Still Focused on Earnings Estimates? Think again | Q1 2026 Earnings Season with Nick Raich

In this episode of the Market Misbehavior podcast, Dave is joined by Nick Raich, founder and CEO of The Earnings Scout. Recorded 4/16/2026. 

Nick shares what he’s learned from years of analyzing corporate earnings data and guiding institutional investors. We dig into the crucial difference between a bearish "Alligator Jaw" divergence and a bullish "Rocket Ship" setup, why the smart money focuses on the delta in earnings estimates rather than simple quarterly beats, how to separate consumer sentiment noise from actual spending data, and why robust earnings growth means the Federal Reserve doesn't need to cut interest rates anytime soon.

📈 Topics Covered
• Defining the "Alligator Jaw" (a major warning sign) versus a bullish "Rocket Ship" market setup
• Why the delta (rate of change) in forward earnings estimates matters far more than simple quarterly beats
• How the recent spike in oil prices is—and isn't—impacting corporate earnings guidance
• Reconciling weak consumer sentiment surveys with the reality of strong consumer spending
• The current state of the AI trade: fears in the software space versus booming semiconductor estimates
• How private equity and delayed IPOs have structurally changed the small-cap market
• The debate over quarterly earnings reporting and the importance of management transparency
• Why the Fed cutting interest rates in the face of above-trend growth would be a massive mistake
• The power of combining fundamental earnings data with technical price momentum (1 + 1 = 3)

And If you enjoyed our conversation today with Nick, be sure to dive deeper into his insights at: https://www.earningsscout.com/

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The content in this presentation should not be considered as a recommendation to buy or sell any security. All information is intended for educational purposes only and in no way should be considered as investment advice. 

Transcript

Intro: 

Dave: [00:00:00] why do we still focus so much on companies beating estimates?

Nick: I believe the smart money knows it's about the delta. I think it's just ingrained in us to go, you watch SportsCenter in the morning, who won the game last night? you wanna know who won the game last night? You wanna see what happened. But when it comes to stocks, it's not about who won the game night because.

The definition of a stock price is the present value of the future cash flows. So every day the market's open. It's not trading off of what's happening in earnings or what happened three months ago on earnings. It's predicting what's gonna happen to earnings a year from now. And then the change of those expectations over time that new pieces of information come out.

But I think it's inherent all of us to know what's the scorecard, and, and there is good data in there. You need to know who won the game last night. To be able to tell how they're doing, to see if they can do well in the future, in the guidance. , But it is all about the delta and that a lot of parts where we don't wanna focus on just the beat alone.

Those numbers tend to get manipulated. They tend to get, low balled by the company. So you always have about 80% beating the [00:01:00] estimates. When that happens every quarter, it's not that much of a surprise anymore. 

Disclaimer: Welcome to the Market Misbehavior Podcast, hosted by Dave Keller. Dave talks to top market practitioners, money managers, technical analysts, investment strategists, and authors to help you navigate the markets and become a more mindful investor. The content of this podcast should not be considered as a recommendation or solicitation to buy or sell any security.

All information is intended for educational purposes only, and should not be relied upon for any investment decision. The host of this podcast as well as any guests may hold positions in securities discussed. Hey there everyone. Dave Keller here with Market Misbehavior and welcome to our latest episode of the Market Misbehavior Podcast. Today we're chatting with Nick Rach. Nick is the founder of the earnings Scout. I met Nick when we lived in the Cleveland area a number of years ago. He's had a successful career [00:02:00] helping institutional investors, analyze earnings through a, brokerage, and, uh, then broke off on his own and launched the earnings scout.

Dave: What you're gonna find in this conversation with, Nick. Is all about the most important evidence to follow when it comes to earnings. Looking at earnings estimate revisions. We're gonna talk about what earnings are indicating here as we kick off Q1 earning season. Some of the initial takeaways as about 10% of the s and p have already reported here.

In mid-April and why the strength in earnings could be the reason why this market is not nearly optimistic enough. So please enjoy this great conversation with Nick Raach of the earnings scout.

Super Excited to be catching up again with Nick Rach, founder of the Earnings Scout. coming to you from, northeast Ohio. Nick, good to see you again. How's life? Okay.

Nick: Oh, it's doing great. Great to see you, Dave.

