North American stocks are pausing near record highs as stalled U.S.-Iran talks inject uncertainty ahead of a pivotal week for Big Tech earnings and a key Federal Reserve decision.
BNN Bloomberg spoke with Eric Sterner, chief investment officer at Apollon Wealth Management, who says strong earnings fundamentals support equities but warns geopolitical risks and inflation pressures could drive volatility.
Key Takeaways
- Strong earnings growth and profit margins continue to support equities, with S&P 500 earnings expected to rise about 15 per cent.
- Mag Seven results are critical to sustaining the rally, especially as AI-driven momentum strengthens in technology.
- Markets appear less reactive to geopolitical developments, though prolonged disruptions could push inflation higher.
- The Federal Reserve is expected to hold rates steady, with focus on its outlook amid geopolitical uncertainty.
- Health care and financials are seen as opportunities, supported by defensive traits, M&A potential and resilient consumer spending.
Read the full transcript below:
ROGER: It looks like North American markets have taken a bit of a breather this morning after efforts to resume talks between the U.S. and Iran stalled over the weekend. All this comes as five of the Magnificent Seven companies are set to report their earnings this week. Together, Apple, Alphabet, Microsoft, Meta and Amazon make up about a quarter of the S&P 500. Their earnings will be a crucial test of whether today’s near-record market valuations can hold. Let’s get more now from Eric Sterner, CIO at Apollon. Eric, thanks very much for joining us today. You remain bullish.
ERIC: Yes, I do. And thanks, Roger, for having me. The first-quarter earnings season is looking to be outstanding. Right now, S&P 500 companies are projected to grow earnings by 15 per cent, which would be the sixth straight quarter of double-digit earnings growth. Net profit margins are near 13 per cent, which is the best since 2009. Certainly, I think we have some tail risk with the Middle East conflict. I think the market is betting that this conflict is not escalating, but we continue to see some mixed messages coming out of the Middle East and the Strait of Hormuz. That’s something investors should pay attention to. But from a fundamental perspective, earnings are looking very strong for S&P 500 companies.
ROGER: All right, I want to talk about that in just one second. I just want to finish with the Middle East. It does feel like there’s less and less reaction every time there’s a delay or snag, like this weekend. We saw another one, but then all of a sudden, Iranian officials are meeting with Pakistani officials. But it seems to be less and less of a reaction from the market every time.
ERIC: Yeah, I think for a few reasons. One, this is a midterm year, and this is not a popular war in the U.S., and there are affordability concerns among many households, especially now with the cost of living up 25 to 30 per cent since COVID. Now we have higher gas prices and potentially higher food prices as a result of higher diesel prices, even fertilizer prices continuing to escalate in the near future if the Strait of Hormuz is not normalized. I think investors are betting the White House has a major motivation to put this war behind them, but that remains to be seen. If the Strait of Hormuz is not reopened and normalized soon, that could cause more upward pressure on inflation, which could raise concerns as midterms approach later this year.
ROGER: All right, let’s talk about earnings. I think the last time I saw, 80 or 90 per cent were beating expectations. How important are the ones we’re going to see on Wednesday?
ERIC: It’s interesting because in the first two months of this year, we started to see a market rotation, and technology was actually the second worst-performing sector because of concerns about valuations. But the NASDAQ 100 P/E ratio dropped about 23 per cent from October to early March. That helped reignite some of the AI rally. We’re seeing strong moves in technology, especially semiconductors, and the Magnificent Seven are at the centre of that. It will have a major impact on whether this rally can continue. As we hear more from the Magnificent Seven this week, I expect continued strong earnings, and I think the rally still has plenty of legs.
ROGER: All right, we’ve got a Fed decision on Wednesday as well. It’s a busy day. What do you think we’re going to see there?
ERIC: I think it’s a sure bet we’re not going to see any rate movement. It will be interesting to hear what the Fed has to say about projections for the rest of the year. The big variable is what’s happening in the Middle East and when that situation will be normalized. It’s hard for the Fed to have a clear view when no one knows when a permanent ceasefire will be in place. Another question is whether Jerome Powell will continue in some capacity after his chairmanship ends. That’s something I’ll be listening for as well.
ROGER: All right, if I were him, I might want to go golfing. Top sectors you like right now — first up, health care.
ERIC: Health care hasn’t delivered strong returns recently and is one of the worst-performing sectors this year. But in midterm years, it has historically outperformed. In the past 10 years, it has only beaten the S&P 500 twice, and both were midterm years. It speaks to its defensive characteristics. We’ve seen many sectors benefit from AI tailwinds — utilities, materials, industrials — and I think health care could be next. There are also opportunities from an M&A perspective as companies look to strengthen their pipelines.
ROGER: All right, financials — we saw strong results from the banks early in earnings season. How are you viewing that sector?
ERIC: That also ties into potential M&A activity as rates have come down and deregulation continues. There are projections of significant deal activity this year. The consumer, at an aggregate level, is still healthy, though it’s a bifurcated story. Higher-income consumers are doing well, supported by home values and the stock market, while lower-income consumers are feeling the pressure of higher living costs. Overall spending is still holding up, which supports banks, along with increased trading activity.
ROGER: All right, we’ve got to wrap it up there. Eric, thanks as always for joining us.
ERIC: Thanks for having me.
ROGER: Eric Sterner, CIO at Apollon Wealth Management.
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This BNN Bloomberg summary and transcript of the April 27, 2026 interview with Eric Sterner are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
