MICHAEL J. HALLORAN, CFA | Equity Strategist of Janney Montgomery Scott
Wyncote Wealth Management Group

Highlights for this week include: 

• Encouragingly, S&P Global’s preliminary August business survey signaled the fastest growth since April 2022, consistent with an acceleration of economic growth so far in the third quarter. 

• The BEA’s Personal Income and Outlays report showed consumers started the second half of 2026 on healthy footing, but inflation remained stubbornly above the Federal Reserve’s 2.0% target. 

• The second quarter (Q2) earnings season is close to completion and showing compelling results. For the full year 2026, analysts are now predicting (year-over-year) earnings growth of a positive 32%. While Technology (Al beneficiaries) and Energy are leading earnings growth, earnings growth for the rest of the market has been strong and accelerating. 

• The S&P 500 and other important indexes remain near all-time highs, and we are encouraged by the breadth of positive performance across sectors and asset classes. While acknowledging the risks posed by the fluid and uncertain Iranian conflict, we continue to expect stocks to be supported by further economic growth and robust profits. 

Preliminary August Business Surveys Remain Encouraging 

Late in each month, we get an important early look at that month’s private sector activity from S&P Global’s flash (or preliminary) business survey. This survey includes about 85% of final respondents and covers both the manufacturing sector and the much larger services sector. 

Encouragingly, the August survey signaled the fastest growth since April 2022 for the U.S. This is consistent with an acceleration of economic growth so far in the third quarter, though the drivers of growth have diverged. While strong manufacturing growth throughout the second quarter has faded over the summer, service sector activity has revived from the sluggish pace reported in the second quarter to reach the fastest since December 2024. S&P Global notes that the survey data for the third quarter is consistent with annualized economic growth approaching 3.0%, up solidly from the 1.5% pace seen in the second quarter. 

The business surveys for Europe and Japan were also consistent with further economic growth. 

Personal Income Rebounds in July while Inflation remains Stubbornly High 

The BEA’s Personal Income and Outlays report showed consumers started the second half of 2026 on healthy footing, with income rising 0.4% in July and up 3.7% in the past year. Income growth was led by private sector wages and salaries which rose 0.3% in July (up 3.8% in the past year) and government transfer payments which rose 0.6% (up 5.1% from a year ago). Personal consumption rose 0.2% month/month in July and is up 5.9% in the past year. 

While record high consumer net worth has been a major support for spending, wage growth remains a key support. With this in mind, we continue to keep a close eye on the labor market. Weekly jobless claims, a timely and accurate indicator, remain at historically low levels and consistent with a healthy labor market and further wage growth. 

Unfortunately, the income and outlays report also showed the Federal Reserve’s (Fed) preferred inflation reading remaining stubbornly above their 2.0% target. The July personal consumption expenditures (PCE) price index increased 0.2% from June and is up 3.7% from a year ago. The core PCE, which excludes volatile food and energy, also rose 0.2% and is up 3.3% from a year ago, a notable uptick from the 2.9% pace for the twelve-months ending in July 2025. The market is assigning the highest probability to the Fed leaving short-term interest rates unchanged at their September meeting. 

Earnings Season Shows Impressive Results 

The second quarter (Q2) earnings season is close to completion and showing extraordinary results following a strong first quarter. With over 95% of the S&P 500’s market capitalization reported so far, expectations are for Q2 earnings to grow an impressive 35%. While Technology (Al beneficiaries) and Energy are leading, earnings growth for the rest of the market has been strong and accelerating. The median S&P 500 company grew earnings by 14% year/year during Q2. The full-year 2026 S&P 500 earnings growth estimate now stands at a notable 32%, while the 2027 estimate is for a further healthy gain of 12%. 

Remaining Positive on the Market 

The S&P 500 and other important indexes remain near all-time highs, and we are encouraged by the breadth of positive performance across sectors and asset classes. While acknowledging the Iranian conflict continues to pose a risk for the economy and stocks, we remain positive on the stock market. We maintain our expectation for stocks to be supported by further economic growth and robust profits. 

Disclaimer 

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