News that the S&P 500 Index (SP: INX) and other United States-listed companies may ditch quarterly earnings reports comes the same week that the benchmark US index is smashing new record highs.
The S&P 500 closed up 0.5% overnight to finish the day at 6,631.96 points, a new all-time closing high. That surpasses the previous record high, notched on Monday, of 6,615.28 points.
With most tech stocks still in a strong upward trend, it's a similar story on the Nasdaq Composite Index (NASDAQ: .IXIC). The Nasdaq closed overnight at 22,470.73 points, which is, you guessed it, a new all-time high.
Here in Australia, the S&P/ASX 200 Index (ASX: XJO) is up 0.9% in morning trade today at 8,819.50 points. That's 2.2% below the record closing high on the ASX 200 of 9,019.10 points, set on 21 August.
While there have been no serious discussions yet (that I'm aware of) about changing the reporting rules for ASX 200 companies, the odds are growing that S&P 500 companies may revert to half-year reporting and bin their quarterly results.
Young African Businesswoman Analyzing Data On Multiple Computer Screen In Office
What's happening with S&P 500 reporting requirements?
The US Securities and Exchange Commission (SEC) directed S&P 500 companies to release their quarterly earnings results back in 1970. The move was intended to increase transparency and reduce volatility in the stock markets.
But US President Donald Trump isn't a fan of the mandate.
On Monday, Trump took to social media in an effort to end the requirement and revert to half-year reporting. Trump said the move would "save money, and allow managers to focus on properly running their companies".
There's no certainty yet that the change will be enacted, and analyst reactions to the potential benefits and pitfalls of axing those quarterly results have been mixed.
What are the experts saying?
Commenting on the potential end of the quarterly reports for S&P 500 and other listed US stocks, Jaret Seiberg, managing director at TD Cowen, said (quoted by Bloomberg):
This appears to be an easy policy win for SEC Chair Paul Atkins to deliver to the President. It also is consistent with his de-regulatory focus. That is why we believe the switch to semi-annual from quarterly reporting has moved from improbable to probable though not guaranteed.
But it won't happen overnight.
"It will take staff at least six months to craft a proposal and collect the economic data needed for the rule change to survive judicial review," Seiberg added.
Michael Kantrowitz, chief investment strategist at Piper Sandler & Co sounded a very positive note on the proposal. Though he believes it's a longshot.
According to Kantrowitz:
To that I say amen! And the Fed should be 'steadily proactive' instead of aggressively reactive — both combined could lead to a far less volatile stock market and less myopia. Unlikely to happen, but we can dream!
But not everyone agrees that reverting to half-year reporting for S&P 500 stocks would be an improvement.
Sameer Samana, head of Global Equities and Real Assets at Wells Fargo Investment Institute, said (quoted by Bloomberg):
At a high level, this would lead to greater uncertainty due to the longer periods between reports. The greater uncertainty would also feed into greater market/price volatility when companies do report. When it comes to investing, more information at higher frequencies always beats less information at lower frequencies.
