Earnings Will Boost Stocks Despite Tariff Risks, Survey Shows

A recent Markets Pulse survey indicates US equities are expected to gain from the second-quarter earnings season, offsetting tariff risks. Nearly two-thirds of 102 participants anticipate stocks will deliver better volatility-adjusted returns than Treasuries, with the technology sector poised for the strongest performance. However, the consumer discretionary sector is identified as most vulnerable to potential tariff impacts.

Analysis

A July 10-17 Markets Pulse survey indicates a prevailing bullish sentiment for U.S. equities heading into the second-quarter earnings season, with market participants largely expecting strong corporate performance to overshadow macroeconomic risks from tariffs. According to the poll of 102 participants, nearly two-thirds anticipate equities will generate superior volatility-adjusted returns compared to Treasuries. This optimism is primarily anchored in the technology sector, which respondents believe is poised to be the strongest performer. Conversely, the survey highlights a significant risk concentration in the consumer discretionary sector, identifying it as the most vulnerable to the adverse effects of trade tariffs. The findings suggest a bifurcated market view, where strong fundamental expectations in key growth sectors are currently outweighing broader geopolitical uncertainties.

Key Decisions for Investors

• Investors could consider overweighting technology sector holdings, as survey sentiment points to it being the strongest performer this earnings season.
• It is prudent to review and potentially limit exposure to the consumer discretionary sector, which has been identified as the most vulnerable to tariff-related headwinds.
• Consider maintaining a strategic allocation favoring equities over bonds, as the survey indicates an expectation of better risk-adjusted returns from stocks.
• Monitor early earnings reports closely to validate whether corporate strength, particularly in technology, is indeed offsetting the margin pressures from tariffs.