A Data Disconnect? Caution Aplenty on Earnings Calls as Some Indicators Turn Up

Is the U.S. economy about to step it up a gear? And is Corporate America being too cautious about that prospect?

Here’s some representative commentary from recent earnings calls:

“I think sentiment is similar to maybe slightly up […] We’d like to see the orders as more objective proof before we would move higher on [our earnings] guide.” – Rockwell Automation Inc. Chairman, President and CEO Blake Moret

“We don’t want anyone to really get out over their skis […] from an expectation standpoint. It remains to be seen if this really is going to lead into that spring surge that we would typically see.” – Old Dominion Freight Line Inc. CFO Adam Satterfield

“That’s a good sign, but there’s just one month. We’ve got to see that sentiment translate into real orders.” – Kennametal Inc. President and CEO Sanjay Chowbey, referencing the surprisingly strong January ISM Manufacturing PMI Report.

To be fair, it only takes a little time to line up reasons for remaining careful about committing lots of capital and energy to expansion:

• The Trump administration’s tariff regime still hasn’t settled into a predictable state. Plus, many of last year’s moves are still trickling through the system, as evidenced by numerous executive teams saying they’re still hiking prices due to trade measures.
• The labor market is neutral at best — with January’s strong preliminary reading offset by large downward revisions of 2025 numbers — as it digests both a lack of supply relative to recent years and a reluctance by some firms to hire, either because there’s tepid demand from some customers or because executives think AI can take the place of new recruits.
• December consumer spending was essentially unchanged from the month before and up 2.4% from the last month of 2024, right in line with inflation. That reading was well short of economists’ estimates and reinforced the argument that many middle- and low-income consumers are increasingly struggling.
• And, not unimportantly from a sentiment perspective, there have been other false signals in recent years, including when sentiment spiked a year ago in the wake of President Trump’s election. It’s easier to sit tight just a bit longer and see if more good news follows the recent positive signals.

Equity investors haven’t been sitting tight, however. Year to date, some of the best performers in the stock market have been materials and transportation stocks, which, as a group, are both at least 10% ahead of the benchmark S&P 500 index. That suggests a lot of people think the economy is about to start growing more quickly and require, for lack of a better word, more “stuff” as well as more ways to move that stuff across the country.