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1. MSCI World in “overbought” territory.

Market breadth for the MSCI World is heating fast and has reached the overbought threshold at the index level. Within the benchmark, the percentage of overbought stocks is now the highest since February. It’s a combination that has often hinted at a market peak, at least in the near term.

But even while the big equity gains may be done, some investors still lack exposure.

So, provided the newsflow or the data don’t deteriorate significantly from here, a volatile grind higher can’t be ruled out.

“The trade truce is opening a way for more visibility in earnings but until we have that clarity, the markets are going to be very volatile,” says Virginie Maisonneuve, global CIO equities at Allianz Global Investors. President Trump uses unpredictability as a strategy and will keep doing that, she says. “I remain cautiously optimistic, but it’s going to be a very volatile year.”

2. Europe has weathered the turbulence and delivered resilient first-quarter earnings.

According to I/B/E/S, first quarter earnings will increase 1.9% from the same quarter a year ago, marking the fourth straight quarter of growth. Excluding the energy sector, earnings are expected to have risen 7.3%.

3. Euro rally is a headwind.

Not only were corporates worried about tariffs, but they sounded the alarm over the unexpected strength of the euro, as investors shunned dollar assets after Trump's tariff blitz.

The single currency has surged about 10% against the dollar since its February trough, and although it has pulled back slightly since the U.S./China tariff pause, it remains elevated.

This is a problem, given about 60% of revenues for companies on Europe's STOXX 600 index are generated abroad. "It's an issue for exporters. When you have tariffs and a stronger currency on top of that it becomes a double whammy," said Barclays' Chandrasekaran.

"The sharp cuts (to earnings expectations) have come for the export-oriented part of the market," he added. Companies that flagged currency movements as a potential headwind in the year ahead included Europe's largest company SAP, Munich Re, Bayer, Prysmian, Unilever and L'Oreal.

4. Banks earnings remain strong.

Bank earnings have largely weathered the market volatility around U.S. tariffs.

Many lenders beat expectations and stuck to their 2025 forecasts – a clear departure from prevailing corporate caution. Even with pressures from moderating interest rates, their latest updates showed resilience in the face of global trade and macro uncertainties. UBS estimates nearly 90% of banks beat market consensus, largely driven by strong revenue performances.

The sector trades cheaply based on various metrics, and even after a 28% surge this year, it remains in favour among investors attracted by high payouts and stronger balance sheets. According to BofA's European fund manager survey, banks reclaimed their spot as the most overweighted sector this month, with financial stocks expected to be the best performers this year.

"Bank numbers are all very strong," said Carlo Franchini, head of institutional clients at Banca Ifigest.

5. Energy earnings take a beating.

Seven of the 10 major sectors tracked by I/B/E/S have seen growth in earnings relative to the first quarter of 2024, but energy is not one of them, with the sector expected to report earnings down 28% from the same period a year ago.

"There's a very clear correlation between profitability and the oil price, and the oil price has come off," GSAM's Geerdink said. "It's a function of two things, lower economic activity and OPEC producing much more than anticipated." Oil prices tumbled to a four-year low last month on concerns about demand following Trump's tariffs, but have since rebounded slightly as trade tensions thawed.

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