Market Call: Earnings Reporting Season Likely To Broaden The Stock Market Rally

We've previously written that our number one concern for the stock market is unsettling domestic and global political turmoil. The attempt to assassinate former President Donald Trump on Saturday heightened anxiety about political violence at home as the November elections approach. On the global stage, the violence of the wars between Ukraine and Russia and in the Middle East seems to be escalating. Then again, the stock market has a history of tuning out domestic and global political shocks, which more often than not turn out to create buying opportunities for stock investors (chart).

We expect that stock investors will be focusing on Q2's earnings reporting season over the rest of this month through early August. If earnings turn out to be better than expected (as we project), then the bull market should broaden as investors continue to discount cuts in the federal funds rate later this year as they did on Thursday and Friday. The breadth of positive three-month forward earnings growth rates among the S&P 500 continues to widen (chart).