This past week saw bonds rally and yields fall as some of the ever-present inflation fears were quelled.  This, after all, is the bet that growth investors are making in their pursuit of earnings performance.  That the Federal Reserve position, inflation is transitory owing to one-time demand excesses and various supply chain shocks, will be mitigated shortly.  So far, Fed Chairman Powell appears to be right.  And as a result, growth stocks are back in favor.

The near-term sustainability of this renewed enthusiasm will be predicated on the earnings performance and outlooks offered by leading firms.  Next week will mark the beginning of earnings season with some industrials and banks scheduled to report.  We will also get a look at the semiconductor supply chain, currently constrained, when the leading fabricator in the world, TSMC, reports.  The last half of July will be when the lion’s share of growth companies makes their way to the confessional.

So, what do we expect?  Most leading semiconductor firms will report excellent results but announce continuing shortages that somewhat dampen out-quarter performances.  Cloud infrastructure companies should once again report impressive results, and equally impressive outlooks, mitigated only by the ability to manage extremely rapid, and in some cases, accelerating growth.  The digitation of every thing and the need to access information from anywhere continues apace!

Leading consumer branded companies will announce pent up demand that should impress investors, as well as progress in direct-to-consumer initiatives that promise to re-invent how we shop.  Rapidly increasing gasoline prices will have consumers thinking about the migration to EV technologies.  The pause in interest rate increases will temper multiple compression among those firms whose future earnings streams are typically discounted back to obtain a present value, think biotech for example, and thus could take some pressure off the group (though drug pricing is always a political football).  Even video streaming services could impress with announcements regarding second half content availability now that the pandemic production shutdowns are over.

All in all, a prodigious amount of information flow.  We look forward to reporting back.

Bruce