The stock market has bigger fish to fry this summer than a bump in oil prices.
Oil has been back in the spotlight with Iran tensions flaring back up, but investors are more focused on the start of another crucial quarterly earnings season
Most Read from MarketWatch Concerning questions about the artificial-intelligence race have been emerging, as well as the path of inflation and interest rates. That means the U.S. and Iran could keep threatening each other, but it’s a risk that’s unlikely to hold the stock market’s attention for long. “Oil and Iran do matter,” said Rob Almeida, global investment strategist for MFS Investment Management — but they matter in terms of their potential to implement an inflationary supply shock, he noted. Investors have learned to view such episodes through a single lens — namely, which companies can pass higher costs through to customers and which cannot, Almeida told MarketWatch. “That’s what will drive future earnings.” Attention has moved “decisively away from headline geopolitics” and toward structural forces that are reshaping the market, said Almeida.
Those factors are most likely to drive equity returns over the next 12 to 18 months. Corporate earnings season begins again in earnest this week, starting with the big banks and followed up later by major tech companies. The AI capital cycle — one of the largest corporate investment cycles in modern history — will be at the center of it all.