Key Drivers Three factors are shaping current market dynamics: geopolitical developments, artificial intelligence (AI), and corporate earnings.

Current Environment Recent U.S.-Iran tensions have elevated oil prices and bond yields, though the economy continues to demonstrate resilience. As Q2 earnings season begins, I expect market focus to shift toward corporate fundamentals, which remain strong.

Earnings Outlook Global earnings are projected to grow double-digit year-over-year for the fourth consecutive quarter—the strongest pace since Q1 2022. Growth is broad-based across regions and sectors, though AI-related companies and energy stocks are outperforming. This diversification across sectors and regions is a healthy development for equity markets.

The AI Question While AI-related companies are expected to lead earnings growth, valuations are elevated and reflect high market expectations. Investor focus will be on whether companies can sustain infrastructure investment demand and convert AI spending into profits. Some uncertainty remains around the scale and duration of AI investment.

Our View I remain constructive on the path forward. However, I recognize that sentiment may remain sensitive to inflation, interest rate, and AI-related developments.