Bold Earning Season Predictions

In this podcast, Motley Fool host Anand Chokkavelu, analyst Emily Flippen, and contributors Jason Hall and Jose Najarro discuss: Inflation ticks up (this bears monitoring)

Additionally, Nvidia and semiconductors get a China bump

However, The big banks kick off earnings season (and tell us the economy), in light of current trends

Nevertheless, Is "crypto week" a thing

Meanwhile, Bold predictions on which company will surprise this earnings season To catch full episodes of all The Motley Fool's free, check out our podcast center

When you're ready to invest, check out this top 10 list of stocks to buy

A full transcript is below

Additionally, Advertisement: I had the absolute pleasure of speaking to Pamela Anderson, all thanks to the Dove Self-Esteem ject

On the other hand, At the same time, We speak the impact Why2K has had on women's body confidence and how Pamela has regained control (noteworthy indeed)

On the other hand, The Dove Self-Esteem ject is an amazing initiative supported by science-backed methodology to help us imve our relationship with our bodies, amid market uncertainty

To find more body confidence building exercises, go to dove

At the same time, That's Why2K spelled W-H-Y-2-K (which is quite significant)

Moreover, Anand Chokkavelu: Get excited

Today is the first day of earning season (remarkable data)

On the other hand, Motley Fool Money starts now

Moreover, I'm Anand Chokkavelu

I'm joined by two of my favorite Fools, Emily Flippen and Jason Hall to kick off earning season with some big banks, giving us a feel for the economy

We'll also give you the skinny on crypto week, and we'll have bold predictions on earnings season

Plus, we're bringing on a bonus Fool

Moreover, Also one of my favorites, semiconductor expert Jose Najarro to talk some hot NVIDIA news

But first, we had a fresh inflation reading this morning (this bears monitoring)

Emily, what were your takeaways

Emily Flippen: Well, if you thought you could have a peaceful Tuesday with no bad news, think again (remarkable data), in this volatile climate

Obviously, inflation is heating up here a little bit

However, I think we're just starting to see some of the impacts from tariffs as those price increases and core goods start to become more tangible, as opposed to theoretical

Conversely, We had this really big front loading of inventory that happened at the beginning of the year as es stockpiled in anticipation of tariffs, and those are beginning to diminish, which I think is making it harder to tect ducts from rising costs

Nevertheless, We saw that in core goods inflation

Those includes things basic necessities apparel and household ducts that accelerated last month

But the good thing is, in the silver lining to our Tuesday here is that this is a gradual acceleration

We're not talking anything that's incredibly dramatic

Those numbers at 2 (quite telling)

Additionally, We're not talking month over month here

No need to immediately panic

But I do think this could have some overarching implications for what we're ly to see in future earning season, both coming up in the next couple of weeks, as well as toward the end of the year (which is quite significant)

Nevertheless, Jason Hall: I think wide reaching is a good way to put it

It's down 1, in this volatile climate

You see where investors are seeing the potential impact of inflation on the companies that are most directly affected by it (fascinating analysis)

What they're looking forward and seeing if we're being honest, is really going to be driven by the tariff story

That's still the big story in the background

If we look at May, we saw a massive increase in imports as companies tried to pull forward inventory as much as they could back in April, I should say

Then in May, it came down quarter over quarter, but May imports were still well up from where they were year over year (which is quite significant)

Maybe some of the concerns empty store shelves later in the year maybe aren't as ly to come to fruition as a lot of investors have been thinking, because that would be a big thing that would certainly drive a lot of inflation (something worth watching)

However, In contrast, By the way, all the data hasn't been reported yet, but June traffic at the Port of LA, it was a record level for that month

I think the market broadly is looking out and saying, hey, I don't really know if what we're seeing with the inflation that could be driven by the potential of the tariffs is going to be as bad as we think

But at the end of the day, what's the investor takeaway, guys, in today's financial world

Peter Lynch bably had it right when he said, if you spend 13 minutes on economics in a year, you wasted 10 minutes

These things affect us in the real world (quite telling)

