The upcoming U.S. earnings season is set to commence at a critical juncture, with stock traders grappling with repeated shocks from Middle East conflicts, private credit concerns, and the disruptive threat of artificial intelligence. A combination of factors—including declining valuations for U.S. tech stocks, intensifying AI disruption, and rising private credit risks—has created significant uncertainty around this earnings period. Investors are eagerly seeking clues from corporate guidance to determine the market’s next direction.
Both the MSCI World Index and the S&P 500 have just endured their worst quarterly performance since 2022. Market declines accelerated in March amid renewed inflation worries and a spike in oil prices triggered by tensions involving Iran. Recent data revealed that U.S. inflation recorded its largest increase in nearly four years during March, while consumer confidence also showed signs of weakening.
Over the weekend, direct talks between the U.S. and Iran in Pakistan concluded without an agreement, introducing fresh uncertainty into efforts to de-escalate regional conflict.
Market participants are keen to hear corporate leaders’ perspectives on these and other risks, which also include ongoing ambiguity around U.S. tariff policies. Goldman Sachs will kick off the U.S. earnings season on Monday. In Europe, luxury bellwether LVMH will mark the beginning of that region’s earnings cycle.
Wall Street does not anticipate a strong earnings season. According to Bloomberg Intelligence, analysts project that S&P 500 companies will report first-quarter earnings growth of approximately 12% year-over-year—the lowest since the second quarter of 2025. Excluding the tech sector, which is less affected by rising oil prices, growth would be around 3%, the weakest in two years.
Marta Norton, Chief Investment Strategist at Empower, commented: “Iran has become a central concern for markets right now, but other themes persist, such as AI-driven disruption, which still demands close attention. There are also uncertainties that we may have to live with for some time.”
As traders navigate heightened market volatility, here are five key themes they will monitor as companies report earnings.
1. Oil Price Shock Investors continue to assess how soaring energy costs will affect the global economy. Energy was the only sector in the S&P 500 to advance in March, and earnings expectations have improved. Before the recent conflict, Wall Street expected the sector’s first-quarter earnings to decline 8.5% year-over-year; now, analysts anticipate nearly 8% growth. However, rising oil prices are pressuring many other industries—such as industrial firms that rely heavily on fuel-intensive plants and transportation. Jed Ellerbroek, Portfolio Manager at Argent Capital Management, noted: “Some companies may offset part of these costs through fuel surcharges, but that could lead to customer attrition.” Large retailers face similar concerns. As doubts grow about consumer resilience, high energy costs add further strain on European companies, which also confront potential interest rate hikes. Barclays strategists lowered their 2026 profit growth forecast for the region from 8% to 6%, citing rising oil prices. Strategists led by Emmanuel Cau wrote: “This forecast assumes an average oil price of $85 in 2026; if prices average $100 or higher, earnings could stagnate.”
2. AI Debate After months of tech stock rotation driven by concerns over AI spending and its potential disruption to the software industry, strategists are watching for signs of a rebound. Keith Lerner, Chief Investment Officer and Chief Market Strategist at Truist Advisory Services, said: “This quarter will test whether tech stocks can reclaim market leadership.” He pointed out that, unlike earlier phases marked by high valuations and expectations, the sector’s valuations have now fallen to multi-year lows. One area of concern within tech is software. CFRA analysts noted that worries about AI disruption “remain a top issue.” All 22 components of the S&P 500 Software Sub-index have declined this year.
3. Private Credit Jitters As redemption requests rise for private credit funds, investors are focusing on the potential spillover effects across broader markets. Steve Sosnick, Chief Strategist at Interactive Brokers, said markets will watch whether financial institutions signal pressure to write down loans, as some large alternative asset managers have done. Regarding overall sector commentary, he added that investors need to “take a holistic view and determine whether real concerns are hidden beneath various statements.” Shares of leading firms in the sector have already declined as worries mount over the quality of private loans, particularly those extended to software companies.
4. Tariff Developments Companies have spent recent quarters outlining their exposure to Trump-era tariff policies. Now, with major policy shifts underway, traders await further updates. A U.S. Supreme Court ruling that deemed many tariffs illegal has prompted the Trump administration to propose a new 10% global tariff. The legal authority for existing tariffs expires in July, and the administration aims to reshape trade policy before then. The White House has also adjusted metal tariffs. Heavy machinery manufacturers are among the most exposed to tariffs. Caterpillar previously estimated that the old policy would cost it about $2.6 billion this year. Apparel and home goods companies rely heavily on imported products, while tariffs have also dampened demand for transport firms such as United Parcel Service.
5. Consumer Worries A key question for equity strategists this earnings season is whether consumer spending will finally buckle under the combined weight of tariff-related costs, AI-linked layoffs, and rising energy prices. Scott Chronert, Head of U.S. Equity Strategy Research at Citigroup, said: “We have long believed that consumers were already stretched, and an oil price shock would present an additional challenge.” Delta Air Lines stated this month that demand for premium and corporate travel remains strong, but hinted that fare increases may be needed to offset higher fuel costs. For Truist’s Lerner, steady demand for premium seats suggests a “two-speed economy,” where lower-income consumers are under pressure. He said he will watch earnings reports for any signs of consumers shifting toward discount retailers.
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