Dave: Lot of things I wanna ask you about. And you had a recent note, Nick. , And the title was, the Setup is a Rocket Ship, not an [00:03:00] Alligator Jaw.

Now, you were on the show, it's been too long. I mean, it was, at a point in 2025 when you came on the show and talked a little bit about the alligator jaw, but what does that title mean? And if you could just kind summarize what that alligator Jaw would represent, I think that'd be a great place to start.

Nick: Well, at the beginning of 2025, there wasn't what we say, an alligator jaw open in the market, which is a warning sign. And the way we define an alligator jaw is we're measuring the earnings estimate changes. For the, in this case, the s and p 500, we do it for 4,000 companies, but with regards to the s and p five, we take all the estimates and then we look at them how they're moving across seven days, 30 days, 90 days if they're going up or down.

But we're taking a look at the percent, the rate of change those estimates, so. We always at the earnings out say it's not about investments are going up or down, that doesn't matter for stock prices. It matters if the estimates are getting better or worse, and the only way you see that is rate of change.

So in Alligator Jaw, we define as a divergence that occurs when you have two [00:04:00] quarters a row or more, and this would be six months or more of weakening on a rated change basis. S and p 500 estimates. The aggregate as the price keeps going up and up and up. So it's a divergence, it's a two quarter divergence.

And when that happens, it's always been a warning sign for stock. Over the last 35 years, it's happened seven times. It's predicted every major bear market and, every major correction. So at the 2025, we had that alligator jaw, We went bearish until May, until we started to see the close with the price drop last year.

The 19% drop in the price and estimate trends start to improve again this year that's not happening. And Dave, it's actually interesting. We've had that alligator jaw open seven times over the last 35 years. I've never seen the reverse of that. I've never seen stock prices go down for six months or more, and the earnings estimates improve, so the market tends to always go higher.

And we're at all time highs. So it, it does that. So anyone who's been on a long-term [00:05:00] perma bear is wrong and every perma bull's been right, but we're looking at the actual estimate data to see that there's never been the reverse of that occur. But what we did see. Beginning at the end of January this year.

Is the price dropped. We had a 9% correction in the market, and during that entire time, the estimates were improving. So we had a two month divergence. So it's not enough to say it's a rocket ship, but if I define the negative divergence, weak earnings, rising price with an alligator for six months or more, if I ever get.

Two quarters in a row of improving earnings and falling price. Gonna flag that with a rocket ship. And I flagged it with a rocket ship because we had two months and said, Hey, if we get some fear subsiding on Iran, the earnings estimates are improving here. And we don't see this. positives don't last long in the market, so you need to be prepared for it.

And, , that's what we wore for and it certainly has rocket shipped, , since March 30th.

Dave: It's felt that way with the s and p closing above 7,000 for the first time here this week, which is a pretty impressive milestone [00:06:00] to eclipse and to your, to your point know, I follow your work closely. I, I enjoy sort of reading your comments , on what's going on and as you mentioned, you've been tracking during that pullback sort of around the, the conflict in the Middle East earnings remaining quite strong.

And I think that was. One of the data points that, that I was seeing , from you that really, really resonated. When we've thought about the impact on events in the Middle East, you know, there's sort of that headline impact, that headline reaction that we saw with, you know, a big sell off as hostilities began.

Big recovery as a ceasefire was announced. We've had a lot of volatility in equities. Earnings have remained fairly strong. What do you make of the argument that the impact of what's happening in Middle East now is not something that's gonna be felt in earnings until down the road? Is there a lag that we're just waiting for potentially?

Nick: That's a great question. So we look at the spike in oil prices, that was the main driver of the sell off, right? Everyone was worried about that and saying it's eventually gonna hit earnings. . And people say it's not about earnings, about oil. I, I always say it's always [00:07:00] about earnings. Oil's a variable that impacts the future earnings and the market trades off of that.

It was interesting to me because we knew the spike was coming in, the oil prices and the companies that were reporting February quarter ends during the month of March when we had that big spike in oil prices. They were guiding the analysts higher after reporting, and you would think, why are they doing that?

Are you crazy for doing that? So what's going on behind that? And either it's a, they didn't think that the spike in oil was gonna last long, so they didn't forecast it out to the analysts, and the analysts didn't change it. So maybe people do believe it's transitory and then the prices are gonna recede and it's not gonna impact earnings.

