3Q Reporting Season Overview
The current reporting season is marked by strong earnings and a surge in AI capital expenditures, despite rising risks and high valuations.
Key trends include:
- Valuations are stretched at the top end of the market.
- The AI investment cycle remains in full swing.
- Earnings remain resilient, with 2025 numbers holding up and 2026 estimates ticking higher.
Notable sector performances include:
- Financials: largest positive contributor to growth, driven by booming trading, capital markets, and decent wealth and insurance results.
- Energy, communication services (excluding mega caps), and healthcare: detractors from growth.
When forward profits rise, markets tend to increase.
Despite some warnings, such as Jamie Dimon's comment that
where there is one cockroach, there are often more, the reporting season has shown surprising resilience.
Author's summary: Strong earnings and AI investments drive market growth despite risks.
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