At the same time, But as investors, I think our time is still just better spent looking for strong durable es with those great long term tailwinds (something worth watching)

Additionally, We start focusing on macro, amid market uncertainty

What happens, in this volatile climate

We're reacting based on what our own biases and inclinations are, given current economic conditions

If we give our motions control of our portfolios, that's never the right decision

Anand Chokkavelu: If you do the math on Peter Lynch, you should spend three minutes on Macro, amid market uncertainty

That's what we did, in light of current trends

However, Give or take, in light of current trends

We'll be back with some news NVIDIA and China after the break (remarkable data)

Moreover, Jose, you've covered semiconductors before it was cool to cover semiconductors

In contrast, Today, we've got some news on NVIDIA in China

Jose Najarro: Pretty exciting news for the overall semiconductor industry, given current economic conditions

Nevertheless, But the CEO of NVIDIA recently made a trip to Beijing and met with a few government and industry officials there, in light of current trends

While he was there, he did vide an to customers, noting that NVIDIA is going to be filing applications to sell the NVIDIA H20 GPU again to that market

Jensen assured that the US government has assured NVIDIA that the licenses will be granted and NVIDIA hopes to start deries there pretty soon

Just a quick backlog of what happened

A lot of companies are excited, amid market uncertainty

This also did trickle down to a little some other companies, in this volatile climate

Additionally, AMD also had similar export restrictions, and they did respond to similar s that they will also be looking for these license apvals for their chips as well

Jose Najarro: Very important, and it also showcases how we want to have this AI nology being run on American nology

We don't want it run from other countries (noteworthy indeed)

It's coming from NVIDIA, which is a US based company, in today's market environment

Furthermore, Anand Chokkavelu: This's all very ly positive news

Is the four trillion dollar in market cap for NVIDIA a buy, a sell, or an index for you at this point, Jose

However, Index means you just stick with whatever allocations in a broad based index fund, which with a four trillion dollar market cap, is it pretty sizable at this point

On the other hand, In contrast, Jose Najarro: For me, it's definitely more in that index position

I'm not looking to add anymore to my portfolio

Obviously, there's a lot of growth opportunities, and that's why I'm willing to hold

However, Additionally, But obviously, you could see plenty and plenty of short term tailwinds that could create volatility

Nevertheless, For me, it's a perfect index play, as you mentioned, pretty much just hold and write this AI wave

Conversely, Anand Chokkavelu: It's a jam pack day, considering recent developments

Moreover, Let's move on to the story I thought we'd lead with

We had three of the major banks report earnings this morning

That's JPMorganChase, Wells Fargo, and Citigroup

As bank lending goes, so goes the economy (noteworthy indeed), considering recent developments

Jason, what are the banks telling us the economy

I know Jamie Dimon must have some thoughts

Jason Hall: He always has thoughts, the godfather of the US banking industry and a little bit of a permabear at times, when things are going very well, he's very bearish, considering recent developments

Meanwhile, He does get a little more optimistic when things are a little bit questionable

However, But what I really saw this quarter was there's less of what management says, and then what the es did and then what management is doing, thinking the es

On the other hand, Overall, again, JP Morgan, Wells and City, the results were fine, in light of current trends

In contrast, Again, that's looking backwards though

The one thing that we can look at that gives us some indication of what management is acting on going forward is visions for credit losses

Frankly, there were no major changes here for any of them

However, This's what they're doing on their books to bolster their balance sheets for expected future loan losses

Wells and City reported increased allowances, but they were both commensurate to things within the mix

Moreover, Wells had some changes in its portfolio mix, a little bit less asset backed stuff mortgages and a little bit more credit cards, and cities went up mainly because its loan portfolio just got larger, in today's market environment

I don't think we really learned a lot broadly that we didn't already know

Nevertheless, Now, you look at these three

Moreover, Management lowered guidance for net interest income

That's the most important source of fit for Wells Fargo because it's a big main street lender

Maybe there's a little bit of an indication there

At the same time, Emily Flippen: I found it really interesting that to your point, Jason, Dimon is considered such a bear when things are good and such a bull when things are bad, amid market uncertainty

