Chart of the Week

Earnings improvement is broadening

October 7, 2025

Time to Read: 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 | Macroeconomic

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.

Chart of the Week | Macroeconomic

Fed friction?

Markets are navigating tensions between a Fed that offers less guidance and an inflation backdrop that remains sticky. Added uncertainty from Middle East tensions and energy-price swings is further shaping sentiment, with recent moves in Treasury yields suggesting the market wants the Fed to hike. However, with yield volatility expected to linger in the near term, we see today’s elevated Treasury yields as an especially compelling opportunity in fixed income.

Chart of the Week | Macroeconomic

Muni yields are attractive

The war in Iran has increased volatility across fixed income markets, pushing municipal bond yields higher as investors reassess inflation risk, energy costs and the path of Federal Reserve policy. Even so, historically elevated municipal bond yields present a compelling opportunity for tax-sensitive investors.

Chart of the Week | Macroeconomic

Sizing up small caps

Small caps have outperformed this year despite the threat of higher interest rates, suggesting the rally is being driven by more than just diversification away from large cap tech stocks. Improving earnings expectations and a resilient U.S. economy support our view that small caps have further upside from here.