Despite a barrage of tariff announcements and escalating trade tensions, U.S. equities touched new highs last week, with the S&P 500 continuing its upward momentum.
According to Morgan Stanley, this strength reflects a measured investor response to policy risks, supported by sector-specific buffers and improving earnings sentiment.
1. Limited Direct Exposure (So Far)
Most S&P 500 industries have relatively low exposure to the countries currently affected by tariffs. For example, imports from Mexico under the USMCA framework remain largely exempt, shielding U.S. firms from immediate cost increases.
2. Market Is Pricing In Revisions
Investors appear confident that announced tariffs — including recent 30% levies on the EU and Mexico — may be scaled back through negotiations. The lack of finality has softened market reaction.
3. Tariff-Hit Sectors Already Corrected
Consumer goods and other tariff-sensitive names have already been repriced lower. Morgan Stanley says this reduces the risk of fresh drawdowns unless broader measures (e.g., on China or semiconductors) are enacted.
Beyond geopolitics, stronger earnings sentiment is helping sustain market momentum. Morgan Stanley notes that earnings revision breadth — the net percentage of upward vs. downward earnings per share (EPS) estimate changes — has flipped from -25% in April to +3% now.
Track this trend with the Financial Growth API, which captures quarterly and annual earnings revisions for public companies.
Sectors like Financials and Industrials have been standouts, reinforcing the idea that underlying business strength is helping absorb external shocks.
Additionally, rising EPS revision dispersion — the spread in analyst estimate changes — is creating a favorable environment for active stock selection as earnings season gains pace.
Stay ahead of reporting updates using the Earnings Calendar API, which offers dates, consensus EPS, and revenue projections across sectors.
While headline risks from trade tensions remain, equity markets are demonstrating resilience, backed by selective exposure, proactive pricing, and improving fundamentals.
For investors, this is shaping up to be a stock picker’s earnings season.
