What We're Seeing: Q1 Earnings Mixed – 7 April 2025

The Week in Brief

Around early April, first-quarter earnings season showed modest growth, while inflation data came in mixed. The S&P 500 traded in a tight range, lacking a clear catalyst in either direction. Sectors were mixed, with no dominant theme emerging.

After the tariff-induced volatility of March, markets settled into a holding pattern. Investors are digesting the new policy reality while waiting for more clarity on earnings and the economic outlook.

Earnings Picture

Corporate results were neither impressive nor disappointing. Revenue growth was modest, reflecting the slower economic backdrop. Margins held up reasonably well, suggesting companies are managing costs effectively.

The technology sector, after a stellar 2024, delivered more muted results. The AI narrative remains intact, but the pace of spending growth is normalising. This is healthy: unsustainable acceleration always gives way to more measured expansion.

Defensive Bid

Utilities and consumer staples enjoyed defensive inflows during the week. With macro uncertainty elevated and bond yields still attractive, investors are seeking pockets of stability. These sectors offer lower volatility and steady dividends.

Technology paused after strong first-quarter gains. Profit-taking is natural after the sector’s run, and we do not view this as a change in trend. The structural case for tech remains sound.

Our Read

The market is in a consolidation phase. After the strong gains of late 2024 and early 2025, some digestion is healthy. Valuations remain elevated, and the easy money has likely been made. From here, returns will be more selective.

We think the earnings picture supports continued investment in equities, but expectations should be realistic. Double-digit returns every year are not the norm, and a more modest 2025 would not be surprising.

For positioning, we are maintaining our balanced approach. Quality growth names deserve a place in portfolios, particularly those with secular tailwinds. But we are also finding value in defensives and dividend-payers that offer downside protection.

What Could Change Our View

A sharp acceleration or deceleration in earnings growth would shift the picture. If companies start guiding lower on trade uncertainty or consumer weakness, we would need to reassess. Similarly, a breakout in inflation would complicate the Fed’s path and pressure valuations. For now, the base case is steady-as-she-goes.

This is informational commentary, not investment advice.