When it comes to equities, it’s (mostly) all about earnings, earnings, earnings.
For several markets, little has changed in terms of analyst expectations for earnings per share (EPS) in 2025.
EPS estimates have been rising appreciably and steadily for companies in the tech-heavy NASDAQ 100 index throughout 2024, with a significant contribution to these expectations from the so-called ‘Magnificent 7’ stocks.
Even excluding those blockbusters, the earnings outlook is good. Before November’s US election, expectations for US small-cap stocks (ref Russell 2000 in graph below) had been rising at a reasonably good pace. After the victory of Donald Trump and the Republican party, they moved sharply higher.
For value stocks, by contrast, the expectations are flat overall, with higher EPS forecasts for financial stocks offsetting lower numbers for energy.
Outside the US, the existing negative trend for emerging markets and Europe persists. Given the market worries over higher import tariffs from the Trump administration, one would not expect the outlook to improve much in the near term.
A broadly weaker yen has helped maintain the positive pattern for Japanese equities, though weak demand in China may limit the upside for Japanese corporate profits.
