The big things you need to know: First, takeaways from last week’s meetings with Australia-based investors, in which our conversations focused on inflation / interest rates / the Fed, the US midterm elections, and the rotation trade. Second, key big-picture themes in last week’s S&P 500 earnings calls included a cautiously optimistic tone among companies, consumer descriptions that seemed a little more complicated than usual, a renewed conversation on Iran war impacts, heightened attention to inflation pressures, and increasingly specific commentary from non-Tech companies about AI impacts. Third, other things that jump out in our weekly updates include the recent spike in gold prices (which has occurred alongside a drop in presidential approval), recent improvements in the 2Q26 S&P 500 EPS growth rate (which now appears to be the peak), and recent developments in sector funds flows (where Consumer flows have turned positive and Tech flows have stayed positive, among other trends).

If you’d like to hear more, here’s another 5 minutes.

Starting with Takeaway #1: What We Talked About Last Week In Australia

We spent last week meeting with investors in Australia, mostly those focused on equities. We found that most were keen to discuss three bigger-picture issues – inflation and interest rates and their potential impact on US equities, the US midterm elections, and the rotation trade. While we wouldn’t describe the investors we met with as cautious or bearish, an air of concern did permeate all three topics.

• On inflation / interest rates / the Fed: Our meetings occurred prior to Friday’s NFP release, and the clients we spoke with were generally of the opinion that interest rates are moving up, a view that was not dispelled by Warsh’s first press conference the previous week. One top chart in our deck highlighted how (as one investor put it) financial markets have a tendency to test a new Fed Chair. This chart shows how (until our trip to Australia, at least) the S&P 500 had been trading sideways since Warsh took office in May, and how the index also experienced choppy conditions in the first few months after Bernanke, Yellen, and Powell took over the role but was higher one year later for all three of them.

• On the midterms: Like most non-US investors we’ve spoken to this year, our Australian clients tended to see the midterms as a risk factor for the stock market in the months ahead given the poor history of how it has traded around this event in the past. We highlighted how the stock market tends to experience some pressure in the summer months in midterm election years, along with the results of our RBC analyst outlook survey which points to a modestly positive performance bias for stocks in a Republican sweep scenario (due to views of friendlier regulation), a modestly negative performance bias for stocks in a Democratic sweep scenario, and a neutral impact view in a Republican Senate / Democratic sweep scenario.

• On rotation: Generally, the investors we spoke with seemed to be in the broadening camp, even though Large Cap Growth, the S&P 500 Tech sector, and the top-10 market cap names in the S&P 500 have all been outperforming since the broader market bottomed in late July. Cash flow concerns were top of mind for many of our Australian clients. In these discussions, we highlighted the valuation improvement of the big cap Growth trade from a number of different perspectives and noted that the companies with challenging cash flow dynamics were mostly categorized in the Communication Services and Consumer Discretionary sectors in the GICS classification system and not within the Technology sector itself.

After our trip, we took a look at flows from Australia domiciled funds to US and European equities. We found that flows to US equities remain positive, but below peak and not quite as strong recently as those headed to European equities. We think these trends reflect the tone we observed in last week’s meetings.

Moving on to Takeaway #2: What We Read Last Week

As usual our team continued to read through many of last week’s S&P 500 earnings call transcripts, hunting for insights into the macro backdrop and other issues in focus for equity investors, with a focus on interesting tidbits.

• As has been the case throughout 2Q26 reporting season, the overall tone remained cautiously optimistic. Companies generally raised or reiterated guidance. A number of companies highlighted the strength of demand they were seeing across a number of industries despite what one company called a “turbulent economic and political backdrop.” Positive drivers referenced ranged from AI to the World Cup. Commentary around inflationary pressures stood out to us more this past week than it has in prior weeks.

• Consumer assessments got a bit more complicated. We continued to read a lot about resiliency in consumer discussions with positive commentary on leisure travel demand and higher-end consumers, and several companies alluded to a continuation of value-seeking behavior. There were some notable exceptions with one major restaurant chain highlighting “a challenging consumer environment that saw QSR industry traffic in several of our largest markets continue to be flat to negative.” A major beer company also noted the impact of external factors on 2nd-quarter volumes.

• AI commentary continued to highlight the role of the technology as an efficiency and productivity driver outside of the Tech area, and a driver of demand within it. We continue to take note of companies that are able to quantify AI impacts in some way, particularly in regard to cost savings. One Financials company noted their fiscal '27 forecast includes $25 million in AI-driven productivity gains, while a consumer company noted that their AI initiatives were expected to deliver approximately $100 million of in-year savings in fiscal 2027. One Health Care company also noted that return impacts were likely to be in the beginning of 2028. Labor comments last week were mixed, with one company discussing how the technology allowed it to moderate headcount, and another noting the technology would not replace its staff. Overall, the cost-savings story from AI still appears early innings to us, but we think it is heading in the right direction.

Wrapping Up With Takeaway #3: What Else Jumps Out

• One of the more interesting questions that came up at the end of our Australia trip was on gold, and why we thought the commodity might be spiking. We’ve discussed the concept of uncertainty as a driver of gold with Chris Louney, RBC’s Gold Strategist, in the past, noting that one visual helping illustrate this relationship is the inverse correlation between gold and presidential approval that has been seen over time.

• Meanwhile, 2Q26 appears to be the new peak in S&P 500 EPS growth. Based on data through August 7th, 2Q26 yr/yr S&P 500 EPS growth is tracking at 32%, overtaking 1Q26’s growth rate of 30%. This is a new development, as 2Q26 was expected to see a bit of a slowdown in the growth rate based on stats in place in the consensus estimates ahead of this reporting season.

• And on flows, the latest updates from EPFR highlighted a number of interesting developments in flows to global developed markets sector funds including the return of inflows to Consumer funds, outflows from REITs funds, choppy conditions in Telecom/Communication funds, ongoing strength in flows to Tech, Health Care and Financials funds, and continued deterioration in Industrials flows. Energy flows have improved, but we have not seen a return of major inflows.

Before we sign off, one last thought on the market outlook. We remain constructive on the S&P 500 in the year ahead. While we don’t expect the path to be linear, we expect pullbacks to be contained in the 5-10% range as long as risks of a recession and/or major interest rate shock remain low. We continue to believe the major rotation trades are caught in a tug of war. Following the burst of US and Growth leadership we’ve seen in August, we continue to have a bias for US over non-US and Growth over Value but give Growth and US a slighter edge than we did a few weeks ago.

That’s all for now. Thanks for listening. And be sure to reach out to your RBC representative with any questions.