Earnings growth will be the key driver of market returns, says Manulife's Matthew Mishkin

Market Outlook - The market anticipates rate cuts, but strong PMI data suggests an accelerating economy, causing a selloff [1][2] - The market's multiple expansion is tapped out, earnings growth will be the key driver of returns [5] - The Fed's navigation is uncertain due to mixed economic signals, making future rate cuts beyond September uncertain [9][10] Sector Preferences - Technology and communication services are favored due to earnings growth, balance sheets, and profit margins, despite rich valuations [3][4] - Industrials are also attractive due to the onshoring capex boom [4] - Quality stocks with strong balance sheets, high ROE, and good profit margins are preferred amidst volatility [3] US vs Rest of the World - US earnings power is superior, with the S&P 500 tracking over 10% earnings growth, compared to approximately 3% outside the US [6][7] - Europe's market rally is primarily driven by multiple expansion and valuation rerating, which is starting to exhaust [7] Fixed Income - Disinflationary forces, including rising housing inventory (up 15%), declining housing prices, contained oil prices, lower commodity prices, and slowing wage growth, support potential Fed rate cuts [12] - Tariffs are the primary inflationary pressure [13]