Trump and Broader Economic Growth in Focus as U.S. Companies Gear Up for Q4 Reports

As the U.S. market approaches the final quarter earnings reports for 2024, investors are keen to assess whether technology firms and other significant companies will sustain their recent profit momentum. Another key aspect of their focus is whether this growth will extend across more sectors of the economy.

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

Analysts project a notable increase in overall profits for companies, estimating a growth rate of 9.6% for the fourth quarter of 2024 when compared to the previous year, slightly outperforming last year's third-quarter growth of 9.1%, according to data from LSEG.

This year has seen the S&P 500 index increase by 23%, marking its second consecutive year with gains surpassing 20%. Much of this rise is attributed to significant advancements in companies like Nvidia and Microsoft, which are leading developments in artificial intelligence technology. The communication services sector, including firms such as Alphabet, has led in earnings gains this year.

Despite a shaky opening to 2025, the S&P 500 currently trades at a multiple of 21.5 times forward earnings, indicating a more expensive market compared to the 10-year average price-to-earnings ratio of about 18, highlighted by LSEG data.

"We’ve seen a significant expansion in multiples over the past couple of years, and it’s crucial that profits catch up to these valuations," remarked Anthony Saglimbene, chief market strategist at Ameriprise Financial. He emphasizes that while expectations for big tech firms are high, growth in profits is anticipated in more sectors, especially with the upcoming fourth-quarter reports.

In 2024, communication services and technology were the frontrunners in earnings growth, and it is expected these sectors will also contribute significantly in the fourth quarter. Additionally, the financial sector is predicted to lead with a 17.5% increase in quarterly profits.

Looking ahead to 2025, projections indicate broader profit growth, with healthcare, technology, and sectors such as industrials, materials, and energy expected to see substantial improvements compared to 2024, according to LSEG.

Stephanie Lang, chief investment officer at Homrich Berg, noted, "Growth rates are expected to improve from 2024 into 2025, and we are optimistic about the overall broadening of earnings success."

Investors are also eager to gain insights from company executives regarding potential policy shifts following the inauguration of President-elect Donald Trump on January 20. Some of Trump's proposed policies, particularly concerning increased tariffs, may lead to higher consumer prices, while deregulation could spur earnings growth in the financial sector and others.

Reports suggest that Trump may consider declaring a national economic emergency to implement universal tariffs affecting both allies and rivals. Timothy Chubb, chief investment officer at Girard, expressed that understanding the timing and implementation of tariffs will be crucial. He also expressed an interest in hearing thoughts from banking leaders on deregulation.

Even amid uncertainty regarding how many further interest rate cuts the Federal Reserve might execute, company commentary on consumer resilience and the strength of the U.S. economy remains essential, especially since the economy has shown unexpected robustness against slowdown predictions.

Trump, Growth, Earnings