Outperforming Expectations in a Volatile Market

Market volatility remained a dominant theme last week as investors continued to process the ongoing news around tariffs. Despite these headwinds, one critical driver of equity markets, corporate earnings, has delivered far stronger results than anticipated. As the second-quarter reporting season nears its close, with roughly 70% of S&P 500 companies having reported, earnings continue to exceed expectations. Sales growth has reached 5.6%, while blended earnings growth stands at 11.2%, well above the July 1 estimate of 5.8%. If these numbers hold, it will mark the third consecutive quarter of double-digit growth. Strong results from the technology and consumer discretionary sectors have been key contributors to this performance, driving the latest leg higher in the index’s growth rate. This momentum is particularly notable given the uncertainty surrounding tariffs. As markets head into the third quarter, attention will shift toward more normalized expectations, and investors will be watching closely to see whether earnings can continue to support valuations that many consider expensive.

The AI Spending Surge

Earnings season is in full swing, and four of the world’s largest technology or tech-related companies have revealed staggering levels of investment in artificial intelligence. Collectively, these firms spent $95 billion in capital expenditures this quarter on AI initiatives alone. This trend shows no signs of slowing. With the recent tax bill providing attractive incentives for capital expenditures, estimates now project these four companies will spend $364 billion this fiscal year, up 12% from the previous $325 billion estimate. For perspective, before the pandemic, $364 billion would have equaled a government stimulus package. These record-breaking investments highlight the intensity of the race to lead in AI, a theme expected to remain firmly embedded in market dynamics for years to come.

Fed Uncertainty Adds to Market Shifts

In addition to tariff concerns, volatility has also been fueled by uncertainty surrounding Federal Reserve policy. Recent developments suggest a period of shakeup ahead, as investors weigh the Fed’s next moves alongside shifting market expectations. Understanding how these monetary policy decisions intersect with strong earnings and historic levels of AI spending will be critical in assessing the market’s trajectory in the coming months.

Greg Powell, CIMA®

President and CEO

Wealth Consultant

Email Greg Powell here

Bobby Norman, CFP®, AIF®, CEPA®

Managing Director

Wealth Consultant

Email Bobby Norman here

Trey Booth, CFA®, AIF®

Chief Investment Officer

Wealth Consultant

Email Trey Booth here

Ty Miller, AIF®

Vice President

Wealth Consultant

Email Ty Miller here

Fi Plan Partners is an independent investment firm in Birmingham, AL, with a team of professionals serving clients across the nation through financial planning, wealth management and business consulting. The team at Fi Plan Partners creates strategies in the best interest of their clients using fee based investing.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

Economic forecasts set forth in this presentation may not develop as predicted.

No strategy can ensure success or protect against a loss.

Stock investing involves risk including potential loss of principal.

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