Wall Street entered the second-quarter earnings season on July 13 with analysts raising forecasts for Q2 2025, highlighting the resilience of the U.S. financial system amid persistent global trade tensions. Financial heavyweights such as JPMorgan Chase, Goldman Sachs, and Citigroup are expected to post strong earnings this week, fueled by steady consumer spending, a weakening U.S. dollar, and heightened trading activity across global markets.
The decline of the U.S. dollar—down about 7% during the quarter based on the DXY index—has provided a boost for companies with international exposure. For major banks, this has meant higher trading revenues as currency volatility spurred greater client activity. This environment has been particularly advantageous for U.S. financial institutions, which saw trading revenues surge approximately 10% in Q2, according to Crisil Coalition Greenwich. The trading boon comes amid a backdrop of economic uncertainty largely driven by renewed tariff threats and trade disputes under President Trump’s administration.
JPMorgan Chase, set to report on July 15, is forecasted to deliver a 5% year-over-year increase in earnings per share, propelled by its strong trading division. Citigroup, also reporting the same day, is projected to post gains as well, following a solid first quarter where net income jumped by 21%. Goldman Sachs and Bank of America, reporting later in the week, are expected to benefit from a busy dealmaking environment and persistent market volatility. Goldman Sachs, in particular, is projected to see an 11% increase in EPS.
Despite these strong projections, headwinds remain. Trade-related uncertainty continues to weigh on corporate planning, with strategists from UBS and RBC cautioning that capital expenditures and merger activity could be disrupted by unpredictable tariff policies. Overall S&P 500 earnings are forecasted to grow by 4.8% in the second quarter, a sharp slowdown from the 13.7% rise seen in Q1. This would mark the slowest earnings growth since late 2023.
However, many analysts believe these conservative expectations set the stage for positive earnings surprises. Historically, about three-quarters of S&P 500 companies beat EPS forecasts in a given quarter. Some experts suggest that fears of a recession and tariff impacts may have led to lower guidance, creating more room for companies to outperform.
Trade policy remains a crucial variable. The reimplementation of a 10% universal import tariff and sector-specific levies, especially on metals and semiconductors, has increased input costs for many industries. Still, these same trade policies have also injected volatility into the markets, which benefits banks’ trading operations. Analysts from Morgan Stanley have noted that equity markets seem to be pricing in the possibility of a policy reversal—what they call the “TACO trade”—before trade measures inflict lasting damage.
Investors are also closely monitoring inflation data and the Federal Reserve’s monetary policy stance. The June Consumer Price Index (CPI) reading, expected to show a 2.6% year-over-year rise, is due this week and could influence the Fed’s interest rate trajectory. Persistent inflation may cause the Fed to delay rate cuts, while signs of cooling could prompt more accommodative policy.
The broader market remains supported by strong tech performance and gains among large-cap stocks, with the Nasdaq 100 advancing 6.3% in Q2. A softer dollar has also boosted returns from international equities, with developed and emerging markets rising up to 20% and 16% respectively. While tech and financials have been the top-performing sectors, defensives have lagged, reflecting a risk-on sentiment among investors.
Looking ahead, markets are watching for several key developments: upcoming bank earnings reports, inflation data, tariff deadlines, and company guidance for the rest of the year. Banks that passed recent stress tests may also announce dividend increases and share buybacks, further supporting stock prices.
In summary, Wall Street’s strong Q2 performance underscores the durability of U.S. markets in the face of geopolitical friction and economic uncertainty. Strong trading revenue, a weaker dollar, and stable consumer demand have helped financial firms weather the ongoing trade disputes. While challenges remain, especially around inflation and policy direction, early indicators point to another quarter of resilient earnings.
