June Newsletter:

You Can Bank on It

Permission to Move Higher

Throughout our daily conversations we often get the question, “how are the markets making new highs?” 

It’s a valid question considering a growing list of concerns: geopolitical tensions, oil price volatility, sticky inflation, uncertainty around the path of interest rates, and ongoing policy headlines. The answer is surprisingly simple: earnings.

While macro concerns dominate the news cycle, corporate earnings continue to deliver results well above expectations. Ultimately, stock prices follow earnings, and the first quarter earnings season provided another reminder that strong fundamentals can outweigh a sizable “wall of worry.”

Q1 Earnings Season Delivered

Heading into Q1 earnings season, analysts expected S&P 500 earnings growth of approximately 13.1% year-over-year. Instead, companies delivered one of the strongest reporting seasons in years!

By the end of the reporting period, earnings growth had surged to 28.6%, the strongest quarterly earnings growth rate since Q4 2021.

The quality of the earnings season was equally impressive:

• 85% of S&P 500 companies beat earnings estimates, well above the 10-year average of 76%.
• 81% beat revenue estimates, compared to a 10-year average of 67%.
• Earnings exceeded expectations by an average of 16.7%, more than double the historical average surprise rate.
• Revenue growth accelerated to 11.8% year-over-year, the strongest pace since 2022.



Importantly, this wasn't confined to a handful of companies. Ten of the eleven S&P 500 sectors reported year-over-year earnings growth, while all eleven sectors delivered revenue growth. 

Impressive Beat across the Board

Sources: Factset

Driving the Upside

The dominant theme remained AI and digital infrastructure spending.

Technology sector earnings grew more than 54% year-over-year, led by Cadence holdings NVIDIA, Microsoft, Apple, and other beneficiaries of AI-related demand. Communication Services earnings rose nearly 49%, driven by Alphabet (also held across Cadance portfolios) and Meta. Consumer Discretionary earnings increased more than 40%, supported by Amazon (yes, we own this one as well) and improving consumer activity.

AI-related companies have become the primary source of earnings revisions for the entire index. Remarkably, a handful of technology leaders accounted for more than 40% of the increase in 2026 S&P 500 earnings estimates year-to-date.



The market has become increasingly concentrated, but concentration is occurring because these companies continue to generate outsized earnings growth.

What About the Outlook

Perhaps the most important development wasn't Q1 itself—it was what happened to future estimates.

Full-year 2026 earnings estimates increased 5.3%. Analysts now expect 22.6% earnings growth for calendar year 2026, followed by another year of double-digit growth in 2027.



The earnings story is not just about what companies reported—it is about improving expectations for what they are likely to earn in the future.

Making New Highs

A common criticism is that valuations appear elevated. That observation is fair. The S&P 500 currently trades at roughly 21x forward earnings, above long-term averages.

However, valuations become less concerning when earnings are rising rapidly, as they are today.



While investors continue to focus on geopolitical risks, consumer concerns, and inflation uncertainty, earnings durability remains exceptionally strong. Q1 earnings season confirmed that AI-related capital spending and productivity gains are translating into real profits rather than speculative hopes.

Until that changes the market trend looks well intact.

Rich Elevated? But Earnings Growing Double-Digits

Sources: Factset

Canadian Banks at New Highs

Bringing it back home, Canadian banks are trading at or near 52-week highs despite concerns surrounding the Canadian consumer and housing market. 

Canadian bank earnings were broadly stronger than expected, with most institutions delivering earnings beats, maintaining strong capital levels, announcing share buybacks, and increasing dividends.

The common theme across the sector was that credit quality remains manageable, capital markets businesses continue to perform exceptionally well, and loan losses are stabilizing.



Despite strong share price performance, Canadian banks are trading at approximately 15.3x forward earnings, roughly in line with historical premium periods and supported by expected ROEs of 15%-16% across the group. 

Bank Quarterly Earnings Scorecard

Sources: Factset

Bottom Line

Markets are making new highs because earnings are making new highs.

