A positive labour report in June echoes Chairman Warsh’s comments that inflation is on the way of reaching its 2% target; so far the market barely notices. Strong rotation favouring the Dow and away from the Nasdaq last week: with a forecasted 23.1% growth for 2Q26 earnings will be key. Oil around $72, back where it was before the war; USD steady. The biggest tail risks are the US Economy falling into a recession (15% chance in the next 12 months), resurging inflation, revenues/earnings/guidance not matching forecasts, a surge in long bond yields coupled with a USD crash, followed by damages done by tariffs/government policies, adverse geopolitical outcomes, and valuations (high multiples).

Major market events 6th – 10th July 2026

Economic data highlights of the week

Mon: DE Factory Orders (5/26), EU PPI (5/26), US Services PMI (6/26), US ISM Non-Manufacturing PMI (6/26), EU ECB President Lagarde Speaks

Tue: DE Industrial Production (5/26), UK BoE Governor Bailey Speaks, US ADP Employment Change Weekly, US Atlanta Fed GDPNow (2Q26)

Wed: NZ RBNZ Interest Rate Decision, US FOMC Meeting Minutes

Thu: CN CPI (6/26), CN PPI (6/26), US Initial Jobless Claims

Fri: NZ – Holiday, JP PPI (6/26), DE CPI (6/26), FR CPI (6/26)

Performance Review

Source: Google

InflectionPoint reports:

* Back after a month of travelling, and still never a dull moment in the markets as we approach the crucial 2Q26 reporting season in the US. One of the questions lingering in my mind was to establish if the ECB was right to increase interest rates (and to threaten to do so again as soon as in September), while the Fed stayed put. In his latest speech, Fed Chairman Kevin Warsh said that inflationary forces have somehow come down recently, boosted also by the subpar June labour report in which the number of new occupants did not climb as much as forecasted. Markets so far have failed to take notice, with a 25bp hike in December seen with a likelihood of 76.6%. However, Goldman Sachs is forecasting no hike this year, with two more cuts in March and June of 2027.

Source: Goldman Sachs Research

Following the agreement between the US and Iran, the leading Investment Bank also cut the probability of a recession in America to 15% from 25%.

Source: Bloomberg, Goldman Sachs Research

There has been a consistent rotation on Wall Street last week, testified by the supremacy of the Dow Jones vs the S&P 500, and by the weakness of the Nasdaq, widely exposed to concerns in Asia regarding memory stocks. There has also been the notable resurgence of European Stocks, in a week in which technology was less brilliant than usual. That said, the demand for data centres is very strong. The lesson from the dot.com boom (and crash) is: watch the profits. With capex ever rising even for the largest companies, investors keep checking whether there are sound returns on their investments, with virtuous companies rewarded and those less so sidelined.

Source: Aterio, Goldman Sachs Research

Once again, with markets having elevated multiples, earnings are of paramount importance. Particularly this year, they were much, much better than investors expected; but now the bar has been raised, and with expectations of 22% growth, it will be more difficult to meet or beat expectations, amid a strong US economy. I continue to remain optimistic.

Source: FactSet, Goldman Sachs Research

Meanwhile, 2026 targets have been raised once again: Ben Snider of Goldman Sachs has a new target of 8,000, underpinned by a 24% growth in earnings to $340 for 2026, a massive upgrade from $309 previously, and more in line with FactSet bottom line calculations. He’s not even the most bullish strategist on the street, as usual bears Morgan Stanley, and Yardeni Research have a target of 8,300. The forecast for 2027 EPS is $385, and the FactSet bottom up forecast is already ahead at $398, making another upgrade likely at some point if the positive trend continues. I’m still keeping equities to buy (with the famous 3% weekly stop), keeping US bonds to hold, and European bonds to buy (with the notable exception of France). Valuations matter: Japan has really impressed with its performance under new PM Sanae Takaichi, and it would be well worth considering to include the Asian country in portfolios, but I still recommend hedging the JPY. The spotlight has been on North Asian countries, namely Japan and South Korea, because of their semiconductor companies. Goldman Sachs also noted that portfolio managers are increasingly preferring semis to software. So far, the Japanese PM Sanae Takaichi hasn’t announced a major fiscal expansion, but still bond yields have been creeping up, on expectations of a move of the BoJ to bring interest rates to 1%. Any case it goes, it’s a ‘brave new world’ for Japan, as the last 30 years of policy and deflation/low inflation are completely wiped out. Meanwhile, the JPY continues its slide against all major currencies, save for a possible Japan-US intervention which made the Yen rebound a little. Finally, a word on Italy, whose FTSE MIB Index managed to grow above 50,000 points, a target set in the fateful 2000. While overall growth remains slow, companies are faring much better, thanks to markets diversification, and are bringing the Italian know-how to the world. I am expecting this positive trend to continue, and certainly to outperform the broader Euro Stoxx 50 index. It’s been a good couple of years, but the party’s not over (yet).