6, 9, 12 months from now that it's gonnae back. Maybe that's it. Maybe that's a risk, right? Because if oil prices did go to 200 a barrel and gas went to five or $6 national average on gas prices, it would certainly impact earnings and hit them. But I just don't think people believe , that it was gonna happen and be sustained.

And the companies that were giving the [00:08:00] guidance were seeing other parts of their business that were offsetting that enough that they could actually raise estimates. And that's very atypical to raise estimates after reporting because. Typically after companies report, they tend to their expectations to Wall Street to get them cut estimate to lower the, so.

Dave: Uh, no, some really good points in there, Nick. I guess another way to think about this, there's generally this sense as the s and p's pushing above 7,000. There's definitely a sense last year into the end of last year, beginning of January, that the market felt very overextended. It felt like we were leaning way over our skis, , and that, some sort of pullback, we were overdue for a pullback because of that strength.

How does that strengthen the market? Compared to what you're seeing in terms of earnings expectations , is the trend that we're now seeing, maybe resuming to the upside, you know, would you characterize it as justified by the earnings data that you're reviewing here today?

Nick: Well, if I look at last year, you know, [00:09:00] just before as Trump was escalating tariffs, and then this year, , the difference was last year at this time it was the market was over Senate. We had the alligator drought, we had weakening earnings, and then Trump. Escalated the tariffs and was on the verge of creating a global economic trade war, which would not have been good for anyone.

Global trade wars, like global thermonuclear wars, it's a game where nobody wins. , So Trump needed to do the pause for the. Adjust to the worst case scenario. And then when he paused, it allowed the estimates to start improving. And if you think about it, last year, at this time, in April, 2025, just before Trump paused the tariffs, most companies did not know what tariffs were gonna be like.

So they were making an extra five to 10% hit to their earnings for the uncertainty to lower the ball, to party the amus. The moment on April 9th when Trump came out of 2025 and paused tariffs. That extra five to 10% hit that the companies were guiding the analyst [00:10:00] with went away. So it was an automatic improvement in the earnings, and we've had that improving earnings trends.

Persist the entire time since that time. So that momentum is very positive. That's the difference. This year we got positive earnings momentum. Last year we had negative until that pause came. So that's the difference. And the thing I think that's really interesting here is Trump is, I always say he's predictably unpredictable.

Um, we, he escalates the situation. This is his of the deal, negotiating tactics. I believe last year he threw out the worst case scenario. With Liberation Day, with tariffs on hundreds of countries, all at once, 200%. He throws out the worst case scenario. I don't think for a second that he means that, but yet that's his starting point to negotiate and go back to then ease it back to get a deal that he wants.

I believe this year's liberation day to meet his worst case scenario is when he came out, tweeted.

I can't honestly think of a worse outcome than that. I don't think Trump actually meant he was [00:11:00] gonna end a civilization, but he throws that out there to scare the Iranians and then he's gonna negotiate from there and then try to get a better arrangement and deal and, and posture for the us. So that may have been the moment that I think the market then digested and said, well, here's the worst case scenario here.

It can only get better.

Dave: you know, when you're, when you're thinking about conditions right now with earnings, which appear relatively strong to your point, how do you reconcile that? I think, you know, one of the concerning sort of broader economic indicators has been weaker consumer sentiment.

Signs that consumer sentiment is at relatively low levels. How do we reconcile estimates that appear pretty constructive? A consumer, you know, data that that appears less than ideal. How do we marry those two? Or how, how do we reconcile that?

Nick: So a lot of the economic data points we always say can be noisy and you can drown in that data. And some of those sentiment polls tend to be more based on your political position. It had to be biased samples, if you will. Whereas [00:12:00] we look at the earnings tell the real, it separates the signal from noise because consumers can say they feel not that confident.

But if they keep going out and spending, it gets reflected in the earnings data. So that's why we always say we try to drown out that noise if you'll, and not drown in the overall data and the delta to the earnings estimates. Tell us everything about what's going on as opposed to speculating. Now, if you know for sure if the consumer's gonna scale back, which I've never been able to predict, human buying patterns.

I never knew like the pet rock was gonna take off or fidget spins in 16 with kids. I can never predict what fashion trends are gonna go, but people pick up on that and go, uh, and we always say it gets reflected earnings data. So that really helps us eliminate some of the noise from some of the economic data points.

