A Peak at 4Q25 S&P 500 Earnings
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A Peak at 4Q25 S&P 500 Earnings

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Barbara Reinhard

Barbara Reinhard, CFA

CIO, Multi-Asset Strategies and Solutions

Mountains with blue sky in background

Fourth quarter earnings season is underway, what is the market thinking? The expected blended earnings growth rate for the quarter stands at 8.3%, up from estimates at the start of the quarter. Since our last review, valuations have continued to grind higher; the forward P/E now sits at 22.2x, well above both the 5- and 10-year averages. 

We enter this earnings season with a constructive backdrop. Negative guidance is at its lowest level in recent periods, while more than the usual number of companies are issuing upward guidance. Unsurprisingly, the AI narrative continues to lead, with the information technology sector emerging as the primary beneficiary and reporting the highest concentration of positive guidance. 

That said, in the prior quarter, markets under-rewarded companies that beat expectations while punishing misses disproportionately. This asymmetry is consistent with late-cycle dynamics, particularly in an environment where valuations and expectations remain elevated. Monitoring whether this pattern persists will be important as earnings season progresses. 

The bottom line: Against this backdrop, we continue to favor high-quality businesses with durable pricing power and the operational flexibility to navigate a more demanding earnings environment. 

Source: Bloomberg, FactSet 

Sebastian Teper contributed to this article.

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