Trump and Broader Growth Amidst Q4 Earnings Reports

As the U.S. approaches another earnings season, investors are keenly observing if tech giants and other significant companies will build on their recent profit successes. They are particularly interested in whether earnings growth is spreading to various sectors of the economy as corporate America gears up to share its financial reports for the fourth quarter.

The fourth-quarter earnings season for 2024 kicks off next week, with major U.S. banks like JPMorgan Chase and Wells Fargo set to announce their results on Wednesday.

Analysts are projecting a 9.6% increase in overall earnings for companies in the fourth quarter of 2024 compared to the same period last year. This represents a slight rise compared to the 9.1% earnings growth recorded for the third quarter of last year, based on data from LSEG.

Throughout 2024, the S&P 500 index has surged 23%, marking its second consecutive year of over 20% growth. This success is partly attributed to remarkable increases from major corporations such as Nvidia and Microsoft, which have been at the forefront of developments in artificial intelligence technology. Communication services, including firms like Alphabet, and the information technology sector displayed the most substantial growth in 2024.

Despite a shaky start to 2025, the S&P 500 is currently trading at a price-to-earnings ratio of 21.5 times forward earnings, which is higher than its 10-year average of about 18.

Anthony Saglimbene, chief market strategist at Ameriprise Financial in Michigan, points out that there has been significant multiple expansion in the past years. He emphasizes the importance of companies reporting on their fundamental financial conditions to ensure that profits are following suit. High expectations are set for leading tech companies, which are under pressure to achieve positive results, while other sectors are anticipated to show accelerating profit growth, beginning with the fourth-quarter earnings.

In 2024, communication services and technology sectors led the way in earnings growth, and similar trends are expected in the fourth quarter. However, financials are predicted to top the earnings growth charts for Q4 2024, with projected profit gains of 17.5%.

Growth is expected to broaden further in 2025, especially in healthcare, technology, and sectors such as industrials, materials, and energy, which are anticipated to see improved growth compared to 2024.

Market observers are also keen to hear insights from company leaders regarding potential policy changes that will come with the new administration led by President-elect Donald Trump, who takes office on January 20.

Trump's proposals, particularly concerning higher tariffs, might lead to increased consumer prices. Conversely, reduced regulations could enhance earnings growth in financials and other industries. Reports suggest that Trump is contemplating declaring a national economic emergency to justify extensive tariffs on both allies and adversaries.

Timothy Chubb, chief investment officer at Girard, remarks on the uncertainty surrounding the timing of tariffs and their implementation, noting the significant impact these factors could have. Additionally, he expresses interest in how banks might respond to deregulation.

Uncertainty persists regarding future actions from the Federal Reserve and how they might affect interest rates. This will place importance on company remarks about the resilience of consumers and the U.S. economy, which has notably resisted expectations of a downturn.

Trump, Earnings, Growth