MW The word from U.S. companies to Wall Street in new Trump era is 'uncertainty'

By Steve Gelsi

The word 'uncertainty' popped up 117 times in proximity to the word 'policy' in conversations between executives at 64 S&P 500 companies and Wall Street analysts last quarter

General Motors is fine-tuning its supply chain to absorb the impact of tariffs, but it won't "spend large amounts of capital" without more clarity, Chief Executive Mary Barra told investors on the car giant's most recent earnings call.

Executives at lumber supplier Builders FirstSource (BLDR) observed that "uncertainty around potential policy changes" is leading builders to pull back from construction of single-family homes. And industrial company Rockwell Automation $(ROK)$ said its sales "continue to be impacted by delays ... amid increasing uncertainty from trade and policy changes."

All told, the term "uncertainty" popped up 117 times in proximity to the word "policy" in conversations between executives at 64 S&P 500 companies and Wall Street analysts, according to an analysis by MarketWatch of FactSet transcripts from the latest quarterly earnings season. In comparison, 33 companies mentioned policy uncertainty to investors in the previous quarter, while in the second quarter of 2024, 25 companies did.

Companies are always hedging their bets in the disclosures they make to shareholders and Wall Street broadly as they prepare for a range of political and economic scenarios. But what makes the most recent earnings season particularly notable is how often company leaders tied that uncertainty to government policy.

The "uncertainty" trend comes as President Donald Trump and his administration make sweeping changes at a pace rarely seen in previous administrations - and sometimes then reverse those changes.

The Trump team's approach - including carrying out mass firings of government workers, rolling back regulatory oversight, proposing major changes to the tax code and negotiating broad tariffs in public - has affected companies' ability to plan, according to corporate leaders quoted in the transcripts from General Motors $(GM)$ and other companies.

It has also roiled financial markets and pressured stocks, with the S&P 500 SPX down about 3.2% so far this year after trading in positive territory up until about a month ago. Since March 10, 59 of the 500 stocks in the index have hit 52-week lows, according to Dow Jones Market Data. Since hitting a record close of 6144.15 on Feb. 19, the S&P 500 is now down about 7.4%.

"We are currently in a period of extremely high uncertainty," Nicholas A. Bloom, an economics professor at Stanford University, said in an email to MarketWatch. "What is particularly striking is this is politically driven, and also not associated with any bad event like a pandemic or financial crisis."

He cited data from the monthly U.S. Economic Policy Uncertainty Index, which has now risen to a point higher than during the global financial crisis of 2007-09 and second only in recent years to the initial months of the COVID-19 pandemic.

"When Trump took office, businesses were generally positive about his impact on the economy, so they see this as potentially good news overall but incredibly uncertain," Bloom said. "So it is unprecedented in being a huge deliberate rise in policy uncertainty."

Gill Segal, an economist and finance professor at the University of North Carolina's Kenan-Flagler Business School, said trade-policy uncertainty is tracking above where it was when Trump announced 10% tariffs on Chinese imports in August 2019, during his first term in office.

"Policy uncertainty, in particular, typically leads to lower business investment and lower future GDP growth, as a result," Segal said. "Firms are usually disincentivized from expanding capacity when uncertainty is high, as this is linked to a higher prospect of learning about bad news in the future, and to an increased cost of capital."

Also read: Trump's tariffs worry companies. Here's what they're saying about the uncertainty.

All sectors are being impacted

The parade of opaque outlooks cut across all sectors of the S&P 500, including consumer names and financial companies, with JPMorgan Chase $(JPM)$ setting the tone in mid-January.

"There are some pockets and some industries where some aspects of the policy uncertainty that we might be facing are making them a little bit more cautious than they otherwise would be about what they're executing in the near term," JPMorgan Chief Financial Officer Jeremy Barnum said then.

In February, Molson Coors Beverage $(TAP)$ said: "The global [macroeconomic] environment is rapidly evolving, resulting in uncertainty around the effects of geopolitical events and global trade policy, including the impact from consumer trends."

Chip maker ON Semiconductor $(ON)$ warned in February that "visibility is very limited and customers are taking a wait-and-see approach in a backdrop of geopolitical uncertainty. We will continue to focus on what we can control."

Gil Mermelstein, president of West Monroe, which advises corporate clients on dealmaking, said the word "uncertainty" is "code for 'I fear the current instability will impact my business materially.'"

For now, however, Mermelstein said the only business types to materially cut back on spending have been the consumer and industrial products sectors, as a result of the sudden impact of tariffs.

Trump imposed a 25% import tariff on products from Canada and Mexico on March 4. The next day, he suspended tariffs until April 2 for vehicles covered by the U.S.-Mexico-Canada Agreement and then extended that suspension for all other goods covered by that trade agreement. A 25% tariff on all steel and aluminum imports took effect on March 12. Canada and the European Union have responded by raising their tariffs on U.S. goods.

The European tariffs include a 50% tax on American motorboats and motorcycles starting on April 1, plus additional tariffs in mid-April on chicken, soybeans, chewing gum and other products. The U.S. has also hiked tariffs on Chinese goods, and the Chinese government has retaliated. Additional U.S. reciprocal tariffs are scheduled to start on April 2.

"Wall Street is reacting to this heightened risk to future performance," Merlemelstein said, rather than to actual performance drops at this point.

Companies have been slowing down their investment decisions, such as whether to launch a new product or deploy capital in another way, due to uncertain policy outcomes, he said.

"When they delay decisions, it impacts growth ... and that's what Wall Street is reacting to," he said.

Steven Davis, director of research for the Hoover Institution, said U.S. tariff hikes on their own are unlikely to cause a recession in the U.S., but they raise the probability that an economic slowdown could take place.

"They place the U.S. economy in a weaker position to weather the next shock, which could come from many directions," Davis said.

Some indicators to keep a close watch on, he said, include consumer confidence, the willingness of households to buy discretionary items and household durable goods, orders for durable goods among manufacturers, and business sentiment.

Among the comments from corporations, First Solar $(FSLR)$ said uncertainty around U.S. policies is "driving a pause in at least some domestic manufacturing expansions."

Hotel giant Hilton $(HLT)$ said uncertainty around immigration rules, border and tax policies as well as regulatory spending "means that people sort of husband their capital a little more."

While information-technology supplier EPAM Systems $(EPAM)$ sees a promising year ahead due to increased interest in its artificial-intelligence offerings, the company said, "We do still see multiple pockets of caution driven by broad [macroeconomic] risks, policy-specific uncertainty due to a very dynamic geopolitical environment."

AvalonBay Communities $(AVB)$, an owner and developer of multifamily real estate, said that "in certain locations that have heightened regulatory risk or uncertainty ... the bar is higher in terms of investing new capital dollars."

-Steve Gelsi

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March 20, 2025 13:21 ET (17:21 GMT)

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