3Q Reporting Season Overview
The reporting season is in full swing, with strong earnings and a surge in AI capital expenditures. However, rising risks and rich valuations are being tested.
Despite worries, the income statement remains resilient. The reporting season has two key messages:
- Weak earnings are a significant risk, as markets tend to increase when forward profits rise.
- Earnings look promising, with 2025 numbers holding up and 2026 estimates ticking higher again.
Financials were the largest positive contributor to growth, driven by booming trading, capital markets, and decent wealth and insurance results. However, energy, communication services (excluding mega caps), and healthcare were detractors.
When forward profits rise, markets tend to increase.
As Jamie Dimon warned, "where there is one cockroach, there are often more," indicating potential risks ahead.
Author's summary: Earnings stay strong despite rising risks.
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