Industrial foreign exchange: 10 trillion stock market rise is facing the test

S & P 500 companies are expecting second-quarter profits to fall 9%, the worst quarter since 2020, while Europe could be worse, with a 12% decline, according to data. But with expectations already low and some indicators suggesting earnings could pick up next year, strategists are divided on how the market will react.

Evgenia Molotova, senior investment manager at Pictet Asset Management, said:

"I am sceptical that companies will be able to show the same level of earnings elasticity this quarter. Revenue growth and margin stability will be key to a rebound in profits in the second half."

Industrial foreign exchangeKey concerns for market observers includeThe impact of a weaker dollar on large U.S. exporters，The practical impact of the artificial intelligence boom that fueled the stock market rally this year, andThe performance of companies affected by rising costs and consumer tightening。

Here are the followingFour areas for investors to focus on：

The influence of large technology companies

The boom in artificial intelligence has propelled the tech-heavy Nasdaq 100 to its best first-half performance in history.Investors' eyes are on how emerging technologies can affect corporate profitability。

According to foreign media reports, Apple、Microsoft、Amazon、Earnings growth at tech giants like Nvidia and Google parent Alphabet is expected to outpace other U.S. companies this quarter.

Aneeka Gupta, head of macroeconomic research at WisdomTree, said:

"If the artificial intelligence boom fails to boost tech profits, the stock market could experience at least one temporary correction."

Inflation effect

Inflation has cooled and expectations are that the Federal Reserve may soon stop raising interest rates. But this is not good news for businesses becauseLabor and other costs remain high, and it is difficult for them to further increase customer prices.

Rob Haworth, senior investment strategist at United Bank Wealth Management, said:

"Overall inflation is slowing faster than wage growth, which may be good for consumers but hurting margins. So we will look at the interaction of wage growth and price inflation to see if companies remain under pressure."

Nokia and restaurant chain Cracker Barrel Old Country Store have already issued warnings about the impact of rising costs in previous earnings reports.

Consumer austerity

Market participants expressed their concernConsumer spending trends, with a focus on automotive sales and the performance of the tourism and hospitality industries, to assess the health of American businesses. Another area of focus isThe company's debt burden and refinancing plan, with a focus on companies with higher debt。

Ross Mayfield, an investment strategist at Baird, said:

"Spurred by a strong labour market and excess savings, it is consumers who have been propping up the US economy for months, so any belt tightening、Measures to reduce consumption or spending on services will have a critical impact. "

Adjusted for inflation, U.S. consumer spending has largely stagnated after surging at the start of the year, and some early signs from businesses are not objective. Memory chip maker Micron Technology said,The PC and smartphone markets are expected to contractGerman chemicals giant BASF has warned of falling profits, blaming slowing demand for consumer products.

Michael Wilson, strategist at Morgan Stanley, said that meantForecasts for a rapid rebound in earnings next year may be too optimistic.And if companies signal caution, the stock market is likely to face the risk of selling.

Europe is underperforming

Barclays strategists said profits in Europe were expected to fall more than in the US because of weakness in European manufacturing.As currencies such as the euro and the Swiss franc strengthen, large exporters will also face more restrictions.Watchmaker Swatch Group AG, which has high fixed costs in Switzerland, has warned that currency changes will affect sales this year.

Stocks began to reflect the challenges facing Europe between April and June, when the Euro Stoxx 600 index, measured in dollars, underperformed the S & P 500. While lower valuations made regional stocks attractive to some, others feltThe dearth of technology stocks could destabilize the outlook。