Despite geopolitical uncertainty, oil volatility, and questions surrounding the path of interest rates, corporate earnings continue to exceed expectations.



Q1 earnings growth more than doubled pre-season forecasts, earnings revisions are moving higher rather than lower, and analysts expect another year of more than 20% earnings growth in 2026.

Pullbacks should be expected and embraced as a normal feature of any bull market. However, as long as earnings continue to surprise to the upside and estimates keep moving higher, the primary trend for equities remains supported by the one factor that matters most over the long run: growing corporate profits.

Canada Day at the Shipyards North Vancouver

Canada Day is a time to come together and celebrate the people, communities, and values that make our country unique. From coast to coast, Canadians gather to enjoy music, food, entertainment, and shared experiences that reflect the strength and spirit of our nation.

At Cadence, we are committed to the communities where we and our clients work and live. We are proud to sponsor this year's Rotary Club of Lions Gate’s Canada Day Celebration at the Shipyards. On July 1^st, head down to the Shipyards in North Vancouver for a full day of music, art, and community fun. 

RJ Cares: Cadence in the Community

As we recognize RJ Cares Month, we’re taking a moment to reflect on the impact our team has made together so far this year. From volunteering our time to supporting meaningful fundraising and donation initiatives, Cadence Financial Group remains deeply committed to giving back to our community. 

Most recently, as part of the RJ Cares initiative, members of our team had the privilege of volunteering at the BC SPCA Charlie’s Pet Food Bank, supporting individuals and families who may be experiencing challenges in caring for their beloved pets. Throughout the day, our team packed and distributed pet food supplies while connecting with pet owners, learning about their needs, and helping create a welcoming and supportive environment. 

We look forward to continuing to support initiatives that make a lasting difference in our community.

In June, we’re excited to introduce Coffee with Cadence - a relaxed, open‑house opportunity to drop in, enjoy a coffee, and connect in person with a member of our team.

Whether you have a question, something on your mind, or a topic you’d simply like to discuss, this is an informal and welcoming space for conversation. Coffee with Cadence is designed to complement, not replace, your regular review meetings.

Click the button below to reserve your time slot. Meetings are scheduled on a first‑come, first‑served basis, with the following time slots available:

• 9:00–10:00 AM
• 10:30–11:30 AM
• 12:00–1:00 PM
• 1:30–2:30 PM

Upcoming Coffee with Cadence dates:

• Friday, June 19
• Thursday, July 16
• Wednesday, August 19



We look forward to welcoming you soon!

Charts of Interest

Revelio Labs finds that US computer science enrollment likely peaked with the class of 2026, with students shifting toward engineering and finance.

Many citrus fruits are harvested in the winter.

FIFA’s adoption of dynamic pricing and resale commissions for the 2026 World Cup has pushed ticket costs to unprecedented levels.

There has been a sharp decline in restaurant and related consumption for current and post-GLP-1 users, according to a survey by Deutsche Bank.

This newsletter has been prepared by the Cadence Financial Group and expresses the opinions of the authors and not necessarily those of Raymond James Ltd. (RJL). Statistics, factual data and other information are from sources RJL believes to be reliable but their accuracy cannot be guaranteed. It is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. This newsletter is intended for distribution only in those jurisdictions where RJL and the author are registered. Securities-related products and services are offered through Raymond James Ltd., member-Canadian Investor Protection Fund. Insurance products and services are offered through Raymond James Financial Planning Ltd., which is not a member-Canadian Investor Protection Fund. This provides links to other Internet sites for the convenience of users. Raymond James Ltd. is not responsible for the availability or content of these external sites, nor does Raymond James Ltd endorse, warrant or guarantee the products, services or information described or offered at these other Internet sites. Users cannot assume that the external sites will abide by the same privacy policy which Raymond James Ltd adheres to. Recommendation of the above investments would only be made after a personal review of an individual’s financial objectives. Securities-related products and services are offered through Raymond James Ltd. Insurance products and services are offered through Raymond James Financial Planning Ltd.



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