Weekly Buzz: The S&P 500 has a habit of beating expectations

Some of the biggest names in finance – think JPMorgan, Bank of America, and Morgan Stanley – are kicking off this quarter’s earnings season in the US. For investors, the data is offering a fresh read on corporate health, and where things might go from here.

What to expect this quarter

Wall Street isn't expecting blockbuster results this quarter, but the outlook is solid. Across the S&P 500, earnings are expected to grow 12.6% compared to a year ago. If that number holds, it'll mark the sixth straight quarter of double-digit growth.

A few tailwinds are helping. The One Big Beautiful Bill Act, signed last July, made permanent several corporate tax benefits that were set to expire, and those provisions are now flowing through to bottom lines. A weaker US dollar over the past year has also lifted the value of overseas revenue for American multinationals, which may give earnings an extra bump.

S&P 500 companies also have a long history of reporting better-than-expected results. In fact, that’s exactly what has happened in 37 of the past 40 quarters. FactSet estimates that, based on the average surprise over the past ten years, the final growth figure could land closer to 19%, the strongest since Q4 2021.

What’s the takeaway?

Profit growth is one of the most reliable supports for market prices, so a strong earnings season would be welcome news for investors. With financials making up 75% of the companies reporting this week, the banking sector will be setting the tone.

Investors will also be looking beyond the headline numbers. Gasoline prices have surged and inflation has ticked back up. If loan loss provisions are rising – the money banks set aside to cover potential defaults – it could mean higher prices and borrowing costs are starting to weigh on the American consumer.

(For a portfolio that’s built around long-term US and global exposure, see General Investing.)

In Other News: The conflict in Iran is showing up in price tags

After indecisive peace talks over the weekend, President Trump ordered a naval blockade on Iranian ports through the Strait of Hormuz. Brent crude fell to around $95 per barrel over the week, however, as both sides signalled a willingness to negotiate. With the price still well above its pre-war level of around $70, the impact on inflation has become hard to ignore.

US consumer prices rose 3.3% in March year-over-year, up sharply from February's 2.4%. Gasoline prices were up 21.2% in a month and accounted for nearly three-quarters of the total price increase. Strip out food and energy, though, and the picture was calmer, with core inflation coming in at 2.6%.

The effects are showing up beyond the US as well. Eurozone inflation jumped to 2.5% from 1.9% the month before. The bloc leans heavily on Middle Eastern energy imports, making it especially exposed. In China, factory-gate prices rose 0.5% year-over-year, ending more than three years of producer-price deflation as input costs rose.

For investors, the question is whether this remains contained. Core inflation readings in the US and the Eurozone are holding steady, and central banks have signalled they're prepared to look through the spike, so long as it stays that way.

These articles were written in collaboration with Finimize.