JP Morgan has said earnings growth is broadening, with evidence of stronger corporate performance outside the tech sector.
In the US, S&P 500 companies excluding the Magnificent 7 delivered 12% earnings growth, the best rate in years, analysts at the American bank said in a note.
Eurozone earnings were subdued in the third quarter, up 1.00% year-on-year, but the bank expects an improvement in 2026. It pointed to better economic growth, fewer FX headwinds, improved Chinese demand, and easier financing conditions as supportive factors.
The analysts reckon investors should not expect consensus expectations to be met, but that this will not necessarily hinder performance. “Now, even with the expected sequential improvement, 2026 Eurozone earnings might not beat the current consensus projections, which are at face value calling for 15% EPS growth rate. This should not preclude earnings from being a tailwind for the market, though,” the JP analysts said in the note.
The median EPS growth estimate for 2026 is closer to 10%. A significant portion of the improvement is forecast to come from autos within the consumer discretionary sector.
JP Morgan added that market rotation is likely to continue, favouring lagging sectors, and suggested dips should be bought due to a stable backdrop of activity and rates.