market's just not that impressed anymore because it's been happening so frequently. And so they know they need to put up great numbers. And even if they are going to outperform, they know investors want more. I want to wrap up by talking about a term that I feel like I've been seeing more often across financial commentary and media, reading strategy reports and things like that, earnings bubble. We're used to talking about bubbles, I think, as the investor side of things. People are paying crazy multiples for these stocks. But as we talked about, the multiples for the market aren't at – I mean, they're high historically, but they're not crazy compared to – 24 times is high. Yes, but they're not crazy compared to a couple of years ago. And so the question is, are we actually in an earnings bubble where it's that E side of the PE that is perhaps flattering to deceive? So, Christine, you've been looking at company earnings trends for a long time. What do you think of this idea? Yes, this is a new term. I've never in my years covering earnings haven't thought about it because earnings, I mean, at some point, you know the answer. You get the hard data. could the data be a little wonky because of accounting things that we've spoken about maybe it's also backwards looking so in some cases during earnings season it's really doesn't even matter what they report it's the forward-looking guidance right um and then as we know come 75 to 80 percent of companies end up beating those estimates anyhow and so the only reason i would say potentially this bubble theory has some um you know has something to it could be that the account, like those numbers are artificially inflated in some way, right? But again, that's also nothing new. We've talked about there's some companies. There's always been adjusted earnings. There's always been adjusted earnings. We need those because we need to see apples to apples comparisons. If you just look at reported earnings and it doesn't take out a one-time charge, you really can't go historically back and see it's apples to oranges, right? So maybe this quarter will be the test. Like where do we stand? How do earnings come in? And let's read through the numbers and see if we believe those. Are those one-time charges? What do we think about the depreciation? But it is interesting that it's, again, the numbers have been so high. They've been high for long. We don't have that kind of catalyst we did. In the other examples, we have historically of a recession or some sort of crisis bumping up numbers. It's just the numbers have been great and a few other, you know, data points aren't great. So we need a read on Q2. That will give us an idea of what to expect for the second half of the year. Well, that's a perfect setup for the week ahead. This is a crucial earnings season. We'll really learn something here. And, Christine, you'll have to come back and tell us what we actually saw. Thank you so much, Christine. Thank you so much for having me. And that's everything you need to know to take on your week. This show is produced by Alexis Moore and Michael LaValle. Michael LaValle is our sound designer. He also wrote our theme music. Aisha Al-Muslim is our development producer. And Chris Zinsley is our deputy editor. For even more, head to WSJ.com. I'm Talis Demos. And I'm Miriam Gottfried. Until next time. Is it okay if I'm this distance from the mic? I'm trying to lean a little bit. All right. I've been doing too much. Hunch back from midtown.
