Week in review
- European Central Bank cuts rates by 25bps
- Japan core inflation rose 2.4% y/y
- U.S. September retail sales up 0.4% m/m
Week ahead
- U.S. consumer sentiment
- U.S. Fed Beige Book
- Bank of Canada interest rate announcement
Thought of the week
U.S. equity earnings are back in focus, and rightfully so. At current valuations, multiple expansion is unlikely to play a big role in driving returns, making earnings growth crucial for sustaining the rally. Reflecting on 3Q24 the S&P 500 continued reaching record highs, rising 5.5% quarter-over-quarter and 22.1% year-to-date (ytd). All sectors posted positive ytd returns, with value outperforming growth and the top 10 stocks gave back some of their earlier gains. However, this rotation wasn't reflected in earnings expectations this quarter, as the top 10 stocks are still anticipated to contribute the vast majority of earnings. Analysts expect this to gradually broaden, with the remaining 493 companies projected to achieve double-digit growth starting next quarter. With the U.S. macroeconomic outlook remaining supportive (highlighted by the Atlanta Fed’s GDPNow model projecting 3.2% annualized growth in Q3 2024) and consumer spending showing resilience (2% y/y growth for goods and 3% for services), we anticipate S&P 500 earnings to remain robust. This earnings season, we'll be watching for signs of an economic slowdown, the effects of rate cuts, and capital expenditure related to the AI transition.
Earnings growth
Pro-forma earnings per share, year-over-year
Market data