Wall Street questions Trump's proposal, can the SEC approve changing quarterly reports to semi-annual reports? Increased uncertainty? More volatility in the stock market?

This Monday, U.S. President Trump proposed that companies should no longer release financial reports quarterly, but instead semi-annually, claiming that this move would save costs and allow management to focus on company operations. Wall Street reacted mixed to this proposal, with some analysts estimating a 60% chance of it passing, while most market participants are concerned that this change would reduce transparency and increase volatility in the stock market.

The current quarterly reporting system was implemented by the U.S. Securities and Exchange Commission (SEC) in 1970, aimed at improving market transparency following the 1929 stock market crash. Earlier, Wall Street Insights mentioned that procedurally, changing the quarterly reporting system does not require support from the U.S. Congress, but only needs a majority vote within the SEC. Currently, three of the SEC commissioners are Republicans, one is a Democrat, and one commissioner position is vacant.

Analyst Jaret Seiberg from TD Cowen predicts a 60% chance that the SEC will advance Trump's proposal for semi-annual reporting. Sarah Bianchi, Chief Strategist for International Political Affairs and Public Policy at Evercore ISI, stated that the process of changing from quarterly to semi-annual reports could take 6 to 12 months.

Although the SEC may modify the quarterly reporting system that has been in place for over fifty years as Trump wishes, Wall Street professionals are raising concerns about the potential negative impacts of the proposal. Market observers worry that reducing the frequency of financial report disclosures by listed companies will weaken accountability and increase stock market volatility. Investment institutions warn that longer reporting intervals will increase uncertainty.

Sameer Samana, Head of Global Equities and Real Assets at Wells Fargo Investment Institute, stated, "In investing, more information at a higher frequency is always better than less information at a lower frequency."

Policy Analysts Predict Divergent Implementation Probabilities

Jaret Seiberg from TD Cowen believes that for Trump's nominee for SEC Chairman Paul Atkins, fulfilling Trump's proposal seems

"like an easy policy victory to present to the president. It also aligns with his focus on deregulation. Therefore, we believe that the shift from quarterly to semi-annual reports has moved from impossible to possible, although it is not a done deal."

He also predicts that SEC staff "will need at least six months to draft the proposal and gather the economic data required for the rule change to pass judicial review."

Sarah Bianchi, Senior Managing Director at Evercore ISI, takes a more cautious stance. She noted:

"Our initial judgment is that Trump is unlikely to push for aggressive follow-up in the near term, and Atkins will have space to initiate the normal SEC procedures."

Ed Mills, a Washington policy analyst at Raymond James, questioned the feasibility of the change, stating:

"Quarterly reports are unlikely to disappear, as they are required by the Securities Exchange Act of 1934. I don't think Congress will change this requirement. The recent action by Congress was to strengthen these reporting requirements through the Sarbanes-Oxley Act."

Investment Managers Concerned About Decreased Transparency

Several investment professionals have expressed concerns about reduced transparency.

Kim Forrest, Chief Investment Officer of Bokeh Capital Partners, believes:

"This is bad for portfolio managers because it reduces two channels of communication: companies (financial reports) disclose specific facts, and most companies engage in dialogue during (earnings) conference calls. These public Q&A sessions generate important information. Missing these will weaken all investors' ability to better understand the company's prospects."

Samana from Wells Fargo Investment Institute emphasized the importance of information frequency: "From a high level, longer reporting intervals will lead to greater uncertainty. Greater uncertainty will also exacerbate market/price volatility when companies do report."

Brian Nick, Head of Portfolio Strategy at Newedge Wealth, pointed out the potential valuation impact, stating:

"While the (Trump-proposed) goal is to make investors and companies more focused on long-term development, this will increase uncertainty in the stock market and may lead to a decline in valuations (i.e., higher risk premiums) due to the reduced frequency of new information releases. As the probability of underperformance increases and the impact becomes greater, the volatility during earnings season may also increase."

Market Volatility May Intensify

Analysts generally expect that reduced reporting frequency will increase market volatility.

Matt Maley, Chief Market Strategist at Miller Tabak + Co., stated: "The lack of transparency will increase the difficulty for investors, but it will also free up company management to focus more long-term on the business. This is definitely a double-edged sword. It will raise the bar for accurate analysis on Wall Street. This is also negative for options traders, as they make a lot of money when companies report earnings."

Michael Kantrowitz, Chief Investment Strategist at Piper Sandler & Co., expressed support: "To this, I say Amen! The Federal Reserve should also 'stabilize proactively' rather than react aggressively—combining both may significantly reduce stock market volatility and decrease short-sighted behavior."

The current quarterly reporting system has been a cornerstone of transparency in the U.S. market since its implementation in 1970. The proposed changes would bring the U.S. closer to the semi-annual reporting system of the UK and EU, but critics argue that this could weaken the informational advantage of the U.S. market.

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