And I really think you can in a lot of those economic data points.

Dave: that's some really good points in there, Nick and again, having followed your work now for a number of years, I think that's what's most refreshing of how you approach things. , It's really focused on. Trends in earnings, and this is not the first time, what happened more [00:13:00] recently where the market does one thing and you come out and say, look, the earnings seem fine.

And sure enough, the market's recovered quite well. So, To your credit, I think that's, served you quite well and I, appreciate you, , helping us focus on the signal versus the noise. You know, just kind of pivoting a lit a bit and thinking about this current earning season that now , we're embarking on.

We've started now. And I think in your, you know, most recent note, I think it was like nine, 10% or so of the s and p companies have reported so far. It's been a lot of banks, a lot of financials so far. Any kind of early takeaways from what we've seen, , that, you know, exudes more optimism, more or less, relative to expectations going into the season here.

Nick: Yeah, so we're just under 10% of the s and p that have given us actual results to see above trend growth above normal beat rates on the estimates. And we always say the beat rate, whether they beat the first quarter numbers or not, doesn't really matter. It's all about. The estimate changes that go on, and that's the most important thing that we're looking at.

And the outlooks the companies are giving right [00:14:00] now that have reported it's only 10%, so we got 90% to go. But thi this tends to be a great sample of what's gonna happen and be the trend for the rest. That report we're seeing companies guide. , Better than they did three months ago, six months ago, nine months ago.

So it shows the positive revision momentum is intact, and so the rocket ship should remain intact here until we start to see deterioration and maybe those consumer sentiment. It, maybe it does hit if oil prices stay elevated for an extended time, maybe we start to see it go, but we'll notice it in the delta.

We're not seeing.

Dave: It's so interesting you, you made a comment just there Nick, in passing and I'd love to just spend a moment, . Pars that out a little bit. You had mentioned, it's not about the company beating estimates for the quarter, it's about the delta in estimates.

And that's something I learned years ago from meeting you and learning about your work. I'm like, oh, and you have the evidence to back it up. So my question is, why do we still focus so much on companies beating estimates? Versus some of the data, [00:15:00] that certainly appears to be much more helpful at understanding the earnings potential going forward.

Nick: I believe the smart money knows it's about the delta. I think it's just ingrained in us to go, it's like getting this, you watch SportsCenter in the morning, who won the game last night? Who you wanna know who won the game last night? You wanna see what happened. But when it comes to stocks, it's not about who won the game night because.

The definition of a stock price is the future value or the present value of the future cash flows. So every day the market's open. It's not trading off of what's happening in earnings or what happened three months ago on earnings. It's predicting what's gonna happen to earnings a year from now. And then the change of those expectations over time that new pieces of information come out.

But I think it's inherent all of us to know what's the scorecard, what's meeting, and, and there is good data to be in there. You need to know who won the game last night. To be able to tell how they're doing, to see if they can do well in the future, in the guidance. , But it is all about the delta and that a lot of parts where we don't wanna focus on just the beat alone.

Those numbers tend to get [00:16:00] manipulated. They tend to get, , low balled by the company. So you always have about 80% beating the estimates. So when that happens every quarter, it's not that much of a surprise anymore.

Dave: Epic sports analogy right there, Nick. Well done. I'll I'll take that one. We'll remember that for sure. So as we, you know, progress past the financials that get into some of the other areas of the market, you know, technology is about 30, 35% of the weight in the s and p, it's obviously a pretty significant weight.

we've seen signs of a resurgence of optimism. In the AI trade, most recently now software companies starting to improve quite again in technology and some of the AI related areas in particular. Can you speak to, again, is it similar to what we've talked about with other areas where the estimates revisions remain constructive?

Are there any warning signs that you're seeing in those that would make you skeptical of this resumption of the AI trade?

Nick: I think the fear for the software companies. That seems like a legit fear, right? So if Adobe gonna sell [00:17:00] less.

