If you’d like to hear more, here’s another five minutes.
Starting with Takeaway #1: The stats for 2Q26 reporting season have continued to come in mixed, arguing for selectivity rather than a leadership rotation, in our view.
• One thing that continues to jump out at us is our work showing that the percent of S&P 500 companies beating consensus on EPS forecasts is up vs. last quarter for the S&P 500, but that the beat rate has fallen on revenues. This supports the idea that companies are doing a good job managing through a tricky macro backdrop, but that they have still been impacted by it in some ways they can’t escape.
, AI, non-AI, and the Russell:
• We continue to see strong rates of upward EPS estimate revisions for Tech as a whole and Semis specifically, Industrials, and Financials. On the latter two, a positive tone has stuck out across the companies we’ve read earnings call transcripts for.
• Zooming out, the 2Q26 EPS growth rate in percentage terms has now moved up to 27%, still a bit of deceleration from 1Q26’s growth rate of 30%, but up meaningfully from the start of reporting season when it was tracking near 23%.
• Financials has shown the biggest move up since mid June, with Energy, Tech, and Industrials not too far behind. Financials and Industrials are still posting growth rates a bit below the broader market, while Tech and Energy are tracking well above the broader market.
• Our valuation analysis continues to suggest Industrials is expensive, while Financials and Tech valuations look reasonable, and Energy looks cheap.
Moving on to Takeaway #2: Last week’s earnings commentary from S&P 500 companies reiterated the themes of resiliency and AI tailwinds, but didn’t give us much insight on how to think about recent war developments.
• On the Consumer – one card company talked about how some impacts have been seen from higher gas prices, but not a general slowdown in spend. We think that’s a good summary of what we’re read so far this reporting season. Some apprehension on big ticket purchases was also noted.
• On AI – we’re trying to stay focused on things that re incremental to the conversation. In that context, a couple of insurance companies stood out positively in discussions about how AI can help their businesses broadly.
• On the War, one of the Rails did note it had seen some customers pulling forward some plastics inventories, a sentiment echoed by a Chemicals company. One company also talked about how if oil stays below $100 it’s manageable but may be more problematic if goes to $110 or $120 for a prolonged period of time. Going forward, we need to see more candor like this from companies and also need to see sell-side analysts do a better job of pressing on this issue in Q&A sessions.
Next, Takeaway #3: how we’re thinking about the role of the retail investor in today’s US equity market, which differs in some respects from the past, and how we’re monitoring risks on this front in terms of data.
• One of the retail brokerages discussed in their earnings call last week how the retail investor has changed – they said, and I quote:
• “As recently as a decade ago, investing skewed towards higher-income, older, college-educated households. Today, stock ownership is at the highest levels we've seen in nearly 20 years. People are investing earlier in their life, and we're seeing engagement across a broader income and education spectrum.”
• They then went on to talk about how interesting things going on are keeping the retail investor engaged.
• On the data side, we’re watching three things
• First, FINRA margin debt, which has climbed and is high, but moves coincidently with the stock market.
• Second, household stakes in US equities as a percent of financial assets as tracked by the Fed – this has also been hitting new highs, but often tracks inflation.
hit a new high in the Fall of:
• We think it’s fair to view froth in the retail part of the US equity market as a risk factor to keep a close eye on, but would be more spooked by a degradation in trends than high levels on their own given the dynamics the retail brokerage firm discussed.
And wrapping up quickly with Takeaway #4: Other things that jump out in our updates this week.
• The first of these is S&P 500 Semi & Semi Equipment valuations.
e highlighted in our work on R:
• The second of these is the bright spots we’re seeing in our quant work on Japan – specifically, positive flows, attractive valuations, and EPS revisions that are trending higher.
That’s all for now. Thanks for listening. And be sure to reach out to your RBC representative with any questions.
