Records Are Made to Be Broken

With SpaceX completing the largest IPO in capital market history on Friday, a few statistics for reflection. First, SpaceX’s $75 billion IPO was the largest in history by a factor of nearly two, eclipsing Saudi Aramco’s $38 billion partial privatization in 2019. In total market capitalization, SpaceX pushed above $2 trillion intraday on Friday, and trading volume reached record territory for an IPO as well. In SpaceX’s wake, several companies have filed for IPOs or reiterated their stance to remain private, but irrespective of the fundraising methodology, technology companies remain at capital markets’ forefront.

We retain a glass-half-full forward perspective for diversified portfolios, but we acknowledge how prominent technology, writ large, remains across public and private markets. Specifically, the AI build remains our primary focus. We will share more specifics in coming publications, but to best understand opportunities and risks ahead, we are assessing the various layers that constitute the AI ecosystem to gauge the likely forward path. While we acknowledge the risk that AI overbuild may occur, digging into various subcomponents can help provide clues on stability. IBM offers an additive framework to this end, highlighting the infrastructure, data, model deployment, application and observability/governance layers that envelope the ecosystem.¹ Companies like SpaceX, OpenAI, Anthropic, Perplexity and others play key roles within this architecture, and understanding winners and losers as AI deployment unfolds will play a central role in our analysis.

With only one company left to report quarterly earnings in two weeks, Federal Express, we can’t say we are complete, but we are close. Earnings were blockbuster and broad-based in strength. Sector earnings growth highlights include technology (over 50% growth), communications (+47%), materials (+40%) and consumer discretionary (+39%).² Only health care delivered negative earnings growth, somewhat hampered by a few pharmaceutical companies. On the sales side, technology once again led, but utility companies delivered strong revenue growth, thanks in large part to data center buildouts. Revenue growth was more stagnant in health care (consistent with earnings) and energy companies, which remain the strongest performers in sector terms in the entire S&P 500 so far this year.³

From an earnings expectation standpoint, analysts have not wavered in their expectations for 2026 or 2027. As of Friday, earnings growth estimates anticipate 16% growth this year and 15% next year, and that is off a base of three consecutive positive earnings years. We have emphasized that earnings growth expectations of that magnitude, both size and duration, require consumer participation. What is unique in this environment is the enduring influence AI’s buildout and uptake has on those numbers. While we remain optimistic about the path forward, we will continue to gauge the supply/demand balance of AI build relative to returns.

The European Central Bank’s (ECB) decision to raise interest rates on Thursday highlights the current policymaker zeitgeist. For context, among the world’s major central banks, the ECB has one of the lower nominal interest rate targets, allowing  room to raise rates relative to peers. North to south, Europe represents highly varied economies and sectors, and finding an interest rate target that balances divergences across the continent is challenging. Further, the ECB is a “single mandate” central bank, meaning it focuses on targeting inflation as its primary objective; employment, economic growth or other elements are secondary or excluded from its remit.

In its published statement Thursday, the ECB highlighted that its forecasters “now expect domestic demand to be weaker than they projected in March as the war weighs on confidence and higher energy costs erode real incomes.”⁷ This statement is nearly synonymous with the study mentioned above. Continuing with the ECB, they added, “we will…closely monitor the size and persistence of the energy price increase, how it feeds through to price and wage-setting, inflation expectations and overall economic dynamics.”⁸ Again, almost textbook relative to the study noted above. Europe’s economy has been more stagnant and its demographic challenges well understood by markets, which suggests the ECB will need to balance containing inflation expectations without thwarting growth.

Both the U.S. Federal Reserve (Fed) and the Bank of Japan (BOJ) will convene next week, yet market expectations diverge on potential outcomes. The Japanese equity market remains the major winner thus far in 2026, rising 31% in local currency terms and a still robust 28% in dollar terms, due to modest yen depreciation. Japan continues to reemerge from deflation’s multi-decade grip, and while the BOJ’s key short-term interest rates remain well below global peers, including the ECB’s, Japanese longer-term government bond yields have risen dramatically. Another region with demographic challenges, Japan’s recent growth impulses are thanks to significant fiscal and monetary buildup as well as increased corporate reform, and markets currently assign a 97% chance that the BOJ raises rates on June 16.⁹

The U.S. Federal Reserve meeting will be of significant importance to markets. With newly installed Chair Kevin Warsh presiding at his first Federal Open Market Committee meeting, markets will be primarily focused on how incremental change may be versus how abrupt. We highlight three areas we are focused on through an investors’ lens: communication policy changes (we may see an alteration to communication frequency and depth, perhaps less often and less detailed), scope of the Fed’s remit (potential to use less of its balance sheet) and potential changes to how the Fed may measure inflation. We will have detailed thoughts next week.

¹ Stryker, Cole. “What is an AI Stack?” IBM Think.. Accessed 12 June 2026. 

² Northern Trust Wealth Management Research. Data from Bloomberg Earnings Analysis, accessed on terminal 12 June 2026.

³ Ibid.

⁴ Burke, Mary A. and Ozdagli, Ali K. Household Inflation Expectations and Consumer Spending: Evidence from Panel Data. Federal Reserve Bank of Boston Research Department Working Papers. 2020, Number 20-15.. Accessed 12 June 2026.

⁵ Ibid

⁶ Ibid

⁷ The European Central Bank. “Monetary Policy Statement Press Conference: Frankfurt am Main, 11 June 2016.”. Accessed 12 June 2026.

⁸ Ibid

⁹ Northern Trust Wealth Management Research, Bloomberg. World Interest Rate Probabilities as of June 12, 2026. Accessed on terminal.