Must Read Research

This week, we check the status of S&P 500 earnings and find turbulence for companies not passing inspection, examine how natural gas prices have lost altitude despite hot weather and AI-fueled demand. Lastly, we spotlight a stealth rally in the year’s top-performing cross-asset.

With 90% of S&P 500 earnings now reported, our U.S. Equity Strategy team sees EPS (earnings per share) tracking a 6% beat, implying 11% y/y growth.

Some 73% of companies beat on EPS, well above the 59% historical average. But the standout is revenue: 78% of companies beat expectations, also above the 59% norm – the highest revenue beat breadth since 2Q21. Companies missing on both top and bottom lines faced the steepest penalty in our data history, suggesting good news was largely priced in. Analysts have revised 3Q EPS estimates up 10bp since July 1, contrasting with a typical 2% cut during this period. While mentions of “weak demand” ticked up and tariff concerns remain, corporate sentiment and guidance are improving. Capex trends were already strong, but Head of U.S. Equity and Quantitative Strategy Savita Subramanian believes the One Big Beautiful Bill Act (OBBBA) could further boost investment outside of AI themes by unleashing delayed projects.

Though we experienced the fourth hottest June and July over the last 30 years, U.S. natural gas storage has swelled.

Efficiencies, higher gas prices, and optimism around liquified natural gas (LNG) have spurred record production and driven a 20% increase in gas rig count since 1Q25. Commodity Strategy lowers their Sep-Dec 2025 price forecast to $3/MMBtu and 2026 to $4. LNG demand continues to grow but their Oct 2026 inventory forecast is just a few percent below normal. And while there’s a well-known positive power demand story led by electrification and data centers, U.S. solar generation was about 30% higher in July than a year ago. There’s also been a shift back to coal. Meanwhile, new gas generation is challenged by wait times for new gas turbines of up to 7 years. We still believe in LNG demand growth, but the upcoming midstream and infrastructure projects diversify feedgas demand away from Louisiana, impacting prices at Henry Hub.

Despite defensive positioning among managers, global convertible bonds (CB) rallied last month, powered by smaller-cap and cyclical names.

Year-to-date, the asset class leads global cross-asset performance with a +10.6% return. Head of Global Convertibles and Preferreds Strategy Michael Youngworth attributes the defensive tilt to renewed concern around policy-driven “burnout” risks, such as equity volatility, asset bubbles, and crypto. However, concerns of a broader economic slowdown have faded. Resilience was also evident in new issuance for converts: July topped $11bn globally, 2.5x the historical average and the strongest July since 2007. Retail CB (convertible bond) funds posted solid inflows globally, with Europe notching its biggest 12-week inflow since April 2015. The sustained issuance pace and supportive market tone prompted Michael to raise his full-year global issuance forecast to $100-120bn. The run-rate of issuance so far is well-above the elevated ’24 levels.