Global Equity Weekly

August 07, 2026 | 16:30

Coming Up Roses

Economist

Robert Kavcic

Senior Economist and Director
Economics

Robert has been with BMO Capital Markets since 2006. He plays a key role... (Read more)

Robert Kavcic

Senior Economist and Director
Economics

Robert has been with BMO Capital Markets since 2006. He plays a key role... (Read more)

Equity markets pushed higher this week as earnings results continued to handily top expectations. The S&P 500 rose 3.6% to a new record high, led by technology. Meantime, the TSX continues to push record territory as well, adding 3.3% this week on massive rallies in materials and tech.

S&P 500 earnings are quite simply blowing the roof off, with growth now pegged at around 50% y/y for 2026Q2. With about 350 companies in the S&P 500 reporting, 85% have topped analyst expectations, which is well above the typical rate (high-70% range). Revenues are also topping the bar at a higher-than-normal 77% rate. From the start of July, the level of expected S&P 500 earning has been revised up by roughly $140 billion, pulling up growth to 40% y/y from 24% y/y expected at the start of the reporting season. In short, if you’re an earnings watcher, you know these results are about as good as it gets.

How much is real and how much is an AI-driven illusion is up for debate, but suffice it to say that these numbers are getting juiced. As one example, “other income” reported by the Magnificent 7 looks to be running at around $160 bln for the quarter alone—this includes things like marking unrealized equity gains in AI investment stakes. Scrub that out, and S&P 500 earnings growth falls below 20% y/y. We’ve also noted some other factors, like today’s capex boom driving reported earnings immediately as revenues soak up purchases of chips, hardware and infrastructure, but leave the expense line to only bite later as these investments get depreciated. Cash flow, therefore, has looked more subdued.

Source: Bloomberg. As of 2:00 pm Friday

That’s the bearish view. The bullish view is that the S&P 500 is still probably running with double-digit earnings growth across sectors like energy, financials, industrials and utilities. And a lot of that, while also leveraging the AI boom, is much more ‘real’.

Back in the economy, U.S. payrolls printed a disappointing -23k in July, but the declines were in government—private-sector employment rose a decent 30k in the month. That leaves the 3-month average private-sector gain at 40k, and the 12-month running at 53k. Household employment was also down in the month (-87k), but the jobless rate still dipped a tenth to 4.1% with labour force growth stalled out. Still, the market read this is mildly dovish, and Fed rate hike expectations have now been pared back to just over 25 bps by December, with the upcoming September meeting at less than fifty-fifty.

Major Index Performance

North American Sector Performances

(% change over period)

Table 1 - S&P 500 Sector Performance

Source: BMO Economics, Bloomberg

Table 2 - TSX Sector Performance

Source: BMO Economics, Bloomberg

TSX Relative Sector Performance

(relative to the index, year-ago = 100; dashed line = 200-day m.a.)

S&P 500 Relative Sector Performance