US CEOs Less Worried About Recession Amid Record Earnings Season

US CEOs have mentioned a recession fewer than 300 times during Q2 earnings calls, near the lowest in data going back to 2001. Despite worries about tariffs, inflation, and consumer demand, stocks have rallied to record highs. Executives have signaled that customers are resilient yet cautious, value-seeking, and trading down. Investors are optimistic about the Federal Reserve reducing interest rates and see the lowest probability of a recession since January.

US corporate executives have shown remarkable resilience in their earnings calls, with mentions of a potential recession near an all-time low in the second quarter. According to data compiled by Bloomberg [1], executives from companies listed on the S&P 500 have discussed an economic contraction fewer than 300 times, marking a significant shift from the previous quarter. This shift is notable given the ongoing concerns about tariffs, inflation, and consumer demand.

Despite these worries, US stocks have rallied to record highs, with companies reporting their best earnings season in more than three years. Earnings per share (EPS) increased by 10.5% against a pre-season estimate of 2.8%, according to data compiled by Bloomberg Intelligence [1]. This substantial growth has bolstered investor confidence and led to a significant improvement in the tone among US executives as the earnings season winds down.

Consumer-oriented firms have signaled that customers are "resilient yet cautious, value-seeking, and trading down," according to strategist Lori Calvasina [1]. This cautious optimism is reflected in the latest survey from Bank of America Corp., which shows the most bullish investor sentiment in six months [1]. Swaps traders are pricing in about 100 basis points of interest rate cuts by mid-2026, further fueling optimism that the Federal Reserve will act to avert a recession [1].

While recent economic data have indicated slowing growth, investors remain optimistic about the economy's trajectory. The probability of a recession is now at 35%, down from 40% in late June [1]. This shift in sentiment is a stark contrast to the sweeping US tariffs that spiked concerns about a downturn in the previous quarter.

Notably, the average US tariff rate has risen to 15.2%, the highest since World War II, but the impact has been modest for many companies [1]. Some high-profile firms have not even mentioned tariffs in their earnings calls, suggesting that the economic headwinds are not as severe as previously feared.

Market forecasters, including those at Citigroup Inc., have turned more optimistic about the S&P 500's trajectory in the second half of the year, expecting tax cuts to shore up earnings after an already solid season [1]. Earnings proved relatively resilient to the tariff landscape, with growth slowing year-over-year but still stronger than anticipated [1].

In contrast, some industries are facing significant disruptions. The Seafood Export Association of India has approached the ministries of commerce and finance to seek emergency financial support due to increased tariffs imposed by President Donald Trump, which threaten USD 2 billion worth of shrimp exports [3]. The tariff escalation has made Indian seafood significantly less competitive compared to other countries like China, Vietnam, and Thailand.

Overall, the second-quarter earnings season has provided a mixed picture of the US economy. While concerns about a recession have been downplayed, the impact of tariffs and slowing consumer demand remains a concern. Investors and financial professionals should continue to monitor these developments closely as the Federal Reserve's policy decisions and the trajectory of the global economy will play a crucial role in shaping the economic outlook.

References:
[1] https://www.bloomberg.com/news/articles/2025-08-12/ceos-are-hardly-talking-about-a-recession-this-reporting-season
[2] https://www.tradingview.com/news/reuters.com,2025:newsml_L8N3U408Y:0-norma-at-1-yr-high-after-q2-earnings-beat/
[3] https://www.business-standard.com/economy/news/shrimp-exporters-seek-govt-aid-as-trump-tariffs-threaten-2-bn-of-exports-125081000195_1.html