We're just not seeing it from the analysts changing 'em yet. So is the sell side too slow and the buy side quick? But there is a disconnect there going on right now, and that disconnect won't last long either someone's gonna be right, so maybe the fear is gonna prove to be excessive. Companies and what it does, you're gonna wanna buy those, improving earnings at a cheaper price and they're gonna be some of the best values in the market.

and then other parts of the ai, they're just still booming. Nvidia, Broadcom, A SML, , we've never saw that. Their estimates. Take hit whatsoever. The estimates are going up at increasing rates, say Nvidia, and the only thing that happened was a 10, 20, 30, 20% pullback. So we said, you know, they're on too expensive year.

You got a discount there's a price tag. There's a 20% off sale, on video Well, maybe not anymore given the runup. , It's had this month, but it [00:18:00] was there. , And a lot of people, I always find this interesting when it comes to the market. They'll see the market go down 20% and get scared and wanna run out, versus the market goes up 20% and they feel safer to them.

So I, I look at it like it's all, all relative to the earnings and relative to the price and, and what value you getting for that price.

Dave: You know, outside of the technology, kind of AI trade, other areas of the market, have not looked anywhere near as strong as the markets themselves. Right. And we've seen that in, in areas like consumer staples, where we've had some pretty challenging performance over the last 12 months versus the strength that we've seen elsewhere.

Do you see any of those sorts of, areas of the market where it feels like things are mispriced, where the earnings is, justifying a better price performance than what we're actually observing these days?

Nick: Staples was coming outta the gate this year starting to outperform again, but. Since March 30th turned it's been tech. It's been the Mag seven, right? That's where it's going. We actually thought that that was the most mispriced area of the economy. 'cause you got to [00:19:00] buy the areas in the economy that have the best earnings, the most rapid acceleration and earnings momentum.

At discounts. So the market's quickly readjusting back to that once the fear has subsided somewhat from the Iranian war and keep mind the Iranian war, the conflict that might drag on. But as long as the worst of what we thought about it is behind us and the delta can go up higher from here, that could be great 'cause if oil prices go up, , and keep going up.

But if the rate of change of what oil prices go up. It gets factored in so that momentum slows. We always say it's not just about the earnings momentum rate of change, it's the delta on everything the market looks at and even the price you can, I know, um, you're great at technical analysis, then there's something to be said there about the price momentum changing and all that.

And I think that's because a lot of this information on earnings, I hate to say it, sometimes the insiders leak that information out and that's why the price sees it first too. Something. I've always, you gotta look technicals with the fundamentals because when [00:20:00] you marry the two, then you get that completely that yes this is the state of the trend.

Dave: I promise I did not, uh, encourage you to make that comment, Nick, but I'm glad that you did, and I would wholeheartedly agree that's, you know, through most of my career, it's been working with investors that focus a lot on earnings and the narrative and. Earnings growth over multiple cycles. But when you combine strong price action and improving price momentum with improving earnings momentum, that's when you c you come up with some really, really powerful combinations.

So thanks for articulating that so well.

Nick: I say when you got one plus one starts to equal three.

Dave: That's, I think that's well said. So you'd mentioned you cover thousands of companies, which means you are obviously getting down into the mid cap and then the small cap space. , I feel like we've been announcing the return of small caps many, many times over recent years, and it's just never materialized because of, you know, sort of the large mega cap dominance.

Are you seeing opportunities in the small cap space? You know, is there strength to be had there [00:21:00] or is it still just sort of, in a backseat to the other areas?

Nick: You know, it's against the playbook. So when we got. An extended bull market when it starts, small cap should be the ones leading out of the gate. They're the high beta plays, right? They should be the ones taking off. I think something structurally have changed , and it's with private equity. I think a lot of the great small companies have just paused for so long before going public.

They wait, they stay private longer. So some of the great companies that could give us that boost early aren't there. and then they wait to go public when they're already. And the large cap space. So I think that has structurally changed from 20, 30 years ago, I think, because companies hold off on, you know, being private for a longer time now.

The earnings trends are about the same right now, so we have roughly a equal weighted view of large cap versus small. , But at the same time, we think the short term trend here, we've been saying overweight the mag seven, but. As they're outperforming here and they skyrocketing off, we do [00:22:00] factor.

So our scores are getting lower and lower now, for compared to were back on March 30th.

Dave: Great points there, uh, , Nick, and thanks for that one other question I wanted to ask you about. , And I remember 10, 15 years ago, a water cooler discussion at a big firm. We were talking about. Quarterly earnings reports because outside the US there's some places where it's like a semi-annual reporting cycle or something like that.

