Chart of the Week

Earnings improvement is broadening

October 7, 2025

Lesezeit: 3 min

Earnings growth is on investors’ minds, especially as it broadens beyond the big tech stocks that have shown the most improvement in the past. We believe this is a positive sign for continued equity gains.

Equity market performance this year has been driven by better-than-expected earnings. With big tech dominating much of this growth, some investors have become concerned about concentration risk among technology stocks. However, current forecasts suggest earnings are improving beyond big tech into other sectors.

As of today, the market capitalization-weighted S&P 500’s earnings are forecasted to grow 10.1% in 2025 compared to 6.7% for the index’s equal-weighted counterpart, representing a gap of 3.4%. However, despite concerns about slowing jobs growth and the impact on the economy, that gap is expected to narrow in 2026 with S&P 500 earnings forecasted to grow 13.5% compared to 12% for the equal-weighted index — only a 1.5% difference.

Broadening earnings revisions should continue to support U.S. equities. Additionally, we are entering a seasonally favorable period, as the fourth quarter has historically been the best performing quarter of the year. These factors, combined with the Federal Reserve’s easing of monetary policy and improving margins, should be positive for stocks through year end.

Chart of the Week | Makroökonomisch

In a real regime shift?

Higher inflation has been a dominant theme of the current decade. In addition to price shocks, it is being shaped by secular investment trends in infrastructure, defense spending, onshoring and the ongoing AI buildout. These structural changes reinforce the case for looking beyond traditional 60/40 portfolios to include real assets as a source of diversification and return potential in portfolios.

Chart of the Week | Makroökonomisch

Getting real with real assets

Inflation appears to have transitioned from its pre-Covid average of 2% to a stickier point closer to 3%, and we do not expect a near-term return to prior levels. In this environment, we believe real assets, such as commodities, infrastructure and REITs, can provide inflation protection, diversification and return potential.

Chart of the Week | Makroökonomisch

Not in a bubble

As the S&P 500 approaches all-time highs, there are renewed concerns among investors about elevated valuations. However, historically strong profitability and expected earnings growth appear to support current pricing. In addition, the current S&P 500 price-to-earnings (P/E) ratio is roughly equal to the average since Covid. As a result, we do not view U.S. equities as being in bubble territory and we remain constructive on the asset class.

Chart of the Week | Makroökonomisch

Is the market rally broadening?

Stocks, as measured by the S&P 500, are up over 13% through early August. The solid gains have been fueled by a resilient economy, steady consumer spending, optimism around artificial intelligence and better-than-expected earnings growth. Still, some investors worry the advance may be too concentrated in technology and that AI-capex monetization may fall short of expectations. A closer look suggests that it is not just tech moving the market higher.