The upcoming US second-quarter earnings season is expected to reinforce the resilience of global equity markets, with artificial intelligence (AI)-driven technology earnings and broader corporate profit growth likely to outweigh lingering geopolitical concerns, according to Standard Chartered.
The bank said the earnings season could provide fresh momentum for global stocks, which have continued to trade near record highs despite heightened tensions in the Middle East and volatile energy markets.
AI investment continues to drive technology earnings
Standard Chartered expects the global technology sector to outperform market expectations, supported by sustained investment in AI infrastructure and accelerating demand across the semiconductor ecosystem.
The bank believes stronger-than-expected earnings should ease investor concerns over AI monetisation and capital expenditure, while presenting an opportunity for investors who remain underweight the technology sector.
It noted that technology now accounts for more than 40% of global equity markets and represents around 21% of diversified multi-asset portfolios, underscoring its growing importance in global investment strategies.
As part of its portfolio positioning, Standard Chartered said it is increasing semiconductor exposure within its global technology allocation to 35%–40%, up from 30%–35%, while maintaining internet stocks at around 30%, hardware and software at 10%–15% each, and services and other technology segments at roughly 5%.
Within semiconductors, the bank is becoming more positive on the memory chip segment, citing improving earnings visibility supported by long-term supply agreements and strengthening industry news flow.
Earnings growth broadening beyond technology
While AI remains the principal earnings driver, Standard Chartered said corporate profit growth is becoming increasingly broad-based.
The bank estimates S&P 500 earnings rose around 24% year-on-year in the second quarter, with profits expected to continue expanding by more than 20% through the remainder of 2026 before moderating to a healthy mid-teen growth rate in 2027.
Importantly, earnings growth outside the technology sector is also forecast to remain in double digits, reflecting improving business conditions across multiple industries.
The bank said this broader earnings recovery should particularly benefit its preferred investment markets, namely the United States and Asia excluding Japan, with China also expected to gain from improving regional earnings momentum.
Middle East tensions seen as manageable
Standard Chartered believes recent developments in the Middle East represent a “controlled escalation” rather than the start of a prolonged conflict.
The bank said Iran remains motivated to keep oil prices elevated to maintain pressure on the United States, while US President Donald Trump is expected to favour relatively lower energy prices ahead of the November mid-term elections.
It expects Brent crude oil to trade within a US$70–US$90 per barrel range in the near term, although it cautioned that renewed geopolitical tensions after the US elections remain a key risk.
The willingness of oil tankers to resume normal transit through the Strait of Hormuz will also be closely monitored as a gauge of supply chain normalisation.
Fed expected to keep rates unchanged
On monetary policy, Standard Chartered expects the US Federal Reserve to leave interest rates unchanged for the rest of the year.
Minutes from the Fed’s June meeting under new Chair Kevin Warsh showed policymakers remain divided over the interest rate outlook, with some members remaining concerned about persistent inflation while others acknowledged easing price pressures following the decline in oil prices since April.
The bank expects June US inflation data to indicate that inflation peaked during the second quarter, supporting the case for an extended policy pause while the Fed completes several internal reviews of its policy framework and communications strategy.
Against this backdrop, Standard Chartered sees value in US inflation-protected securities (TIPS), noting that inflation expectations have fallen close to the lower end of their four-year range while real yields remain near their highest levels since 2008.
Volatility presents buying opportunities
Despite ongoing geopolitical uncertainties, Standard Chartered believes corporate earnings will remain the primary market driver over the coming weeks.
The bank expects improving earnings visibility, particularly in the US and Asia ex-Japan, to support investor sentiment and recommends using periods of market volatility to accumulate high-quality technology stocks and other companies with strong earnings prospects.
According to the bank, sustained AI-related investment and the broadening corporate earnings recovery should continue to underpin global equity markets even if geopolitical tensions flare up intermittently.
