Daily Commentary

MarketMinder’s View: As there are specific companies mentioned here, please note MarketMinder doesn’t make individual security recommendations. Our focus is only on the higher-level, titular theme: Q2’s actual and still expected “blended” earnings are booming, but there are some notable caveats that make the growth rate a little bit exaggerated. “So far, the top contributors to the S&P 500’s massive quarter are hyperscalers [firms running gigantic data centers.] Those insane gains, however, were largely the result of large, non-operating, unrealized gains on equity stakes these companies hold in other tech companies. ... Some analysts have felt the need to strip out earnings from these giants to get a better sense of the underlying trend for earnings, which—it should be said—is still strong. ‘Excluding [them], the blended earnings growth rate for the S&P 500 for Q2 2026 would fall to 28.8% from 47.4%. However, this would still mark the second consecutive quarter of earnings growth above 20% and the seventh consecutive quarter of double-digit earnings growth for the index,’ FactSet analyst John Butters wrote.” Also noteworthy: Companies’ capital expenditure (capex) costs are spread out—depreciated—over time, whereas those making money off that capex (like chipmakers selling to hyperscalers) book their gains immediately. Now, none of this is new to markets, which are well versed in various accounting methods—stocks weigh them all. Their day job is separating fact from fiction (including paper profits). Moreover, they are forward-looking. While there are still a little less than a quarter of S&P 500 firms left to report Q2 results, all of that is in the past more than a month into Q3—old hat to stocks. Quarterly results can only describe what already happened, which markets anticipated long ago. Stocks look further ahead, around 3 to 30 months, and weigh what those future earnings will be in reality against expectations. Earnings releases may be a nice report card, but don’t overrate them. Keep your eye on the prize: the profit outlook over the next several quarters.

MarketMinder’s View: Here we go. “A coalition of 25 US states sued the Trump administration on Monday over new tariffs pegged at 10% to 12.5% on goods from 60 trading partners, calling them a pretext for replacing import taxes struck down by the supreme court in February. The states are asking the US Court of International Trade to halt the tariffs, declare them unlawful and order refunds of duties that have already been paid.” President Donald Trump enacted these tariffs under Section 301 of the Trade Act of 1974, which lets the White House apply tariffs against countries whose trade laws discriminate against US goods. The White House argues the new tariffs, aimed at countries with no or unenforced laws against importing goods made with forced labor, fits Section 301 parameters. The states disagree, and it now seems the courts will decide. As always, we are neutral in political matters like this, preferring no party nor any politician and assessing developments for their market and economic implications only. And in this case, we think there is little to see. Markets moved on from tariff news long ago, barely blinking at the February court decision, refund orders and replacement tariffs. We guess completing the legal process here will ease some uncertainty about these latest tariffs’ staying power, however it goes. But businesses seem to have shrugged it all off long ago, swallowing the added tariff burdens and moving on.

MarketMinder’s View: Look, we haven’t bugged US Treasury Secretary Scott Bessent’s office, and we aren’t clairvoyant, so we don’t actually know the specific reasons the US helped Japan’s Treasury with its intervention to strengthen the yen. But we don’t think the reasoning posited here (and many other places) passes muster. The argument goes like this: Since Japan is the country with the largest stockpile of US Treasury bonds and yentervention by Japan’s Treasury would generally require selling dollars and buying yen, this piece suggests the US stepped in to keep Japan from dumping a boodle of Treasurys and driving US borrowing costs skyward. If that is indeed the reason, it is a silly one, because this is hardly the first time Japan has intervened to support the yen. They did so earlier this year. And in 2024. And and and. None of these efforts ended with sky-high US Treasury yields and debt doom. Or, for that matter, with Japan’s pile of US Treasurys diminished—Japan still owns a little more than it did at the end of 2023, per the US Treasury’s data. As for parallel chatter that the US did this to curb its trade deficit with Japan, feeding on the myth that a weak currency makes Japan’s exports boom and imports sag, US exports to Japan hit a fresh high last year despite the weaker yen. This whole saga strikes us as a tempest in a teapot.