What does the chart show?
The chart shows the annual growth in earnings per share (EPS) and sales, for companies in the S&P 500. Each quarter, companies report aggregate EPS and sales alongside other data, thus providing an update on their performance.
Both measures – EPS and sales – are important: sales is a straightforward, fairly objective metric. Meanwhile, delivering positive and growing EPS is the ultimate aim of companies.
As the chart shows, US companies are currently experiencing the strongest period of growth since the covid reopening in 2021, marking a five year high.
Why this is important
Growth announced by S&P 500 companies in Q1 was excellent: not only was it high in absolute terms – good news for investors and society as a whole – but it was also significantly ahead of expectations – even better news for investors. It is early days in terms of Q2 reporting (data in the chart to Wednesday’s close), but so far things are looking good: public companies appear to be in rude health.
A note of caution, however. As always, when looking at short term performance, investors need to make a judgement about how long current trends are likely to persist. Traditional valuation metrics like price-to-trailing 12 month earnings, oversimplify this key decision: if EPS today is high, valuation multiples are lower as a result and optically more attractive. However, if current EPS and growth dynamics are only a cyclical uptick as opposed to a structural shift, then those same valuation multiples may not look so attractive as we go through the year and growth normalises. In short, PEs are a useful shorthand; not a golden rule.
But overall, the above is a great picture in terms of the current health of US public companies from a growth perspective. Long may it last.
Cooling US inflation offered markets some relief, but renewed Middle East conflict and higher energy prices kept global central banks cautious and interest-rate expectations volatile.
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Inflation cooled sharply in June: headline CPI fell 0.4% month on month and eased from 4.2% to 3.5% annually, helped by temporarily lower energy prices. Core inflation slowed to 2.6%.
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Near-term rate-rise expectations declined: markets reduced the probability of a Federal Reserve increase in July to around 10–14%, although further tightening later in 2026 remained possible.
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Federal Reserve independence remained in focus: Chair Kevin Warsh told Congress that monetary policy would remain data-led despite potential pressure from President Trump.
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Renewed conflict with Iran unsettled markets: US strikes, disruption around the Strait of Hormuz and higher oil prices revived concerns that energy costs could reverse recent inflation progress
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Andy Burnham prepared to become prime minister: markets focused on the likely direction of the new government, particularly its approach to public spending, devolution and regional investment.
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Cost-of-living policies moved up the agenda: Burnham’s team indicated that the proposed £1.8 billion digital identity programme would be dropped, with resources redirected towards more immediate domestic priorities.
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The OECD called for continued fiscal discipline: it forecast UK growth of approximately 0.9% in 2026 and warned that high debt-servicing, pension and healthcare costs limited the new government’s room for manoeuvre.
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Sterling strengthened on expectations of policy continuity: the pound reached a one-year high against the euro as investors welcomed reports that a fiscally cautious chancellor could be appointed and anticipated a possible Bank of England rate rise.
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The ECB was expected to hold rates in July: economists forecast the deposit rate would remain at 2.25%, while rising oil prices increased the possibility of another rate rise in September.
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The eurozone growth outlook remained subdued: quarterly growth was reported at only 0.2%, while the 2026 forecast was lowered to around 0.5% as energy costs and geopolitical uncertainty weighed on activity.
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Inflation remained above target: eurozone inflation eased to 2.8% in June, but higher oil and gas prices threatened renewed pressure on household and business costs.
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EU governments remained divided over Israel policy: foreign ministers discussed tariffs, licensing restrictions or a ban on trade with Israeli settlements, but failed to reach a common position
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Middle East tensions dominated global markets: renewed US-Iran hostilities, attacks on Gulf shipping and restrictions around the Strait of Hormuz increased risks to global energy supplies.
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Russia intensified missile and drone attacks across Ukraine, including one of the largest strikes on Kyiv this year, highlighting ongoing pressure on Ukrainian air defences.
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China’s Economic growth slowed more than expected: second-quarter GDP expanded by 4.3%, leaving growth below Beijing’s annual target range and increasing pressure for additional policy support.
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The weak yen remained a market concern: analysts warned that the currency could fall beyond ¥170 per dollar before the government’s investment and growth policies produced measurable results.
