The fourth-quarter earnings season should be broadly constructive for markets, JPMorgan strategists expect, arguing that resilient activity momentum points to better earnings delivery than current consensus forecasts, despite recent geopolitical and tariff-related headlines.
Equity strategists at the bank said the latest headlines, while they may provide “an excuse for some derisking”, do not undermine what is seen as a supportive fundamental backdrop for equities.
Activity momentum held up well through the quarter and should translate into more reassuring results than investors are currently positioned for.
Year-on-year earnings growth expectations for the fourth quarter show a wide regional gap, with the S&P 500 at about 9% and Europe at around -2%.
However, the JPMorgan team said that looking at equal-weighted earnings growth rather than market capitalisation-weighted figures significantly narrows the differential, with median growth forecasts closer to 5% in the US and 2% in Europe.
With economic data momentum converging between the US and Europe, this suggests far less regional earnings divergence than the consensus assumes.
This underpins the bank's bullish view on the Eurozone, which it expects to deliver strong earnings growth this year.
The bank argued that global earnings growth has recently been narrowly driven by the US and artificial intelligence-related themes, while Europe and China saw little growth last year.
It expects that gap to close, with earnings drivers broadening and cyclical sectors, particularly in Europe, showing an inflection higher.
Capital goods, semiconductors and basic resources were flagged as likely beneficiaries, while bank earnings are expected to remain supportive but with some softening in momentum looking into 2026.