Goldman Sachs\u2019 July 2026 Corporate Macroscope says the equity rally has shifted from valuation expansion to an earnings-led phase, which changes the standard for further gains. Sticky long rates mean this is not a free-money equity cycle, so companies need to justify their multiples through profits and credible capex. The bank also frames AI capex as moving beyond the Magnificent 7, with spillover into industrials, capital goods, electrical equipment, defence, energy security and infrastructure.<\/p>\n
The report says global equities posted an exceptional first half despite geopolitical risk, oil volatility and concerns over the growth-inflation mix. Asia led, while Europe lagged modestly on price return but outperformed the US on total return; Goldman adds that earnings growth accounted for a large share of the advance. On market structure, it flags rising supply, but points to buybacks, M&A and strong corporate balance sheets as demand supports that may help keep equities intact as leadership broadens.<\/p>\n
We are seeing the market’s engine shift from broad valuation expansion to a more focused test of corporate earnings. The easy gains from falling macro anxiety are likely behind us, making the coming weeks more about picking specific winners. This means our derivative strategies must become more precise, targeting individual company performance rather than just broad market direction.<\/p>\n
With Q2 2026 earnings season upon us, implied volatility will be the key focus. The latest data shows S&P 500 earnings growth tracking at 11%, beating the 8% forecast at the start of the quarter, so we should anticipate sharp moves on announcement days. We see opportunity in buying calls on companies with strong pre-announcements or using straddles on those in competitive sectors where the outcome is uncertain.<\/p>\n
The artificial intelligence boom is no longer confined to a few tech giants. We have seen capital goods orders for electrical equipment rise 15% year-over-year as companies build out power infrastructure for data centers. This suggests exploring call options on industrial and utility sector ETFs, as these are the new beneficiaries of the AI capital spending cycle.<\/p>\n
Persistently high interest rates mean we cannot rely on a rising tide to lift all boats. The 10-year Treasury yield has held above 4.5% for most of 2026, which punishes unprofitable companies and rewards those with strong balance sheets and real cash flow. This environment makes long-dated options on speculative growth stocks riskier, while favouring strategies on established, profitable firms.<\/p>\n
A strong cushion of corporate demand should prevent a severe market downturn. Announced share buybacks have already surpassed $700 billion year-to-date, putting us on a pace to challenge the record levels seen in 2024. This consistent buying pressure could make selling cash-secured puts or put credit spreads on high-quality S&P 500 names a viable strategy to generate income.<\/p>\n\n\n\n