* After a 1Q26 growth of 2.1%, GDP forecasts for 2Q26 are good, with the Atlanta and New York in agreement on a positive direction. The current P/E ratio of 20.4x is above the average P/E ratio of the last 5 years at 19.9x, and the 10-year average at 19.0x. As the multiple held throughout 2025, I believe that it should hold over the next 12 months, if the economy performs similarly and there are no major geopolitical displacements; it is the same assumption I had back in 1999, when the multiple was 24x. Bear in mind this level, as simple math tells us that the real end 2026 multiple is 23.5x, if the S&P reaches 8,000 and earnings grow at the new projected level of $340. That multiple level lasted for the good part of almost two years, and despite the fall in 1H00, technology stayed strong through the summer, until the Intel preannouncement in September sealed their demise and gave way to 2 years of bear market. One of the major differences of the current cycles relative to the dot.com boom is that then many companies were thriving on expectations of future sales and no earnings, now companies, even start-ups (Palantir did raise to the challenge with a 16% quarter on quarter revenue growth) do have tangible revenues and earnings, so the market is on a much sounder footing now than then. Furthermore, then the Fed was hiking rates, and had reached the peak by the end of 2000, with the famous out-of-meeting jumbo cut on January 3, 2001, in response to the rapid deterioration of the economy due to the dot.com crash. A very influential voice, such as that of Goldman Sachs’ CEO David Solomon, said that AI will lead to opportunities, as well as inevitable job losses, and was painting a rosier picture of this new technology. Space X, OpenAI, and now Anthropic are in a pre-IPO phase, and a success of three of the most hyped companies ever is important to lead the markets higher.  

*  The Federal Reserve was on hold in June, and kept the rate to 3.50-3.75%. It is now expected that the FOMC, under the guidance of new Chairman Kevin Warsh, will raise rates in December, with a 76.6% chance, which is understandable given the strength of the US economy and the threat of inflation. I wonder if all this growth we are seeing in 2026 so far has been the result of the Fed’s decision to lower rates by 175bp in the last two years. We need (lower) yields and (higher) earnings to support some of the highest multiples since my heyday (the fated 1999-2000), but it is increasingly difficult to get these in the US. You can look forward to these in Europe to some extent, albeit because the economy’s growth path is much more shallow than across the pond. 

* Yields on US 10-year Treasuries have reached 4.48%, and were up last week, in line with European government bond yields. While in 1999 they were even higher, and the Fed was hiking, not easing, we definitely need yields to return below 4% to have a more constructive scenario, albeit gradually and not through a crash. We seem to be on a struggle to get there; and on top of this I cannot yet recommend the US Debt on their public spending plans. Legendary investor Jeffrey Gundlach said that there might even be a haircut on US Treasuries, which never happened before. The potential opening of a sovereign crisis is something that must absolutely avoided. Higher borrowing costs will be felt across the balance sheets of most states, potentially further reducing growth. Regarding earnings, I continue to remain optimistic, particularly on technology (the main driver for the S&P 500). Ben Snider, who has taken up his post as Chief US Equity Strategist from legend David Kostin, has a bullish forecast of $340 per share for the S&P 500 by the end of the year, with a target price of 8,000, and $375 for 2027, with a target price of 8,800. At the moment, the bottom-up forecasts for 2026 match his target, while they are already ahead for 2027. Earnings for 2026 are continuing to rise to a level of $340.62 per share, while for 2027 they are seen at $398.32 (ahead of GS’ own forecast at $385). In both cases, the earnings’ progression puts both of them on a significantly higher level than just one year ago. 

