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The team led by Lori Calvasina said early trends suggest US companies have been resilient to the trade war so far. However, a slate of executives have warned that the effects will become clearer in the second half of the year, they said.
'It's still too early to assume tariffs won't generate inflation pressures,' Calvasina wrote in a note that was published Sunday, after the trade agreement between the European Union and the US was announced. 'It also poses a risk to the path of stock prices if company outlooks for 2026 don't end up being as rosy as investors have been anticipating.'
US stocks have rallied to record highs as investors bet earnings would continue to be robust. About 82% of S&P 500 companies have beaten second-quarter earnings estimates to date, the largest share in almost four years, according to data compiled by Bloomberg Intelligence.
Progress in US trade negotiations has also lifted sentiment. In the latest agreement announced Sunday, Washington and the European Union agreed on a pact that will see the bloc face duties of 15% on most of its exports.
Some market forecasters including Morgan Stanley's Michael Wilson have turned more optimistic about the S&P 500 as they expect earnings to remain upbeat. On Monday, Oppenheimer & Co.'s John Stoltzfus upgraded his year-end target for the benchmark to 7,100 points — the highest among strategists tracked by Bloomberg.
However, others like UBS Group AG's Bhanu Baweja have previously warned the market was too optimistic about profit margins being protected even in the face of higher levies.
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