One of the key business stories to watch in 2026

Group 1: Profit Margins and Earnings Growth - Analysts expect profit margins to expand in 2026, driven by factors such as operating leverage, efficiency gains, and cost-cutting measures [3][4][7] - EPS is projected to grow about 10% to $298 in 2026, with net margins increasing by 40 basis points to 13.2% [2] - Companies are focusing on tariff mitigation strategies to bolster profit margins, indicating a proactive approach to managing costs [4][9] Group 2: Economic Outlook - The U.S. economy is expected to continue expanding into 2026, although job growth is slowing, which may limit wage growth [1][6] - The Federal Reserve has cut interest rates, signaling a shift in focus towards supporting the labor market while managing inflation [10][11] - Retail sales have shown positive growth, with a 0.6% increase in August to a record $732 billion, indicating strong consumer demand [11][12] Group 3: Market Sentiment and Stock Performance - There is a growing sentiment among investors to discuss 2026, as market participants shift focus towards future earnings potential [5][6] - Despite cooling economic growth, the long-term outlook for the stock market remains favorable, supported by expectations for continued earnings growth [20][21] - Companies have adjusted their cost structures significantly since the pandemic, leading to positive operating leverage that translates modest sales growth into robust earnings growth [24]