Chart of the Week

Signs from sales

July 15, 2026

Time to Read: 3 mins

Year-to-date stock market returns have been driven by robust earnings growth. But when assessing the equity outlook, it’s important to ask what’s supporting the strong earnings trend.

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As second quarter earnings season gets underway, we look at the historically important variable of sales to understand performance. Corporate earnings are a function of both sales and margins. As we’ve highlighted before, S&P 500 margins are at or near all-time highs because of cost cutting and efficiency gains. But even as margins improve, sales growth remains essential to sustaining earnings momentum.

After a softer period following the post-pandemic boom, sales expectations are improving. Consensus estimates for 12-month forward sales have moved up this year and are nearly 14% higher than a year ago, highlighting the resilience of the broader economy. While sector-specific tailwinds such as AI adoption are helping drive sales and earnings growth, the trend is not limited to technology. Sales for S&P 500 companies outside the technology sector are still expected to increase 8.7% from a year earlier.

In short, rising sales expectations are a positive signal for markets. They suggest analysts expect companies to generate more revenue in the coming year, which can support earnings growth, strengthen corporate fundamentals and renew investor confidence. Although sales growth is nearing the upper end of its historical range and may slow at some point, its broad-based, continued momentum remains a positive signal for our 2026 outlook.

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Getting real with real assets

Inflation appears to have transitioned from its pre-Covid average of 2% to a stickier point closer to 3%, and we do not expect a near-term return to prior levels. In this environment, we believe real assets, such as commodities, infrastructure and REITs, can provide inflation protection, diversification and return potential.

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Not in a bubble

As the S&P 500 approaches all-time highs, there are renewed concerns among investors about elevated valuations. However, historically strong profitability and expected earnings growth appear to support current pricing. In addition, the current S&P 500 price-to-earnings (P/E) ratio is roughly equal to the average since Covid. As a result, we do not view U.S. equities as being in bubble territory and we remain constructive on the asset class.

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Is the market rally broadening?

Stocks, as measured by the S&P 500, are up over 13% through early August. The solid gains have been fueled by a resilient economy, steady consumer spending, optimism around artificial intelligence and better-than-expected earnings growth. Still, some investors worry the advance may be too concentrated in technology and that AI-capex monetization may fall short of expectations. A closer look suggests that it is not just tech moving the market higher.

Chart of the Week | Macroeconomic

Fed friction?

Markets are navigating tensions between a Fed that offers less guidance and an inflation backdrop that remains sticky. Added uncertainty from Middle East tensions and energy-price swings is further shaping sentiment, with recent moves in Treasury yields suggesting the market wants the Fed to hike. However, with yield volatility expected to linger in the near term, we see today’s elevated Treasury yields as an especially compelling opportunity in fixed income.