President Donald Trump has floated a lot of ideas since returning to office. One that he keeps going back to again and again is the idea that Wall Street should call it quits on quarterly earnings reports.
Publicly traded companies have been required to report their earnings every three months since 1970. This quarterly reporting regime is part of a strict SEC mandate, and advocates argue it gives investors the transparency they need to make informed decisions on the market.
On the flip side, Trump says quarterly reporting makes U.S. companies less competitive on the global stage. He thinks getting rid of it would free corporations to focus on long-term strategy instead of short-term earnings expectations.
You can kind of see where he’s coming from. But would fewer earnings reports actually be worse for investors? Let’s take a closer look.
Why Does Trump Want to Scrap Quarterly Reporting?
Trump isn’t the first person to advocate for an end to Wall Street’s quarterly reporting requirements. Various campaign groups have been arguing about it for decades. But earlier this month, Trump renewed his focus on this goal and has started piling pressure on the SEC to change its rules.
His primary argument: Quarterly earnings reports encourage short-term thinking.
Because the C-suite is often focused on finishing each quarter on a high, some market watchers say companies spend less time thinking about long-term investments. And it’s true: To hit near-term targets, you’ll often see businesses make cuts to R&D or take on debt that ends up biting them in the future.
You’ve also got to admit the existing quarterly schedule is prone to market volatility. When loads of companies beat or miss earnings in swift succession, the stock market can fall victim to some wild swings. As a result, markets don’t actually reflect business fundamentals — they’re just constantly reacting.
Finally, there’s compliance costs.
Large public companies can spend millions of dollars every year prepping their quarterly reports and accompanying audits. There’s an unconfirmed suspicion these huge regulatory overheads prevent some really promising small companies from going public. The theory is that if quarterly requirements were removed, it would pave the way for a tidal wave of new public listings.
As a result, Trump claims American companies would be more competitive globally. It’d bring the U.S. in line with reporting requirements in a lot of overseas markets, and CEOs would be thinking years ahead instead of 90 days at a time.
What Would Companies Do Instead?
If quarterly reporting were abolished, the SEC would likely scale back to a semiannual reporting model. That means public companies would be required to submit their earnings twice a year, which is what happens in other Western economies like the U.K. and Europe.
Reporting requirements would almost certainly remain the same in terms of the type of information companies would need to disclose. That means you could still expect to see a company’s income statement, balance sheet, statement of cash flows, and disclosures. You just wouldn’t see it as often.
That being said, it’s difficult to imagine large companies giving shareholders total radio silence in between semiannual reports.
It’s likely we’d see many businesses willingly provide quarterly updates without earnings — offering cherry-picked metrics like revenue or subscriber counts as and when it serves them.
Similarly, a lot of CEOs would probably shift to regular guidance adjustments as a way to prepare investors for material changes. These “pre-announcements” are commonly used in Europe to preempt nasty surprises.
That means investors wouldn’t be totally in the dark when a company runs into turbulence. But those warnings wouldn’t be a regulatory requirement, and it'd be up to executives to come forward with important developments.
What Would Change for Investors Without Quarterly Earnings Reports?
The single biggest change for investors would be less transparency.
Quarterly reports give shareholders a regular snapshot of how companies are performing. Without those snapshots, it’d be way harder for investors to spot early warning signs. Revenue slowdowns, accounting problems, or margin compression could take months to surface. That means when things finally did come to a head, the damage would be compounded.
The consequence is greater uncertainty, and more violent price swings when earnings do come out.
As a result, it’s difficult to buy into the assertion that scrapping quarterly reporting would create less volatility. It would just create delayed volatility.
There’d be less frequent earnings-day shocks, sure. But when those shocks do come, they’d drive even larger moves and huge corrections and would leave markets way out of balance.
That creates a tougher environment for retail investors. They’d be the real losers because they rely on regular earnings updates to guide decision-making. Some valuations could end up getting inflated due to a lack of data, which creates a higher risk premium for buying stocks.
Institutional investors wouldn’t feel a huge impact because they’ve got so many analysts working away to compensate for information gaps. But a move away from the quarterly system would require those big firms to shift strategy toward longer-term horizons.
A lot of active traders thrive on earnings-driven catalysts, and those wouldn’t be happening as often. So instead, investors would need to place more faith in a company’s long-term strategy and be willing to discount quarterly misses. Very few investors are willing to go on good faith.
At the end of the day, it really is a tricky one.
You can see what Trump is talking about. The quarterly reporting system does place a lot of emphasis on short-term earnings, creates volatility, and probably deters startups from going public.
But believe it or not, the alternative could be worse. We’d be looking at significantly less transparency, bigger and more unpredictable market swings, and unrealistic valuations that price retail investors out of the market. In this case, quarterly reporting may be the lesser of two evils.
For now, we’ll just have to sit tight and see what happens. The SEC has a lot to think about here — and if things do change, it’ll mean some fundamental changes for how many of us trade and invest.
