News

While the equity markets got a shot in the arm this week from the U.S. election, results from the Materials sector this earnings season are yet another reminder that the market is not the economy.

The Materials sector, a barometer for the broader economy, continues to reflect the complexities and challenges of the current economic landscape. While last quarter indicated a move towards slow but steady stabilization with hopes of a back-half recovery, commentary in Q2 earnings suggests many of the persistent challenges observed over the past few quarters have remained just that — persistent.

As we look at the broader landscape and try to read the tea leaves on behalf of our clients this quarter, the Materials sector – a barometer for the economy – is showing signs of slow, but steady stabilization. Indeed, Materials, one of the “canary in the coal mine” sectors, has now moved to a “variable degree” of optimism, a better place than we were last quarter and the boom-and-bust nature that played out from the Covid-induced cycle. However, with many companies exposed to the consumer, progression will most likely be choppy and bounce along versus linear.

We view the Materials sector as a canary in the coal mine and will continue to monitor performance, as a rising tide for this sector tends to lift most ships as they are a leading economic indicator.