Investors are rattled at the start of the week as oil prices once again jump on renewed fighting in the Middle East.
But it’s likely such geopolitical and inflation angst may be put on the back burner as traders turn their focus to the U.S. second-quarter corporate earnings season. It unofficially kicks off on Tuesday as big banks such as JPMorgan, Citi, Goldman Sachs and Bank of America present their numbers.
The analyst community expect a bumper harvest, with 23.6% earnings growth for the S&P 500 compared with the same quarter a year earlier, according to FactSet.
That stellar earnings growth is about to remind investors why the U.S. equity market remains a prized destination and will catalyze resumption of the path to Evercore ISI’s year-end S&P 500 price target of 7,750, says strategist Julian Emanuel in a note published Sunday.
Emanuel’s colleague Stan Shipley expects companies to beat earnings-per-share forecasts by 7% this quarter, which is more than double the rate companies beat earnings expectations prepandemic.
“Record AI investments will continue supporting above-trend EPS growth for the S&P 500 in 2Q26 as they have been a major reason for higher revisions to S&P 500 2026 and 2027 EPS since the start of the year,” says Emanuel. Importantly, Evercore found that 69% of clients in a recent snap poll expect the artificial-intelligence capex cycle to last another two years or more.
To put the expected earnings growth in perspective, that would usually be associated with a profit increase seen in an economy recovering from recession, Evercore observes.
For the whole of 2026, Evercore has increased its EPS target for the S&P 500 from $310 to $330. This remains below the consensus forecast of $340.70, but Evercore says its number reflects the historical tendency for estimates to fall as the year progresses and the possibility that rising oil prices could damp economic activity.
That relative caution may also explain why Evercore’s 2026 target for the S&P 500 is below many peers, who favor the round figure 8,000.
In terms of the stock market set-up going into earnings, Evercore notes that the mood surrounding tech is as cautious as it was in the run-up to the first quarter of the year, “when earnings catalyzed the market higher.” Such negativity may allow for the market to jump on positive surprises.
Evidence for the caution is shown in the multiyear-high short interest in the Invesco QQQ Trust exchange-traded fund, a proxy for the tech-heavy Nasdaq-100 index. (Taking a short position usually means an investor is betting a stock price will fall.) Furthermore, valuations for the Nasdaq-100 are near their lowest levels relative to the S&P 500 since 2018, Evercore adds.
Such caution is also evident in Nvidia, where short positioning is at its highest in a few years. Indeed, the AI chip maker is among Evercore’s picks going into earnings season as it recommends adding exposure to Russell 1000 companies that have underperformed their respective sectors to date this year while exhibiting elevated short interest relative to their own two-year range.
Evercore says it further screened “for companies with exceptional fundamental strength, defined as above-sector YTD 2027 earnings estimate revisions and a consistent track record of execution of at least seven double beats over the past eight quarters and no more than one double miss.”
Prominent in this list are some of the biggest and “least loved” names of 2026, says Evercore, which along with Nvidia includes Alphabet, Netflix, Intuitive Surgical, Booking Holdings, Stryker, Automatic Data Processing, Moody’s, Cintas, Regeneron Pharmaceuticals, Nasdaq and Axon Enterprises.