But the JP Morgan CFO said during the call that the consumer seems to be fine (noteworthy indeed)

That's an exact quote, which feels to me a bit of a reach because to your point, a lot of the data that these banks are working off of is lagging, in light of current trends

They're basing off theories credit and consumer spending based on their own consumer credit portfolios

This leads to the conclusion that analysis reveals seems to be fine, but that lagging indicator, I worry, could just be something that sneaks up on these types of es because we've seen unemployment tick up continuously for over two years now

More than half of all American consumers say they expect to be worse off financially next year in comparison to this year, and consumer spending is declining (fascinating analysis)

The Federal Reserve is looking to manage inflation, not unemployment

With less rate cuts this year, I feel that could further worsen unemployment rates

That lag in between, I think, what some of these banks are experiencing in terms of the quality of their credit portfolio versus what the average American is experiencing right now is incredibly to me when I listen to these earnings calls, given current economic conditions

However, Anand Chokkavelu: No way our listeners want to hear the nitty gritty details on three different banks

They're bably zoning out already, Jason

Jason Hall: We don't want to talk return on tangible common equity for all three of these

Moreover, Anand Chokkavelu: We'll get to the stress tests, all that stuff

You get to talk one and only one, Jason

Of JPMorganChase, Wells Fargo, and Citigroup, which had the most noteworthy earnings for stock pickers out there

Jason Hall: Honestly, I don't think we had really any outliers here

Nevertheless, Just a couple of really quick points each of them, I think it bably serves our listeners better, given current economic conditions

Furthermore, Nevertheless, JP Morgan continues to be that gold standard (which is quite significant)

You look at their return metrics

Additionally, Nobody fall asleep on me here, but they're extraordinarily high

Directionally, we're talking twice as good as a city, which is struggling with years of issue

Morgan also had pretty decent loan growth

Jane Fraser is doing a really good job of dragging city forward (noteworthy indeed)

However, That's the difference you see there, in light of current trends

Now, looking at Wells, it may be the one that really signaled to the market that consumers to Emily's point are feeling more of a pinch than anyone else (this bears monitoring)

Again, looking at that bringing down their expected net interest income, this is the one of all of these that's most concentrated on, traditional Main Street, USA banking and lending

Maybe that's the biggest takeaway for me is that

By seller index on these banks, Jason (this bears monitoring)

On the other hand, Jason Hall: You know how I do this (noteworthy indeed), given current economic conditions

I can't give you any of those three (something worth watching)

I'm going to say none of the above

If I'm buying bank stocks today, valuation really matters with these giant mature es

This leads to the conclusion that re are some positive things

However, Less regulation, lower corporate taxes is compelling

But there's just much better values to be found, if you look at some of the larger regional and a handful of more specialized banks out there

Conversely, That's who I'm looking to hear from this week, Truist Financial, for example, it's really in the sweet spot of the demographics, the Southeast migration trends

I won't steal Emily's thunder, but there's a big regional bank with national reach that just made a really interesting acquisition that has that one on my radar, but I'll let Emily talk that one

Emily Flippen: I completely agree here with Jason

Furthermore, However, I think there's a fair point that a reduction in regulation across the board with the new administration could just be a boon for the industry, but that doesn't make me want to go out and be, I'm going to start indexing these banks

However, If I'm indexed, index a total market of which you get exposure to a lot of these high quality companies

But if you're going to want additional exposure in my book, pick the high quality ones, in today's financial world

This tells us that JP Morgan's and to Jason's earlier point, a company that should be on everybody's radar, which is Capital One Financial, in this volatile climate

They just closed their discover merger, and that makes a behemoth in this space

But skip the bad ones

I was going to say that I think quality is more important than price here, and I think that is true

But I was thinking of that in the context of those small regional banks that can sometimes get really attractive on a price basis, but you're losing out on quality (something worth watching)

I think Jason's point understanding the price you're paying for even the larger banks is incredibly important because these are mature es, and the market can have pretty stark reactions for factors outside of their control when it comes to the broader economy, given the current landscape