(Kitco Commentary) - The second quarter has come to an end, which means that the next wave of earnings reports is about to begin. Companies will start releasing their second-quarter results next week, with the big banks leading the way, as usual. JPMorgan Chase, Citigroup, and Wells Fargo will release their results on July 15.
Overall, expectations aren’t very optimistic, largely due to the uncertainty from ongoing trade wars. According to FactSet, analysts have lowered their quarterly earnings per share estimates, with forecasts for the S&P 500 dropping an average of 4.2% — a sharper decline than usual. Yet, investors don’t seem too worried.
That’s because this cycle of pessimistic forecasts has become almost routine. Analysts tend to lower expectations each quarter before results come in, companies beat those forecasts, and optimism bounces back in the markets. The same pattern played out in Q1 2025, when “analysts became more cautious.”
In the end, results were once again surprisingly strong: EPS rose 12.8% year-over-year, well above the 7.2% forecast. It almost feels like forecasts are intentionally conservative to help boost market sentiment. No wonder the S&P 500 and Nasdaq haven’t been rattled much by fears of weak results.
So, will the second quarter follow the same script, or are we in for something different this time?
Trade tensions remain unresolved, and it’s unclear how much of the recent cost increases were passed on to customers versus absorbed by companies. The good news is that even if tariffs have a negative impact, they won’t affect all sectors equally — some industries are more exposed to tariff-related risks than others.
For example, the technology sector is not expected to suffer — quite the opposite. Analysts are forecasting a 12.2% year-on-year increase in revenues and an increase in profit margins to around 25%. Cloud-related companies, in particular, could shine thanks to continued AI-driven demand.
Financials and healthcare companies are also expected to report solid results. The consumer sector might see some slowdown, with revenue growth projected to slow to 3–4% year-over-year, but there’s no talk of a decline. Energy companies, on the other hand, are likely to post weaker numbers.
But perhaps more important than the second-quarter numbers themselves is what companies say about the future. If guidance focuses heavily on tariff risks and economic woes, this could weigh on investor confidence and threaten the upward momentum of the S&P 500 and Nasdaq.
Investors will also monitor share buybacks, which have been a key pillar of market support in recent years. So far, there is no compelling reason to expect a sharp drop in buybacks, at least in the U.S., where the economy remains relatively resilient. If the most pessimistic scenario comes to pass, the market may turn red.