Earnings Season Heats Up Amidst New Fiscal Policies
This week, the corporate earnings calendar is packed, with major companies across various sectors set to report their quarterly results. The United States has a new president, and new fiscal policies are expected to roll out, which could have a significant impact on the economy.
Market Performance
Last week, the Dow Jones Industrial Average surged 3.7%, while the S&P 500 rose 2.9%, and the Nasdaq gained 2.5%. So far, in 2025, all three indices are up about 2%. This positive momentum is expected to continue, driven by strong earnings growth.
Earnings Expectations
Only 42 of the S&P 500 companies have reported their earnings so far, but the results are promising. Earnings growth is up 11% from the prior-year quarter, compared to a 9% growth rate in the third quarter. The financial sector is leading the way, with a whopping 26% growth rate in these early weeks of the earnings season.
Raising Forecasts
Based on our expectations for continued economic growth, we have raised our 2025 and 2026 forecasts for S&P 500 EPS growth. We now forecast 12% EPS growth in 2025, up from our prior forecast of 7%-9%. For 2026, we now forecast 11% growth, up from 7%-9%.
Economic Calendar
This week, the economic calendar is relatively quiet, with only a few key data releases. On Wednesday, data on Leading Economic Indicators will be reported, and on Friday, Existing Home Sales will be released. Our Economic Call of the Week is Existing Home Sales, which could have a significant impact on big-ticket spending and Consumer Discretionary stocks.
Housing Market Insights
According to our economist, Chris Graja, Existing Home Sales are expected to remain steady at 4 million homes at a seasonally-adjusted annual rate, matching November’s numbers. An upside surprise could be important for Consumer Discretionary stocks, as housing turnover is a key leading indicator for these stocks. Additionally, Harvard University’s Leading Indicator of Remodeling Activity projects modest growth for 2025, which could further boost Consumer Discretionary stocks.
Inflation Update
Last week, consumer inflation data grabbed the headlines, with the headline CPI number coming in as expected at 2.9% for December. However, Core CPI was 3.2% in December, down from 3.3% in November. Over the past few years, inflation has been decelerating, and this trend is expected to continue.
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