Source: FactSet

* The US GDP for 1Q25 came in at 2.1% according to the latest estimate. The Atlanta Fed GDPNow model forecast for 2Q26 is in positive territory, with a current reading of 1.2%. This forecast crashed over the course of the quarter, being unusually below that of the Blue Chips consensus, which are presently at 2.0% and raising. The New York Fed’s Nowcast model, which is less volatile,  paints an entirely different picture: its current forecast is 2.74%, up from 2.71% last week. I believe it is prudent to make an average of those two forecasts to get to the real number. Introducing a forecast for 2Q26, with earnings expected to climb by 23.3%, compared with a forecast of 18.8% as of March 31st, with revenue growing by 12.2% vs 9.5% as of March 31st. It is very important to note that analysts have been increasing numbers for 2Q26, even after the impact of the war. For 2026, earnings growth is forecasted at 24.1% vs 17.0% as of March 31st, with revenue coming in at 10.8% vs 8.5% as of March 31st. Introducing a new forecast for 2027, earnings growth is forecasted at 15.8% vs 16.6% as of March 31st, with revenues coming in at 7.6% vs 7.5% as of March 31st. Finally, it’s worth noting that the chance of a recession in the next 12 months, as calculated from the yield curve, according to the Federal Reserve Bank of Cleveland, is presently (May 2027) 13.59%. The peak was 68.76% in April 2024, and it was the only time since 1960 in which a recession did not materialise, given such a forecast. The current level is below economists’ current forecasts: a 15% chance of a recession in the next 12 months.  

Source: Blue Chip Economic Indicators and Blue Chip Financial Forecasts; Federal Reserve Bank of Atlanta

Source: Federal Reserve Bank of New York, New York Fed Staff Nowcast

Source: Federal Reserve Board, Federal Reserve Bank of Cleveland, Haver Analytics

Earnings, What’s Next?

The reporting season for 2Q26 will start the week of Jul 13. Here’s a list of companies reporting this week. 

Source: Earnings Whispers

Market Considerations

Source: FactSet, Goldman Sachs Global Investment Research, ISABELNET.com

Source: Compustat, FactSet, IBES, Goldman Sachs Global Investment Research, ISABELNET.com

Source: Carson Investment Research, FactSet, ISABELNET.com

Revenue growth estimates for 2026 are forecasted to grow by 10.8% (8.5% on March 31st), and earnings growth estimates for 2026 are predicted to grow by 24.1% (17.0% on March 31st), so the future looks bright. Introducing forecasts for 2027, which sound again very positive, with revenue to grow by 7.6% (7.5% on March 31st) and earnings to grow by 15.6% (16.6% on March 31st). As mentioned, the Fed has cut its rates by 100bp in 2024 and 75bp in 2025. It should have continued to ease were it not for the spike in inflation generated by the war in Iran. While the price of oil has eased, it is too soon to say if the spike in inflation will be transitory or permanent. 

Three highlights this week. First, we have a chart from Goldman Sachs, which shows that this year’s performance has been led by outstanding, superior earnings’ growth, with little or no multiple expansion. While multiples remain elevated (also the last 10-year average at 19x), such powerful earnings more than justify the progress made by the markets so far. The second chart, again from Goldman Sachs, gives us a balance of valuations in S&P 500’s sectors, with Industrials being at the top (understandingly), and with Energy and Financially (less understandingly), being at the bottom. In a week which saw the Dow reign over the S&P 500, taking some position in these sectors may indeed help in the long run, given that they are both underpinned by solid fundamentals. The third chart, from Carson Investment Research, and the excellent Ryan Detrick, shows us that in Trump years, in July stocks were up 100% of the time, with an average gain of 2.9%. This bodes for a positive earnings season; be aware that analysts, after missing the boom of 1Q26, have significantly raised estimates this time, and therefore this level will be more difficult to top. Is it possible? Yes, I think so.

For equities, be careful not to fall into ‘Buffett’s trap’. He famously said that there were moments when Berkshire Hathaway’s stock was down more than 50%, and nothing was wrong with the company at the same time. Timing and risk management are key. I remain optimistic in the long term; I have faith in the new CEO, but to follow the Oracle means filling very, very big shoes. The late Angelo Abbondio, a legendary Italian investor, used to say that you can rely on fundamental analysis and on technical analysis, but the most difficult thing was to decide when to prioritise the first and when the second. In general, no stock can outperform all the time; some volatility has to be expected. Those who performed better earlier may not perform so well later.

