From the studio

Podcast: (7 min)
Podcast: Jump Start: Trade deals and the Fed's independence (5 min)
Podcast: Investors Club: CIO’s Tan Teck Leng on our revised EURUSD forecasts and more (11 min)

Thought of the day

US equities stood at record levels as the second-quarter earnings season got off to an encouraging start. While so far companies representing only 15% of the S&P 500 market capitalization have reported their results, nearly 80% of them are beating earnings per share (EPS) estimates. Earnings guidance for the current quarter has also been better than expected.

With valuations at an elevated level and the market having just experienced one of its strongest pre-earnings season rebounds, the current reporting season may not be enough of a catalyst to drive stocks much higher in the near term. Bouts of volatility are likely in the coming weeks as trade negotiations continue ahead of the new 1 August tariff deadline.

But we continue to expect further gains over the next year, and believe the resilient results so far are a step in the right direction.

A resilient US economy provides a supportive backdrop. Despite continued uncertainty on tariffs and trade policy, US economic data have remained healthy. Retail sales in June grew more than expected, with broad-based advances. Since consumer spending accounts for around 70% of US economic activity, JPMorgan’s recent comments that it is struggling to find signs of weakness in consumer spending point to a resilient economy that should continue to underpin corporate profits. Delta Airlines, in its earnings call, also described the US economy as solid and its core customer as being in good shape.

A weaker dollar offers a tailwind for earnings. Historically, every 10% change in the US dollar has translated into a roughly 2.5% increase in S&P 500 profits. While we could see some near-term support for the dollar, its structural decline remains in motion and will likely become more apparent as economic data weakens later this year. We expect a weaker greenback to continue to boost year-over-year profit growth for the balance of the year.

The One Big Beautiful Bill should stimulate additional capital investment. The One Big Beautiful Bill, which was signed into law earlier this month, includes provisions that should drive a modest boost to near-term cash flows and provide incentives for capital spending. This means companies could be in a position to increase share buybacks, which would bolster earnings growth. A small step up in capital expenditures is also possible, which is usually beneficial for corporate profits as one company’s investment spending is another company’s revenue.

So, while stocks may be due for a breather, we believe the bull market remains intact. We maintain our June 2026 S&P 500 price target of 6,500, and recommend using volatility as an opportunity to phase into markets. Within US equities, we like information technology, communication services, financials, health care, and utilities.