This may be the biggest week of Q2 earnings season. Here's what's going on. We've got Microsoft, Meta, Apple, Amazon, all reporting earnings this week. Now their stock market performance over the course of 2026 has been lackluster. Nevertheless, they are still the epicenter of the surge that we've seen so far this year, largely because their spending is the rationale for the broader AI trade.

Now, when we see earnings for these companies, we'll likely see investors focus on the same things with these companies as they did with Alphabet last week. So that, of course, means spending, it means AI-related revenue, and it means free cash flow.

Now, recall that last week alphabet showcased good earnings, more spending, and evaporating free cash flow. And investors punished it as a result. We could very well see that same trend this week with these companies. Now, that's not all that we've got going on.

On Wednesday, we also have the Fed press conference. Consensus has been really hard to pin down. Inflation is higher. We've had all of these supply shocks. And the labor market is and has been potentially more stable than people expected. This opens the door to a rate hike, though that still is not my base case.

Here's the bigger picture. Rates have already been moving up, and that's not just because of inflation, that's largely because of higher real rates. What does that mean? Well, real rates are interest rates apart from inflation expectations. And higher real rates could reflect higher growth expectations, or it could reflect uncertainty around the path of interest rates.

But the point is that this is a who's afraid of the Big Bad Wolf moment. In other words, rates matter to markets. They matter to consumers. And yet markets have been choppily higher and the consumer has hung in there even as rates have moved higher.

But if the Fed does indeed hike, I think it could tell us a bit more about Fed decision making under chairman Warsh, and his potential lack of patience for the price instability that we've seen over the past 5 years.

At least as it comes to equity markets, that could be a bit unsettling, even if there isn't an immediate economic significance to a higher Fed funds rate. Of course, there are some other things to watch. This week we have Coke reporting, we have Visa reporting, and on Thursday, we'll see the PCE come out. That's often considered or described as the Fed's preferred inflation gauge.

But all of this put together, I think by the end of the week, we'll have a bit more information on two key variables for 2026--

the AI trade and the Fed's reaction to the state of inflation. Stay tuned.

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VOICEOVER: This is Taking Stock with Empower.