If quarterly earnings and Fed guidance both get cut back, what will the market price on?
Put simply, Fed funds rates tend to be increased (cut) after short term treasury rates have gone up (down), suggesting that the Fed is mimicking the market.
On 5 May the US Securities and Exchange Commission proposed a rule change that would let public companies report twice a year instead of filing quarterly reports. Kevin Warsh, the new Fed chair, has taken the language that signals the next move on rates out of the FOMC statement altogether. On the corporate side and the central bank side at once, the dated deliveries of news that markets price against are being cut back.
The proposal does not abolish quarterly reporting. It opens a semiannual option for companies that want it and leaves the quarterly report in place, a narrower change than the replacement of quarterly with semiannual reporting the post takes as its premise.
2026-05-05 · SEC press release 2026-42
Why these two stories sit together
Both remove information that markets had been receiving on a schedule. The case for removal rhymes too. Quarterly reports are said to chain companies to the next three months, and Fed guidance is said to push investors into reading the committee instead of the businesses they own. The case against rhymes as well. Take away the material prices are set on and those prices swing more and carry less information.
Where Damodaran splits the two
He does not give the same answer twice. He would keep the quarterly report and cut the Fed's guidance. What he would strip out of the quarterly filing is not the financial statements but the risk disclosure section and the earnings guidance companies volunteer. The share of US listed companies issuing guidance topped half in 2003 and is now around 20%. Reports ran 2,000 to 5,000 words in 1980 and tripled or quadrupled in size by the early 2000s. The statements stayed the same size. The words piled up around them. He also declines the short-termism argument. Traders with short horizons are the people standing on the other side of your order, and the mass of those trades still produces a price that holds up over a long horizon.
Countries that dropped quarterly reports
The European Union made quarterly reporting mandatory in 2007 and withdrew it in 2013. Britain and Singapore added it and then backed away, and Japan ended its quarterly filing requirement in 2024. The same experiment has run in several places and has mostly been reversed.
Why he lands the other way on the Fed
His reason for backing less Fed guidance is his own reading that the Fed is not what sets the direction of rates. Measured from January 1962 through June of this year, the Fed funds rate goes up or down after short term Treasury rates have already moved. Most of the variation in long rates, he adds, is explained by inflation and real growth. If that holds, cutting back on advance signals removes less information than it appears to.
Fed policymakers leave rates unchanged, three officials dissent in favour of a hike (Fox Business, 2026-07-29)The day the post went up, 29 July, happened to be the first test of that experiment. The Fed held its policy rate at 3.50% to 3.75% on a 9 to 3 vote, and all three dissents were for a quarter point increase. The statement carried no line about where rates go next. With the signal gone, what showed through was the spread of views inside the committee.
What we will be watching
The question comes down to one thing. What fills the space that disclosure and guidance leave behind. If financial statements and inflation and growth data fill it, Damodaran's reading was right. If investors who cannot wait six months fill it with private data sets and readings of central bank remarks, the information did not shrink. It moved somewhere more expensive. For an individual investor that difference matters. A public filing reaches everyone on the same day at the same price. What replaces it reaches whoever paid for it first.
- The SEC has proposed letting public companies report twice a year, and the new Fed chair has removed forward guidance from the FOMC statement.
- On the surface these are two moves in the same direction: strip out information that feeds short horizons and Fed watching.
- Damodaran splits them. He would keep the financial statements and cut company guidance, and he would accept less Fed guidance, on the reading that the Fed has been following market rates rather than setting them.
What happened next
Awaiting gradingIn the first half of 2027, score whether the SEC adopted the semiannual reporting rule and whether any listed company actually elected it.