And, you know, debating the strengths or weaknesses , of the quarterly earnings cycle and what it means. And I've heard rumors once again of that being discussed about maybe getting away from that quarterly earnings cycle. How do you think about that potential change?

Are there positives to that sort of, , evolution? Are there benefits to the quarterly data that you think outweigh the, you know, challenges more the short-termism with management? , How do you think about that potential change?

Nick: I think for the companies that truly think long term, and don't worry about the quarterly earnings, they can do a good job of guiding the analyst community. Say, okay, here's what we're [00:23:00] doing in the short term. These are the expectations. Here's what we're doing in the long term. And they can still report the quarterly numbers because some of the companies that might not be as open and honest, I think we need to see what they're doing.

at the end of the day, when you buy a stock, you're an owner in the business. And so if you are an owner in any business, you're invest in, whether it's a private business, whether it's a public, how is you gonna measure your success other than the money you're making off of it?

Right? Is the business making money? And so if you don't know that and people are disclosing that from you longer and longer, and saying, uh, just trust me, I got it. that would be, the longer reporting cycle. Now, at the same time, I don't want companies that feel the pressure to manage the every quarter of earnings and every, and then they're being too shortsighted to the long term.

But I think a good management team can manage the short term expectations. Say, Hey, we're spending here in the near term the CapEx, but it's gonna lead to X out into the future. And then their trusting credibility means everything to the Wall Street community. So. It's up to, I think to have a good communicator at the m and that's what [00:24:00] CEOs and CFOs should be to outline their against that.

And earnings probably have some F in.

Dave: I, yeah, I, it, it's hard for me to thinking that moving to a, i, I guess some sort of less transparency seems like a good thing , in my mind I would say the more the better. But Your point. It seems like a scapegoat more than anything. I mean good companies with good management shouldn't have a problem with keeping, , shareholders updated and also having an appropriate long-term focus.

Nick: Dave, the example was Amazon, Jeff Bezos. They used to lose money in the near term, but Bezos did a great job of explaining this is what we're doing. We're spending money, and yes, we're gonna lose money over the next one to two years, but we're gonna build something huge here. And he did a phenomenal job of Wall Street and he, and you know what?

He lived up to, what he said. So he had the credibility there. Not everyone is Jeff Bezos though. . Uh. Amazon was, that prime example. , And their quarterly earnings kind of looked crummy initially, but yet [00:25:00] higher.

Dave: Well, one final question actually, Nick, , I was thinking one other thing to ask you about is the Fed and just the interest rate environment I think I know the answer, but I'd love for you to articulate for people because you do such a great job of looking.

Bottom up analysis of all these companies and their earnings estimates and revisions, and then rolling that up to sort of a, a market view based on the bottom up strength there. How does it change in, expected fed policy from, you know, potential rate cuts to. Now very few rate cuts to even a rate hike was even discussed as a potential thing happening.

How does that impact, companies, is that the kind of thing that you would see baked into, estimate revisions in some meaningful way? Or how do you reconcile sort of a macro factor like that versus the bottom up work of really thinking about companies and their earnings potential?

Nick: Yeah, I mean the level of interest rates is maybe the most important variable. Like oil prices are a variable impact feature, and the level of interest rates is an [00:26:00] important variable to determine of where future earnings are gonna be. If, if interest rates went to a hundred percent overnight, earnings are gonna take a massive hit, the interest burden, everything would go down and, the payment, could be no disposable income from consumers at that point?

Right? So it's an important determinant. I look at it like this from the standpoint. When you have above trend growth and outlook's improving, you don't need rate cuts. And particularly with the elevated oil prices, I think that would be a huge mistake to cut rates at this point. , I don't think we need to raise 'em either because I don't know that the spike in oil prices are gonna be sustainable.

I just think the Feds standing pat right now is the right move, uh, to do it. And I know the administration is trying to pressure. Rate cuts, but I don't know that you wanna cut rates with oil above a hundred dollars either. And, the core inflation rate above the Fred's comfort zone as well.

So I think we don't need rate cuts right now. The earnings are strong enough, but I, I know a lot of times the market. It becomes addicted to those rate cuts and wants those [00:27:00] rate cuts, but I only say you need rate cuts. When the estimates are weakening and the outlook for the economy's weakening and inflation's not a problem, then you wanna stimulate and lower rates to get it back up, but not when you have above trend growth and improving earnings.

