Muzinich Weekly Market Comment: Don’t forget the micro

August 10, 2026

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Markets have started August on a strong footing, supported by easing geopolitical tensions and lower energy prices. But beneath the macro headlines, a broad-based global earnings upcycle may offer a more compelling explanation for record equity markets and resilient credit spreads.

August has opened strongly. Investor sentiment is improving, with our preferred gauge, the VIX, back around 15, a level typically consistent with normal risk appetite and manageable uncertainty.

The positive backdrop was driven by both bottom-up and top-down factors, though, as always, it was the geopolitical macro headlines that grabbed the spotlight. Iran said it had reached a preliminary agreement with Oman on a proposed shipping route through the Strait of Hormuz – a tentative accord, but a step towards reopening the critical waterway for energy supplies.

The details, however, point to a harder line. According to the semi-official Fars news agency, some Iranian politicians are pushing for clauses that would bar US and Israeli ships from the waterway, a condition that directly contradicts Washington's demand for free passage. Other reported modifications include compensation from "hostile countries," a ban on Israel-related cargo, and a fee structure covering services such as insurance and environmental costs. In practice, the flag-based restriction may matter less than it appears: few US- or Israeli-flagged commercial vessels operate globally, and fewer still have transited the Persian Gulf since the conflict began.¹ 

Financial markets responded accordingly. Energy prices are now 9% lower month-to-date, with oil sitting close to US$80 – the upper end of the US$60-80 band within which we see limited impact on the economic outlook. Government bond yields in both Europe and the US shifted lower in a bull steepening, with 10-year yields falling around 10 basis points. Credit markets continued their relentless grind higher, though for once, investment grade kept pace with high yield. Equities, meanwhile, melted higher: the Bloomberg World Large & Mid Cap index is up over 2.9% month-to-date, one of many indices to set all-time highs alongside the Dow, S&P 500, Euro Stoxx 600, FTSE 100.

Away from the spotlight and the hostility-pause-hostility yoyo playing out in the Middle East, a more rational driver of equity indices breaching all-time highs and credit spreads staying glued to cycle tights sits quietly in the background – the bottom-up story of earnings, which have been strong across the board globally.

Europe is delivering one of its strongest scorecards in years. MSCI Europe Index profits have surged 14%, with more than half the index's constituents beating estimates for the second quarter, both the best readings since early 2023, see Charts of the Week. Commodities remain a major contributor on the back of higher oil prices, but the strength runs deeper than that: the median Stoxx 600 stock has reported a 7% rise in earnings per share (EPS) year-on-year, a sharp break from the past few years of near-zero profit growth amid subdued economic activity. Encouragingly, analysts are still raising forward expectations across a broad range of sectors.²

It's the same in the US, where nearly two-thirds of S&P 500 companies have beaten consensus EPS estimates in the second quarter – one of the highest frequencies of earnings surprises on record, exceeded only by last quarter and the COVID reopening period of 2020-21. Growth is running well above consensus even after adjusting for non-recurring "other income*," with EPS tracking at 26%, an acceleration on Q1 and the fastest pace since 2021.³ 

Emerging markets complete the picture. JPMorgan expects 2026 earnings growth to be the highest since 2021, led by industrials such as tech manufacturing, petrochemicals and commodities, with most other sectors still delivering a respectable 10-15% increase year-over-year.⁴ 

As difficult as the macro is to predict, the bottom-up picture seems clear. This is a broad-based global earnings upcycle, underpinned by loose financial conditions, rising real incomes, full employment and a generational capex cycle. Perhaps that is why equities keep breaking to new highs and credit spreads remain anchored, regardless of the macro uncertainty emanating from the Middle East.

*Alphabet and Amazon's combined US$151 billion of "other income" related to equity investments. Microsoft contributed an additional US$3 billion of "other income."

Charts of the Week: Earnings

Source: Bloomberg, as of August 7, 2026. Muzinich views and opinions are subject to change. For illustrative purposes only, not to be construed as investment advice or an invitation to engage in any investment activity.

Past performance is not a reliable indicator of current or future results.

References to specific companies is for illustrative purposes only and does not reflect the holdings of any specific past or current portfolio or account.

References

1. Bloomberg, “Iran Debates Hormuz Wording as Trump Says Deal’s ‘Moving Along’,” August 7, 2026
2. Bloomberg, “Europe’s Best Earnings Since 2023 Are Stronger Than They Look,” August 4, 2026
3. Goldman Sachs Research, “US Weekly Kickstart: Q2 2026 mid-season earnings update,” July 31, 2026
4. JPMorgan Research, “Emerging Markets Corporate Strategy: 2026 Mid-Year Outlook,” June 2026

This material is not intended to be relied upon as a forecast, research, or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed by Muzinich & Co. are as of August 7, 2026, and may change without notice. All data figures are from Bloomberg, as of August 7, 2026, unless otherwise stated.

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