Key takeaways from the US earnings season
- Aug 14
- 5 min read
The US second quarter earnings season has been very strong overall, with corporate earnings coming in well ahead of expectations. Approximately 88% of S&P 500 companies have now reported their results, with around 86% exceeding earnings per share expectations and 76% surpassing revenue forecasts. The strongest areas continue to be technology and AI-related spending, with large technology companies benefiting from sustained demand for cloud computing and AI infrastructure. Earnings growth within the technology sector remains at particularly high levels.
Encouragingly, this strength is not confined solely to the Magnificent Seven stocks that have dominated market attention in recent years. Industrial companies and other economically sensitive sectors are also reporting healthy demand conditions and improving earnings expectations. US banking stocks have likewise delivered solid results, with companies such as JPMorgan Chase and Goldman Sachs seeing positive share price performance following strong earnings announcements.
One company that deserves particular attention is Caterpillar, an important economic bellwether whose equipment sales provide valuable insight into construction, infrastructure, mining, manufacturing and broader global capital spending trends. Caterpillar recently delivered an exceptionally strong second quarter result, with sales and revenues of approximately US$20.5 billion, up around 24% year-on-year and reported earnings per share of approximately US$8.17, a substantial increase from the prior year. More importantly, the broader message from the company remains positive, with resilient demand across infrastructure, energy and heavy equipment sectors. A significant order backlog also provides some visibility into future activity levels.
Other bellwether companies are also worth watching, as their results provide valuable insights into key themes shaping the US economy and markets:
Microsoft, Amazon, Alphabet and Meta continue to highlight the scale and durability of the current AI and cloud computing investment cycle.
Nvidia remains one of the clearest beneficiaries of ongoing spending on AI infrastructure.
UPS and FedEx provide useful signals on business activity, trade flows and consumer demand.
Walmart and Costco offer an important read on the health of the US consumer through trends in spending, traffic and purchasing behaviour.
Overall, the earnings season is providing investors with a reasonably positive fundamental backdrop. The key question from here is whether strong earnings growth can continue at a pace sufficient to justify relatively elevated US market valuations. So far, markets have remained resilient, supported by solid corporate profitability and ongoing economic activity.
Looking ahead, investors will be watching closely to see what direction new Federal Reserve Governor Kevin Warsh brings to monetary policy. Balancing inflation, political pressures and bond market dynamics presents a challenging task. At the same time, ongoing tensions in the Middle East and the continuing Russia-Ukraine conflict continue to contribute to volatility in oil prices and inflation expectations. Additionally, ongoing tariff announcements are creating uncertainty around both demand and supply conditions globally.
Closer to home, New Zealand has entered a new interest rate hiking cycle, with the Reserve Bank raising rates recently. While the outlook remains uncertain, it is possible that the Official Cash Rate could eventually move towards the 3% level. Higher interest rates are already beginning to flow through to cash and term deposit returns, providing more attractive options for conservative investors.
Despite ongoing market uncertainties, we remain confident in the markets and investment managers we have selected. A well-balanced blend of active and passive investment strategies continues to provide an important layer of protection and diversification. As always, diversification remains one of the most effective tools available to investors, and staying the course during periods of volatility is often the best long-term strategy. If you would like to discuss your portfolio or require further information, please do not hesitate to get in touch.
Finally, there is some good news for investors seeking more conservative options. With higher cash rates, term deposit returns continue to improve. Attractive rates are currently available from approximately 2.5% on-call through to around 4.25% for 12-month term deposits, providing additional opportunities for investors seeking tax-efficient income solutions and capital preservation. These rates below are for a 33% tax payer on a 28% Prescribed Investor Rate (PIR).
If you have any queries or concerns about how your investments are faring in the current markets or your financial, investment, lending, or retirement planning matters, please feel free to give our office a call at 09 553 8928 or email us at info@trilogyfs.co.nz.
Sincerely,
The Team at Trilogy Financial Solutions
Supporting The Actor’s Program
Last Saturday, Trilogy Financial Solutions (TFS) and Morris & Co Financial Advisers (MoCo) were delighted to host a very special evening in support of The Actors’ Program (TAP), with the generous support of PPS Mutual.
The evening brought together clients, friends and supporters for an intimate performance by Michael Hurst, alongside performances from TAP alumni and emerging talent.
Most importantly, the evening was about supporting TAP and the work they do helping develop the next generation of New Zealand actors and performers. Thanks to the generosity of everyone involved, 100% of ticket sales went directly to The Actors’ Program.
A big thank you to Michael and the TAP performers, our sponsors and supporters, and everyone who joined us and helped make the evening such a success.
For TFS and MoCo, supporting our wider community is something we genuinely value, and it was a privilege to play a small part in such a memorable evening.
Market Update
New Zealand
The NZX 50 slipped this week, pulling back from record highs as investors took profits and weighed rising unemployment (5.6%) alongside sticky inflation.
Healthcare, utilities and property weighed on the index, with names like Gentrack, Vector, Mercury and Ryman among the main decliners; Serko, Heartland and Stride Property provided some support.
US
US equities edged lower, with the S&P 500 and Nasdaq down as optimism over a US–Iran deal faded and oil prices rose ahead of key inflation data.
Tech and mega-cap names (Amazon, Alphabet) dragged on sentiment, while traders positioned cautiously before Wednesday’s CPI report that could influence the Fed’s rate path.
Australia
The ASX 200 was little changed to slightly lower, with mining gains offsetting weakness in banks after the RBA left the cash rate on hold at 4.35% and flagged inflation risks.
Market focus remains on the big-bank earnings season and the outlook for further RBA tightening, with rate futures implying a meaningful chance of another hike.
Asia
Asian markets were mixed: Japan’s Nikkei has been strong on recent sessions, while China and Hong Kong traded more cautiously amid property-sector concerns and global growth worries.
Regional sentiment is being driven by U.S.–Iran developments, oil-price moves, and expectations around central-bank policy in the U.S. and China’s stimulus response.
Europe
European stocks hovered near record highs, with the STOXX 600 and Euro STOXX 50 at or close to all-time peaks, supported by solid earnings and a rotation into banks and industrials.
Gains were capped by Middle East uncertainty and elevated oil prices, though technology and luxury names (ASML, LVMH) helped keep indices near the top of their ranges.
Commodities
Oil prices jumped to multi-week highs driven by fears the Strait of Hormuz could be disrupted and by fading U.S.–Iran deal optimism.
Gold traded near US$4,300–4,400/oz supported by geopolitical risk and rate uncertainty; copper held firm on tight supplies and tariff expectations, while iron ore remained under pressure on softer Chinese demand signals.
Upcoming important dates
2 September
Next OCR update
October
TFS Quarter 4 review season
If you would like to discuss your current portfolio, retirement planning needs, goals-based investing approach, or any other financial planning matters please feel free to give our office a call at 09 553 8928 or email us at info@trilogyfs.co.nz.
We are always happy to help.
Sincerely,
The Team at Trilogy Financial Solutions
Disclaimer: This newsletter is for informational purposes only and should not be treated as financial advice.
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