3Q Reporting Season in Full Swing
Earnings remain strong and AI capex surges, but rising risks and rich valuations test the market's profitability.
Valuations are stretched, and the AI investment cycle continues. Despite concerns, the income statement remains resilient.
The reporting season conveys two messages: weak earnings pose a risk, but current earnings look good, with 2025 and 2026 numbers holding up.
- Q3 estimates are being revised up.
- Q4 estimates are holding firm.
Financials were the largest positive contributor to growth, driven by booming trading, capital markets, and decent wealth and insurance results.
Detractors include energy, communication services (excluding mega caps), and healthcare.
When forward profits rise, markets tend to increase.
As Jamie Dimon warned,
where there is one cockroach, there are often more, but overall, the reporting season has been resilient.
Author's summary: Earnings stay strong despite risks.
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