The last time we had. Was 20, 20, 21. They too for too long and had inflation problem. Certainly Jerome Powel, at the end of his tenure doesn't want to make the same mistake twice.

Dave: Well said, Nick. Listen, I've always told people during periods of market uncertainty, you want to listen to voices that have a proper long-term perspective and focus on the evidence and. And its meaning. And I think you're one of the best at that. , So thanks for coming on the show, Nick. Thanks for what you're doing.

Spreading the gospel of appropriate analysis of the earnings, environment. And, uh, we'd love to keep the conversation going, uh, later. But for now, thanks for coming on the show. 

Nick: Thanks for having me Dave. 

​

Dave: I hope you enjoyed that interview with, [00:28:00] Nick ish and, uh, thanks again, Nick, for coming on the show again. Nick was on the show, uh, about a year ago. It's been too long since I had him on before. And, you know, uh, I really am glad that he sort of compared and contrasted the conditions that he observed the last time we spoke, which is sort of, you know, just after the April market low in 2025.

Then just talked about the conditions, uh, now , not just what's happening in the Middle East and, uh, oil prices and interest rates, but just the difference in those environments. Back, uh, a year ago we were talking about that alligator jaw configuration, which is something that, you know, Nick, to his credit, , often has highlighted, , with great success in his research where you have strong price action that's not supported by strong earnings estimate revisions.

And that usually is a really, really negative sign. As he wrote his recent note, this is not an alligator draw. This is more of a rocket ship where prices going higher, but it's really supported by fairly robust earnings estimate revisions. We haven't had a lot of downgrades, haven't had, uh, analysts, uh, you know, pricing any and any sort of [00:29:00] significant impact.

To recent events, earnings have remained robust and I'm glad he is able to talk through some of the things to look for here in the weeks to come as we, , think about earnings from technology, some of the big, uh, growth names, uh, et cetera. Really appreciate his comment if you call him, when we were talking about, how strength in earnings estimates relates to, sort of expected weakness or essentially weakness in consumer sentiment, consumer surveys.

And I think his comments have really look. Consumer sentiment is kind of what people are saying, right? That's sort of the idea of what they're thinking. Earnings estimate is really analyzing and projecting how consumers are voting with their capital, right? With their wallets. Are they actually spending money?

Are companies planning, and projecting. Continued growth and earnings based on, , consumer behavior. And this is one of those times where there's a bit of a disconnect. And when you have that disconnect, it's much better to pay attention to kind of the, the earnings side of things. Would've been his argument really valuable.

And I, I would say one of the ways that I've [00:30:00] really. , Enjoyed navigating challenging market periods like we're observing here in 2026 with all the volatility the sudden, , downswings, the sudden upswings, , et cetera. Talking to people like Nick who have seen these sort of environments before, not exactly this, but enough different cycles to recognize some of the most important, , information won't wanna pay attention to.

And, uh, really at the end there, , enjoyed his comments about, , interest rates and why those are so. Essential as part of the, valuation process and how we're actually able to calculate the future value of, uh, of, uh, projected earnings. What a great take there.

And again, thanks again for Nick Raach, , joining us on the show. We'll try to make it not so long before we have Nick on again, because, , every time it comes to earning season, I always pay a little bit more attention to Nick's work. You can find more information about. , Him and his products that he offers@ourearningsscout.com.

By the way, if you wanna learn more about sort of the price side of the equation, earnings are valuable as Nick offered up, and I promise I did not ask him to mention this, but I [00:31:00] would have had, I thought he would, uh, put it so eloquently. He had mentioned, look, this is why you really have to combine the earnings with the technicals because a lot of times the charts will anticipate changes before they may be reflected in some of those quarterly earnings reports, and I appreciate 'em.

Talking about and introducing, and recognizing the value of combining those two in a meaningful way. So, uh, after this discussion on earnings, if you want to, uh, upgrade your own ability to analyze price action, to think about price momentum, and try to identify potential new leadership as these markets evolved in 2026.

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That'll do it for today. Thanks so much for joining me here on the Market Misbehavior Podcast. My name is Dave Keller with Market Misbehavior reminding you it's always a good time to own good charts. Take care folks.