Is the Q2 earnings season make or break for US equities?

Soared to record levels earlier this month

In a far cry from the global stockmarket rout seen in the early part of the year, US equities soared to record levels earlier this month as investors viewed the asset class as a safer prospect against a backdrop of increasing European political risks, while bond proxies benefitted from the search for yield.

After suffering outflows of some $83bn in the first half of the year, US equity funds saw inflows of $12bn in the week to 13 July alone, leading both the Dow Jones and S&P 500 to reach a 15-month peak on 14 July. The S&P 500 has rallied by more than 25% since the index plummeted to a low in February, and has now broken out of its trading range for the last 14 months. Investors were buoyed as widely-held fears of a US recession at the beginning of the year have now all but disappeared following better-than-expected economic data - the latest being June's non-farm payroll report which s...