Q3 Earnings Recap: Steady As She Goes

Core Insights - The earnings season indicates that US large-cap companies continue to outperform expectations, with S&P 500 earnings 6.3% higher than anticipated, while all sectors except Communication Services showed positive surprises [3][4][7] - Future earnings expectations for the S&P 500 have increased due to positive earnings surprises, suggesting continued growth potential for US large-cap companies [6] - The annualized trend for US large-cap earnings is a positive 13.1% year-over-year, supported by an 8.3% revenue growth, with notable strength in Financials and Industrials [7][8] Earnings/Revenue Surprises - US large-cap earnings results remain strong, with small-caps also showing improvement for the second consecutive quarter [5] - All 11 sectors reported positive revenue surprises, alleviating concerns about the impact of tariffs on earnings [4][5] Analyst Adjustments - Analysts have revised their earnings expectations upward in response to the positive earnings surprises observed during the quarter [6] Earnings/Revenue Trends - The technology sector has demonstrated exceptional performance, with an annualized earnings growth of 29%, justifying its strong market performance [8] - Small-cap earnings are improving but show more inconsistency compared to large-caps, with potential for growth in sectors like technology, industrials, and healthcare [18] - European equities have shown improvement, but results are inconsistent across sectors, with a 3% earnings surprise compared to 6.7% in the US [18] - Japan's earnings have rebounded strongly, flipping all indicators to positive, although consistency remains a concern [18] Market Outlook - The overall strength of the US economy has overshadowed potential disruptions from tariffs, with strong earnings from AI-related segments and signs of growth in value-oriented sectors [13] - The company maintains an overweight position in US large-cap stocks while selectively investing in Europe and Japan, focusing on value and financial sectors [14]