Earnings Still Rule: Markets Look Through Geopolitics—for Now

Franklin Templeton maintains that earnings momentum, not geopolitics, remains the dominant driver of equity markets, even as energy shocks build in the background. 

• US GDP is expected around 2.5% in 2026, supported by sustained AI-driven capex and resilient consumer demand.
• 81% of S&P 500 companies beat earnings, reinforcing the strength of the current cycle despite macro noise.
• Equity leadership is broadening, with small- and mid-caps, EM, and Japan gaining traction beyond mega-cap tech.

Markets are trading the income statement, not the map. The question is how long that separation holds.