Yearning for Earnings
Yearning for Earnings
As UK skies glowed with Bonfire Night celebrations, the same date across the Atlantic marked Donald Trump’s election anniversary. In markets, the show went on, with layoffs and better-than-expected earnings taking centre stage.
Results and Reactions
The Q3 earnings season is progressing steadily, with the US continuing to show robust performance. Earnings growth is tracking at around 14%, supported by strong contributions from technology, utilities, energy, and financials. Margins are beating expectations in many sectors, reinforcing the view that corporate America remains resilient even in the face of macroeconomic uncertainties.
While early in the season, a high proportion of companies have beaten expectations — around 87% — investors are increasingly focusing on the underlying quality of those earnings and the guidance provided by management, rather than headline surprises alone. Companies maintaining strong margins and demonstrating sustained growth are receiving a positive response from investors.
Meanwhile, despite adverse immediate reactions to recent results from Meta, Tesla, and Microsoft (as touched on in last week’s investment comment), the dominance of the “Magnificent Seven” remains intact. Relative to Bloomberg’s index of the next biggest 493 stocks, these seven tech giants are trading very close to their highs, underlining their continuing market influence.
The spotlight on tech and AI dominance was further amplified last week when Nvidia made history as the first-ever US $5 trillion company. Its market value now represents nearly one-tenth of the S&P 500 and surpasses the combined GDPs of India, Japan, and Germany. Many are now calling it the most influential stock in Wall Street history.
The Magnificent Decade Continues
Source: Artorius, Bloomberg
Data is normalised with factor 100 as of January 1, 2020.
In Europe, the Q3 season has been more mixed. Earnings growth is tracking at around 4%, driven primarily by technology, materials, and energy. The number of companies beating expectations has been lower than in the US, but when expectations have been exceeded, markets have responded strongly — the median share-price reaction is the most positive seen in the past two years. Overall, the European earnings season highlights pockets of resilience, even as companies navigate a challenging macroeconomic backdrop.
Corporate Layoffs
The US Federal Reserve (Fed) chose to cut rates last week by 0.25%, with Chair Powell signalling that further reductions this year were unlikely despite market expectations. Labour market concerns have been the principal justification for those calling for more aggressive Fed easing. Amid these developments, Amazon announced 14,000 corporate job cuts, citing the need for fewer layers and a shift of resources towards AI and cloud services. Despite making headlines, this represents roughly only 1% of the company’s global workforce.
Getting a clear read on the broader US labour market has been unusually tricky of late. The federal government shutdown — now the longest on record at 38 days — has delayed key employment data releases, leaving a gap in official data. Private datasets, from payroll processors to job-posting platforms, have increasingly stepped in to fill the void. According to data from outplacement firm Challenger, Gray & Christmas, nearly 950,000 US job cuts were recorded through September — the highest year-to-date total since 2020 and already exceeding full-year totals for every year since 2009, excluding the pandemic’s first year.
Layoffs Already Higher Than for Any Full Year Since 2020
Source: Challenger, Gray & Christmas
Those in the government sector were hit the hardest, with nearly 300,000 job cuts linked to the Department of Government Efficiency (DOGE) actions. Economists describe the US as a ‘low-hire, low-fire’ economy, where most companies remain reluctant to let employees go. This caution reflects pandemic-era hiring frustrations, when job vacancies and quit rates both hit record highs.
Some commentators warn of a potential AI-driven shift in jobs, but near-term labour trends are more affected by slowing population growth and companies trimming labour to absorb tariffs rather than passing costs on to consumers. Fed Chair Jerome Powell described the situation as a “very gradual cooling” in the labour market — “nothing more than that”.
Data released just yesterday from ADP, the largest US private employer data collector, shows that US companies added 42,000 jobs in October, after declines in the previous two months.
Layoff headlines can grab attention, but the overall impact so far appears limited. The real picture will become clearer once more complete labour market data is released, and it will be important to monitor how trends develop.
Conclusion
This week marks the one-year anniversary of Trump stepping into office for his second run. From a market perspective, things are going smoother than many expected.
Over the past 12 months, market performance has been exceptional, with certain sectors and stocks standing out as clear leaders.
European aerospace and defence (proxied by the Stoxx Total Market Index) has soared to the top of the charts. Trump has made no secret of his push for Europe to boost defence spending, and the market clearly believes he’ll get his way. Meanwhile, the Magnificent Seven have kept delivering stellar returns since Trump 2.0, with only South Korea, Bitcoin, and Gold outperforming in dollar terms.
Dollar volatility is far lower than a year ago, signalling that markets are settling into a Trump-era rhythm. Surprises are never off the table — Trump is nothing if not unpredictable — but for now, investors seem more focused on the ripple effects of what he’s already set in motion, rather than the surprises still to come.
In other news
New York elected Zohran Mamdani as its new governor — a progressive shift that grabbed headlines, though markets remain focused on federal policy.
In Washington, the Supreme Court began its long-anticipated hearing on the administration’s tariff strategy. No immediate ruling was expected, and the process could be lengthy, but it is certainly one to keep an eye on.
Back in the UK, the Bank of England have kept rates on hold, as expected. With inflation easing and growth subdued, the Monetary Policy Committee opted for continuity, and markets were largely unmoved. All eyes now turn to the UK Autumn Budget on 26 November 2025, as markets look for fresh guidance on fiscal policy and its potential impact on growth and inflation.
Yuval Peshchanitsky
Portfolio Analyst
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