Summary of Key Points from the Conference Call Industry Overview - The focus is on the US equity market, particularly the transition from a late cycle to an early cycle backdrop, indicating a rolling recovery is beginning [4][15]. Core Insights - **Economic Transition**: The July jobs report supports the bullish case for stocks, confirming a shift to an early cycle environment with rebounding earnings and cash flow expected over the next 6-12 months [4][15]. - **Rate Cuts Anticipation**: The expectation of significant rate cuts is based on the belief that tariff-induced inflation will subside later in the year, with core CPI expected to peak in August [4][12][15]. - **Inflation Data Impact**: A hot CPI print could lead to quality leadership in stocks, while a lighter print may favor small caps and lower quality stocks, suggesting investors should remain nimble around CPI reports [4][12][15]. - **Labor Market Dynamics**: A measured rise in the unemployment rate and weak payroll prints could pull forward market expectations for rate cuts, which would be constructive for equities [9][12]. Sector Analysis - **Preferred Sectors**: The company remains bullish on Industrials and Financials while underweighting Consumer Discretionary Goods due to tariff pressures and weaker pricing power [4][15][13]. - **Earnings Revisions**: There is a notable improvement in earnings revisions breadth, which has moved from -25% in April to +16%, indicating a positive shift in corporate confidence [27][15]. Earnings Season Insights - **Earnings Performance**: The 2Q earnings season has shown a surprise ratio of +8% for EPS and +3% for sales, with expectations of 10% y/y EPS growth for 2025 and 13% for 2026 [27][28]. - **Market Reactions**: Price reactions to earnings have been muted, with an absolute change of -0.1% and relative to the S&P 500 flat at 0.0% [57]. Additional Considerations - **Tariff Pressures**: The sectors most exposed to tariff costs, particularly consumer goods, are expected to face margin compression due to a lack of pricing power, which is a key reason for the underweight stance on Consumer Goods [13][15]. - **Future Outlook**: The overall outlook remains positive for the next 6-12 months, driven by factors such as positive operating leverage, AI adoption, and a weaker dollar, despite near-term inflation risks [15][4]. Conclusion - The company maintains a bullish outlook on US equities, emphasizing the importance of upcoming economic data, particularly CPI, in shaping market dynamics and sector performance [4][15].

The start of August witnessed a shift in market momentum. The S&P 500, which had recorded six successive all-time highs, entered a four-day losing streak. The decline was caused by soft jobs data and rising unemployment, along with new tariffs announced by President Donald Trump targeting U.S. trading partners.However, Morgan Stanley and Goldman Sachs believe that this could be an entry point to the market. Let’s delve a little deeper. SPDR S&P 500 ETF Trust (SPY) , which fell on Aug. 1, 2025, rebounded on ...