ARE THE ANIMAL SPIRITS GONE? Hardly!
We will find out this week.
This is the first real test of 2026, and it arrives with major bank earnings week. If you believe
the narrative that animal spirits have disappeared, that risk appetite is dead, and that the
economy is rolling over, then this week should finally validate that view.
I don’t believe any of that. And neither do the numbers.
Earnings season is about to remind the market of something it periodically forgets: profits still
matter, and they are growing — decisively.
Earnings Season Is Set Up to Be Strong
Let’s start with the big picture. Consensus expectations for full-year 2026 S&P 500 earnings
are currently clustered around $270–$280, implying double-digit earnings growth for the year.
That is not a heroic assumption — it is what analysts already have embedded.
More importantly, first-quarter 2026 earnings growth is expected to exceed 10%, with most
estimates now in the 12–14% range year over year. That figure has been moving up, not down.
So when I say I expect earnings season to be strong, I’m not making a leap of faith — I’m
simply reading the data.
If earnings grow at that pace, the idea that animal spirits are “gone” becomes very difficult to
defend.
The Week Ahead: Earnings That Matter
This week’s calendar is front-loaded with companies that tend to tell the truth about the
economy — banks, asset managers, transport, and semiconductors.
Tuesday, January 13
- JPMorgan Chase (JPM): Expected earnings growth of roughly 4–6% year over year,supported by strong trading revenue and stable net interest income.
- Delta Air Lines (DAL): Earnings expected to be down year over year, largely due to prior-year strength and transitory cost pressures — not demand destruction.
- Bank of New York Mellon (BK): Expected earnings growth of approximately 14–16%,driven by higher fee income and operating leverage.
Wednesday, January 14
- Citigroup (C): Expected earnings growth in the 20–25% range, reflecting restructuring benefits and improved efficiency.
- Wells Fargo (WFC): Expected earnings growth of roughly 15–18%, as cost disciplineand net interest income improvements continue.
- Bank of America (BAC): Expected earnings growth of approximately 15–17%,supported by loan growth and expense control.
Thursday, January 15
- Taiwan Semiconductor Manufacturing (TSM): Expected earnings growth north of 20%, driven by AI-related demand and advanced node pricing.
- Goldman Sachs (GS): Earnings expected to be flat to slightly down, due to an unusually strong comparison quarter — not a deterioration in core business.
- BlackRock (BLK): Expected earnings growth of 4–6%, with strong asset inflows and rising markets supporting revenue.
- Morgan Stanley (MS): Expected earnings growth of approximately 3–5%, driven by wealth management stability and improving investment banking activity.
- J.B. Hunt Transport (JBHT): Expected earnings growth in the 15–20% range, despite persistent pessimism around freight demand.
Friday, January 16
- PNC Financial (PNC): Expected earnings growth of 11–13%, reflecting solid credit quality and regional banking resilience.
- State Street (STT): Expected earnings growth of 8–9%, supported by higher servicingfees and operational improvements.
- M&T Bank (MTB): Expected earnings growth of 13–15%, driven by loan growth and margin stability.
If this lineup doesn’t look like an economy in distress, that’s because it isn’t.
So… Are the Animal Spirits Gone?
Hardly.They’ve been restrained by headlines, macro anxiety, and political noise — not by collapsing
earnings. When profits grow at a double-digit pace, confidence tends to follow.
As these results come in, I expect risk appetite to improve, sentiment to adjust, and the market
to remember what ultimately drives valuations.
In short, animal spirits are very likely to return — unless we get the unexpected from this
administration.
Takeaway:
Takeaway: This earnings season matters because it directly challenges the prevailing narrative
of slowing growth and fading confidence. With S&P 500 earnings tracking toward double-digit
growth for 2026 and first-quarter results expected to exceed 10% year over year, fundamentals
are reasserting themselves. Financials, asset managers, and cyclically sensitive companies are
not signaling stress — they are signaling resilience. If earnings meet even modest expectations
this week, the case for sidelined capital, suppressed multiples, and muted animal spirits becomes increasingly difficult to justify.
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