The Market After Earnings: Geopolitical Impacts and Sector Analysis
As the global market reaches the end of the corporate earnings season, macro factors and geopolitical risks have once again become the central themes of the market. This article focuses on the U.S. market and provides an analysis from four perspectives: (1) the market situation after the earnings season, (2) geopolitical factors such as the Iran-Israel conflict, (3) trends in notable sectors like solar power and home construction, and (4) concerns regarding the private credit market, incorporating specific examples and comments from stakeholders.
1. Market Overview After Earnings Season
Earnings announcements are the biggest milestone for U.S. companies to show their performance to investors every quarter, and they typically attract market attention from mid-April to around May 20. In 2025, the season followed a similar pattern, starting around April 15 and ending almost entirely by May 20, with the exception of 'stragglers' like NVIDIA (announcing on May 29). However, as June begins, company-specific news is scarce, and macro factors such as inflation, interest rates, and geopolitical events are once again driving the market.
“Once the earnings season is over, there is almost no new material, and investors start to focus on two major themes.” (Steve Eisman)
The S&P 500 and NASDAQ remained mostly flat this week. While temporary gains were seen following strong earnings from major companies, there was no material to form a sustainable trend.
2. Impact of Geopolitical Risks
2-1. The Future of the Iran-Israel Conflict
In the first week of June, the biggest factor was the tension in the Middle East.
Monday: The market rose temporarily on the view that it was a localized conflict between Iran and Israel.
Tuesday onwards: The market plummeted as U.S. involvement was suggested.
Over the weekend, former President Trump stated, 'Give Iran two weeks and watch the diplomatic negotiations,' which eased anxiety, and the market ended the week almost flat.
“The market will fluctuate depending on whether the conflict remains localized or how far the U.S. intervenes. This week, Mr. Trump's remarks provided a floor.”
2-2. The Fed's Stance
At the FOMC meeting on June 10, interest rates were kept on hold as expected. Former President Trump criticized this, saying, 'The Fed not cutting rates is irrelevant,' but Mr. Eisman expressed the view that 'unless there is a major external shock such as a U.S.-China trade war, the Fed's actions will not have a major impact on the market.'
“If there is no trade war, the economy and the market will be fine. Interest rate policy is currently a ‘bystander.’”
3. Sector Trend Analysis
3-1. Challenges in the Solar Power Sector
Residential and commercial solar power stocks, which are sub-sectors of energy, all fell significantly.
Enphase Energy (residential benchmark stock): fell about 24% during the week
First Solar (commercial benchmark stock): down about 20%
The background to this is that the U.S. Senate version of the budget bill includes a provision to 'completely phase out tax incentives for solar and wind power by 2028.' Meanwhile, incentives for nuclear, hydroelectric, and geothermal power remain, leaving solar power in particular among renewable energies exposed to significant political risk.
3-1-1. Residential vs. Commercial Differences
Residential: Rooftop installations. System installation costs are approximately $30,000. Interest rates have risen from the 3% range to the current 9% range, reducing investment appeal.
Commercial: Large-scale plant installations. Targeted at corporations and local governments, with equipment scales in the tens to hundreds of kilowatts. Often have longer payback periods than residential projects.
3-2. Trends in the Housing Construction Sector
The NAHB (National Association of Home Builders) index, which indicates housing starts and consumer sentiment, fell to 32 in June. A reading below 50 is considered 'pessimistic,' and it has sunk to its lowest level since 2012.
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Existing home market is in a 'lock-in state'
Existing homeowners who refinanced at low interest rates (around 3%) during the COVID era have little incentive to switch to current mortgage rates of around 7%.
While the new construction market has remained strong due to increased market share for major builders, interest rate buydown programs (where builders cover part of the interest) are gradually ending, putting pressure on new orders and margins.
3-2-1. Valuation Benchmarks
Lennar (LAR): $340 in 2022 → currently $35.
D.R. Horton: $200 in 2024 → currently $120.
LAR's P/TBV (Price-to-Tangible Book Value) is 1.4x. Some point out that if it drops to the 1x level, it would be a 'good opportunity to buy the dip,' but the current situation looks like 'no man's land.'
4. Concerns Regarding Private Credit
Amidst claims that 'the next financial crisis will be private credit,' existing bank lending remains stagnant, while BDCs (Business Development Companies) and private funds like Apollo are explosively expanding their loan balances.
'During the 2006-07 subprime crisis, securitization data was published monthly, allowing for early detection of anomalies, but there is no disclosure for private credit. The reality is invisible, and it is impossible to predict when a problem might occur.'
Prominent short trader Eisman predicts that the risks of private credit will manifest 'when a recession hits the real economy.' At present, he offers a calm view that 'the collapse of private credit itself will not trigger an economic downturn.'
Post-Earnings Season: There is a lack of company-specific material, and attention is shifting to macro factors.
Geopolitical Risk: The Iran-Israel situation is the biggest risk factor for the market. Potential for increased volatility depending on U.S. actions.
Major Sectors: Solar power and housing construction have undergone significant adjustments under the headwinds of tax and interest rate environments. Recovery in investment appeal is conditional on policy changes or lower interest rates.
Financial Market Stronghold: While private credit is growing rapidly, a lack of disclosure is a source of anxiety. Caution is required regarding credit risk when a recession becomes apparent.
Moving forward, the direction of the market will be determined by progress in US-China trade negotiations, the Fed's policy shifts, and developments in the Middle East. In particular, for the private credit and renewable energy sectors, it is essential to analyze trends based on changes in policy and the economic environment. While following expert opinions and corporate developments, careful judgment is required in both risk management and investment strategy.
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