For decades, public American corporations operated by a familiar rhythm: quarterly reports, press releases, and investor calls. The financial calendar was as stable and predictable as the changing seasons. But Donald Trump has suggested tweaking this “natural cycle” by shifting from quarterly to semiannual financial reporting. According to him, such a move would save money and finally allow managers to run companies instead of writing endless reports.
Wall Street, however, greeted the proposal with the same enthusiasm analysts display when reading a Friday evening press release about declining profits. Bloomberg remarked that Trump had, in effect, suggested investors get more silence and less information, though presidents are typically expected to deliver the opposite.
Analysts estimate the odds of the SEC adopting this change at as high as 60%. Other experts are more skeptical, warning of risks ranging from decreased transparency to increased volatility. The less frequently reports are published, they argue, the higher the chances the market will react to rumors, leaks, and tweets, which, after all, fits the spirit of the current era.
Historically, quarterly reporting surfaced after the 1929 crash and became standard in 1970. So, after more than half a century, Wall Street is so used to quarterly financial disclosures that switching to a six-month reporting schedule now appears almost drastic.
What do the experts say?
Jonathan Golub was diplomatic: “Capital markets and our economy in general are more productive when there's more information and transparency.” For traders, this could mean fewer numbers and more volatility.
Ed Mills goes further, calling the rollback unrealistic: “Quarterly reporting is unlikely to go away as it is required in the Exchange Act of 1934.” Indeed, imagining Congress making life easier for corporations is a bit like imagining a tax reform without loopholes.
Samir Samana is even more blunt and warns that “greater uncertainty would also feed into greater market/price volatility.”
“It’s a bad thing for portfolio managers as it removes two points of contact where the company discloses certain facts and most companies offer a dialog on the conference call. Important information comes out of these public Q&A sessions. Missing these would diminish the ability of all investors to better understand the company’s prospects,” Kim Forrest of Bokeh Capital Partners supposes. Investors will no doubt adapt, but for top executives, it could offer a rare six-month reprieve from public scrutiny.
In the end, Trump’s idea is still far from becoming reality, but the mere discussion has shaken up the market. For Wall Street, going without updates for six months is considered highly unrealistic.