Due to the persistent stickiness of inflation, monetary policy is again taking centre stage. Obviously, we should not overlook geopolitical scenarios in Ukraine and the Middle East: this will dominate the news for a while. Any further escalation would be negative for the markets.  

I now recommend a long position in equities and a neutral position on US bonds. For EU Bonds, I advise going long (with the notable exception of France), while I still suggest putting together a portfolio that focuses on the safety of German Bunds, which are to be preferred in my view, given increased yields. While the spreads in Europe have widened as a result of the war and consequential flight to quality, I can still find value in 10-year German bunds with a yield around 3%. 

There are four main headline risks to what is otherwise a constructive view for 2026: i) revenue/earnings/guidance not matching forecasts, particularly in technology; ii) any damage to the economy and trade done from Trumponomics, tariffs, increasing sovereign yields, and resurging inflation; iii) any negative geopolitical outcome (which could see an expansion of the current conflicts); and iv) valuations, which are nearing levels only seen once before (at least during my lifetime!). 

Japan continues to be very strong, with another leg up after the surprising results of the February, 8 elections in which PM Sanae Takaichi and her LDP conquered more than 2/3 of the seats in parliament, giving her an ample mandate to govern. She favours fiscal and monetary expansion for the economy, whose 4Q25 GDP reading came well short of expectations. The Bank of Japan is also in a very tricky position, like the Fed was not so long ago. It would need to raise rates to counter inflation, but the weak growth may prevent it to do so. That might turn in a further weakening of the JPY. Watch out the long bond yields, particularly the 30y and 40y, as they react to increased government spending. I am now very positive on the country, although I would definitely hedge the JPY. Obviously the market was hit by the increase in the price of oil, although it is the best major market on a YTD basis. While the BOJ raised rates to 1% in June, the highest level in 31 years, it is seen as behind the curve, which is why – barring interventions – the JPY is continuing to fall, especially vs the USD. 

Portfolios

Finally, I want to introduce four portfolios that Tom and I published on Wikifolio. Tom’s a multi-asset portfolio, whereas the one I manage (with substantial input from Tom) is a global income and growth with a heavy US tilt. The third one is on Italian Equities. The fourth and latest one is on Japanese Equities. Check them out!

https://www.wikifolio.com/en/int/w/wf00inf8ig

Tom’s Multi-Asset Portfolio is up 35.9% in 2 1/2 years, with a Sharpe Ratio of 1.3

https://www.wikifolio.com/en/int/w/wf000ipggi

Our Global Income and Growth Portfolio is up 36.7% in 2 1/2 years, with a Sharpe Ratio of 0.7. Obviously, the devaluation of the USD had a big impact as all stocks are priced in EUR

https://www.wikifolio.com/en/int/w/wf00ipiteq

My Italian Equities Portfolio is up 91.6% in 2 years+ and has outperformed the FTSE MIB Index by 2925+ bp in this timeframe, with a Sharpe Ratio of 1.8

https://www.wikifolio.com/en/int/w/wf00ipjpeq 

My Japanese Equities Portfolio is up 8.5% in about 6 months. Obviously, the devaluation of the JPY had a big impact as all stocks are priced in EUR.

Consulting

Finally, I have officially become an Italian Independent Financial Consultant (Consulente Finanziario Autonomo), registered with the Italian OCF since 19 March 2024 (protocol 2425). If you are interested in my financial advice or simply for more information, please contact me at giorgio.vintani@inflectionpoint.blog

Consulting accounts usually start from EUR 100,000. Please note that you should be based in Italy to avail yourself of this service. If you are interested, please feel free to drop me an email. I am happy to send you my presentation and track record upon request.

Happy trading, and see you next week!

InflectionPoint

Disclaimer

All views expressed on this site are my own and do not represent the opinions of any entity with which I have been, am now, or will be affiliated. I assume no responsibility for any errors or omissions in the content of this site, and there is no guarantee for completeness or accuracy. The content is food for thought, and it is not meant to be a solicitation to trade or invest. Readers should perform their own investment analysis and research and/or seek the advice of a licensed professional with direct knowledge of the reader’s specific risk profile characteristics.