3 Things You Need to Know This Week | Q2 Earnings, ECB Meeting, Trump Accounts

Transcript

Mathew White:

Hello, and welcome to 3 Things You Need to Know This Week—our regular series designed to help you sift through the noise across financial media and understand what really matters for markets. To stay up-to-date with our latest market insights, subscribe to our YouTube channel or visit fisherinvestments.com. And with that, here are three things you need to know this week.

First, Q2 2026 Earnings Season.

Q2 earnings season is kicking into high gear. Analysts expect Q2 2026 S&P 500 revenue to rise 12.3% year-over-year, with earnings expected to rise by 23.6% year-over-year. Positive numbers for Q2 would mark the 12th consecutive quarter of earnings growth. This week, look for earnings announcements from a few of the so-called "Magnificent Seven" companies, along with major defense sector firms. Behind the headline numbers, the story is familiar. Ten of 11 sectors are projected to grow earnings, led by Energy, Information Technology and Materials. Health Care remains the lone outlier, where earnings are expected to contract 9% year-over-year. That number is somewhat deceptive because it's largely due to a single company. Remove that company, and the Health Care sector would actually post about 7% year-over-year earnings growth. That's a useful reminder that surface-level sector weakness sometimes masks broader strength underneath. For long-term investors, earnings reports can serve as confirmation for what forward-looking financial markets already suspect. Since this bull market began in October 2022, stocks have continually priced in an ongoing earnings upturn despite volatility along the way. Q2 results look poised to validate that view. We do believe warmer sentiment towards Tech and AI is worth monitoring, as it appears to signal we're in the later stages of this bull market. But warming sentiment can persist for a long time, and stocks can still rise even as optimism builds, so long as reality keeps pace with or exceeds expectations. Our view is that broader fundamentals—including increasing global trade and healthy loan growth—remain supportive of continued gains. Rather than reacting to any single earnings announcement, long-term investors are better served by staying focused on their strategy and letting the broader trends do the work.

Next, the ECB interest rate decision.

The European Central Bank gathers for its next interest rate policy meeting on Thursday. The ECB hiked their policy rate for the first time since September 2023 at their June meeting. Last month's move came in response to accelerating eurozone inflation, which was driven largely by the ongoing conflict in Iran. Now, investors are turning their attention to what comes next, and whether policymakers will double down on their tightening stance. According to the June meeting minutes, ECB officials agreed to avoid providing forward guidance on the future path of interest rates, citing elevated economic uncertainty. Instead, they reaffirmed a data-dependent meeting-by-meeting approach. The ECB also revised its inflation forecasts upward, now projecting headline inflation of 3% year-over-year in 2026, up from 2.6% while trimming year-over-year eurozone GDP growth expectations down to 0.8%. To us, this reaction suggests that the ECB and other central banks remain preoccupied with 2022, when inflation spiked alongside surging oil and natural gas prices following Russia's invasion of Ukraine. For investors, the risk worth watching isnt inflation itself. It's whether the ECB overshoots the mark by hiking rates for the wrong reasons and inverts the yield curve. An inverted yield curve has historically been a reliable warning sign for the economy. Right now, the global yield curve remains positive, which continues to support lending activity and corporate fundamentals across developed markets. An incremental rate adjustment in July's meeting is unlikely to change that picture materially, but a series of aggressive hikes could.

Finally, Trump accounts.

Enrollment for Trump accounts opened recently. Many parents and grandparents are curious about how their loved ones can access these new tax-advantaged investments and savings accounts. Here's what to know. Any US citizen under the age of 18 is eligible for an account, but children born from 2025 through 2028 can receive a one-time $1,000 contribution from the government. Parents or guardians can open an account for their dependents by filing IRS Form 4547, which is available on the IRS website. The form also allows parents or guardians to opt their dependents who are born within the allotted time frame into the $1,000 pilot program contribution. After the account is established, families, friends, and even employers can contribute, with total annual contributions capped at $5,000 per child. Unlike traditional or Roth IRAs, the child doesn't need earned income to receive contributions. This is a meaningful distinction for younger kids. For families with eligible newborns, the government contribution is essentially "free money" and worth taking advantage of. But when it comes to deciding whether to add your own funds, it's important to consider all options and choose the one that makes the most sense for your family's goals. If your kids have earned income, a Roth IRA could make more sense because qualified withdrawals in retirement are tax-free. And for families focused on college costs, a 529 plan offers tax-free withdrawals for qualified education expenses. Trump accounts are one more tool in a broader planning toolkit, not a replacement for thoughtful, diversified,long-term strategy.

And that's it for this episode of 3 Things You Need to Know This Week.

For more of our thoughts on markets, check out This Week in Review, released every Friday. You can also visit fisherinvestments.com. Thanks for tuning in and don't forget to hit like and subscribe.