• Bellwether stocks like UPS can be a good guide to the health of the overall economy and consumer trends
• The tech sector makes up 31% of the US market but has contributed to 43% of the returns of the index¹
• Some of our largest holdings in TSMC, Meta and Microsoft have surpassed analyst expectations this earnings season and enjoyed a significant uplift in share price

What is earnings season?

Earnings season is a period in which publicly traded companies release their quarterly financial results. It’s a key time for investors as it provides insight into how companies are performing, but also the wider economy. Whilst public companies all over the globe have to report their earnings, earnings season tends to refer to the US stock market. It happens four times a year, running for about a month after the end of each quarter.

The season unofficially starts with the big banks (JPMorgan, Citibank, Wells Fargo) and ends with the big retailers (Target, Walmart, Home Depot). The Q2 earnings season is happening at the moment and spans July and August – JPMorgan’s results were announced on July 15, and Walmart’s results are on August 21.

The Bellwether Stocks

Bellwether stocks is the nickname given to companies who are good indicators of the overall economy. Good examples are:

• UPS – a global package delivery company. Quite simply, when the economy is healthy and growing, consumers are ordering more goods and businesses are shipping more goods. It is therefore a good indicator for economic activity but also global trade as UPS operates internationally too. Interestingly, UPS’ Q2 revenue came in slightly ahead of expectations this week but their share price is down over 15% since Monday. This is because they refused to offer an update on revenue expectations for the rest of the year citing ‘macro-economic uncertainty’.²
• Caterpillar – a farm and construction machinery manufacturer. It is a strong indicator of the construction industry which is inextricably linked to the wider economy. When CAT sees strong sales, the economy is typically expanding, whereas when demand for heavy equipment falls, the economy is typically in a slowdown. CAT announces its results next week on 05 August so is something we will have a keen eye on.
• PayPal – an online payment system. This is much the same as UPS, in that PayPal’s results reflect broader trends in e-commerce and consumer spending. PayPal beat earnings and revenue forecasts this week but the share price, like UPS’, is down double digits. This is based on tariff uncertainty driving slower growth in their branded checkout.

The Tech Stocks

The Tech sector makes up almost a third of the main US stock market, the S&P 500, but has contributed 43% to the overall return of the index this year. Because of this concentration, tech earnings have significant potential to move the market. Microsoft and Meta both announced their results on Wednesday this week, revealing a strong spend in AI Infrastructure that was finally paying off. Microsoft leapt 9% having topped analyst estimates, making it the second $4 trillion company. Meta was up 12% following its earnings release with AI driving ad sales.²

Source: Morningstar, August 2025

Bowmore Portfolios

We reduced our US equity exposure a few weeks ago on concerns around a weakening consumer and the results this past week have provided further evidence of this theory. Meanwhile, we maintain a healthy exposure to the innovative tech industry through our L&G Technology ETF that is up a little over 5% this week and over 30% the past 3 months. Microsoft is the third largest holding in our middle of the road; Core Risk 5 portfolio and Meta is the eleventh largest. The largest is actually TSMC, the Taiwanese semiconductor company. They posted a 62% surge in profits on 17 July and have enjoyed a 5% increase in share price over the past month. All in all, it’s been a strong earnings season for Bowmore Portfolios.

Source: LSEG DataStream, data as at 31/07/2025

The value of your investments can go down as well as up, so you could get back less than you invested. Past performance is not a guide to future performance.

Other Sources:

¹Morningstar, August 2025

²Refinitiv, August 2025