If there is one thing I hate more than earnings season, it’s when it’s not earnings season. Why? Because then more often than not we investors, and especially the talking heads on the financial news networks, bloviate non-stop about macro data in between company quarterly reports. After this has gone on for several weeks, I actually find myself BEGGING for earnings season to start.

We feel this way because much of the discussions on these macro data points often end up as being so much noise. Take for instance the discussion on first quarter GDP. Most would agree it was lackluster, with a good percentage of analysts blaming the performance on the weather. Really? Earlier in the year we discussed that weather doesn’t really have much of an impact on retail sales. Additionally, if weather really does have a sizable impact on the economy, why was it not anticipated as estimates for the first quarter off by so much as the consensus was 1.5% with the actual tally being 0.9%? Conversely, when GDP is more than forecast, how come we never hear that absolutely great weather biased results upward? Our point is that when you have something as complex and organic as the US economy, it’s difficult to shrug off any result to just one factor.

Perhaps the bigger question is what comes first; unexpected GDP changes or unexpected corporate results changes? Usually in our observation GDP is fairly coincident as corporate earnings are an important part of the real economy. Sometimes we think of it as slightly lagging as we often hear from companies and their supply chains what they are seeing and expecting on Main Street before the official GDP data is released. For reference here’s one example, the S&P 500 revenues plotted against nominal GDP. We used this chart as we believe revenues are a better indicator of demand than earnings, which can be more influenced by accounting assumptions, cost controls, and changes in capital structure.

However, we also think that one completely ignores these macro data points at their own peril. Macro data can help confirm or deny an investment thesis and there are plenty of quantitative and algorithmic strategies that can influence your positions, at least in the short-term. Our best use for them is to help confirm or deny existing theses we have on individual sectors or companies as some of our companies are influenced less by US macro data than others, e.g. large multi-national companies are less influenced by US data than, say, a small cap retail chain.