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: Six months into the Iran war, here is what markets saw before most and which many pundits warning about its crippling economic effects globally still miss: Regional conflicts are, indeed, regional—and don’t disrupt the vast majority of global economic activity. Why? Because although the Strait of Hormuz—and Bab al-Mandeb Strait—are key Middle Eastern waterways for energy transport to Asia, countries reliant on Gulf energy producers have every incentive to find workarounds to loosen the grip of alleged chokepoints’ stranglehold on global oil routes. Markets adapt. In Asia, “The top-energy consuming continent saw imports of 22.82 million barrels per day in July, according to data compiled by commodity analysts Kpler. This was down about 4 million bpd from the average of 26.89 million bpd in ‌the three months prior to the U.S. and Israeli attacks on Iran on February 28. ... While still some way short of returning to pre-war levels, the July imports of crude are well up from April, when flows were most affected by the closure of the Strait of Hormuz, the narrow waterway through which about 20% of the world’s oil and products moved prior to the war. Asia’s imports of crude were 18.77 million bpd in April, the lowest since November 2015, according ⁠to Kpler data.” Many extrapolated Asia’s two-thirds of normal oil imports and saw shortages bringing them to their knees. In reality? 15% below normal may not be great, but guess what: Asian economies’ growth remains among the world’s swiftest. The reason, as this details, is partly because China (the world’s largest oil consumer) cut imports dramatically and relied on huge and swollen stockpiles instead during the height of war. With that behind us, more normal activity is returning as prices cool from April’s peak. Now, with workarounds in place, future global energy supplies should be more stable than before. So markets are moving on. As the Ukraine war shows, even lasting regional conflicts fade into markets’ backdrop once their extent is priced.

MarketMinder’s View: Before beginning, remember that MarketMinder doesn’t make individual security recommendations, since this article namechecks some stocks—including two upfront, which are incidental to the titular topic under discussion. As the rest of the piece covers, many fixate on dividends (or dividend growth) as a seemingly comfortable middle-ground between investing purely for growth or income. But that can lead to some major pitfalls. For one, a big dividend—or high dividend yield—may mean a company is “digging deep and struggling to grow.” More generally, focusing on dividend-payers may unintentionally lead you to some sectors (Financials, Real Estate or Utilities) to the exclusion of others (like Tech and Communication Services). The article then offers this reminder and counsel, which we agree with entirely: “Receiving a dividend doesn’t increase wealth on its own, though. A stock’s value falls by the same amount. It also isn’t especially tax-efficient. With brokerage commissions eliminated, an investor can create their own dividend at will by selling only as much as they need. Income investing shouldn’t look that different from plain old investing.” We call this approach homegrown dividends. Once you unlock that mindset shift, the dividend dilemma goes away.