United States
Volatility is high, but the path for yields is clearer than it looks. Across three oil scenarios, we show how policy responses shape fixed income markets and why the balance of risks still points to lower yields.
The long-run rise in S&P 500 margins reflects more than a shift toward higher-margin sectors. Most of the increase has come from higher profitability within sectors, supported by favorable mix of macro forces. Looking ahead, many of those tailwinds are likely to fade, with AI-driven productivity gains as a potential offsetting upside driver of margins.
Inflation’s underlying trend was headed lower prior to the Iran war. This makes the recent back-up in bond yields look like an attractive buying opportunity.
US employment data show some tentative signs of job growth acceleration and stable utilization. We see breakeven monthly job growth as closer to +30k per month than zero.
We expect the S&P 500 to deliver $308 of EPS in 2026, with a year-end target of 7700. Revenue growth drives upside, with little margin or multiple expansion. With economic growth tilted toward investment, we are overweight Technology, Industrials, and Materials, market-weight Financials, Energy, Health Care, Communication Services, and Real Estate, and underweight Consumer Staples, Consumer Discretionary, and Utilities.
Our "miniature stagflation" episode is coming together on the back of the Iran shock, China slowdown, and American political division.
Our Portfolio Allocation Summary for April 2026.
This screener report builds on the US Equity Strategy team's sector view published on 30 March 2026, where the team overweights Information Technology, Industrials, and Materials on a 3- to 12-month horizon. Here we utilize our screening tools to layer bottom-up stock selection onto their top-down sector views.
We continue to expect the S&P 500 to gain ground in 2026, driven by revenue growth, with limited scope for margin or multiple expansion. With cyclical upside tilted toward the investment side of the economy, we favor sectors with high-quality, revenue-driven earnings growth, leverage capex, and valuations that leave room for catch-up.