US Perspectives: US equity outlook for December 2025

Highlights: US equities have continued to lead global markets since the April trough, supported by resilient consumer spending, solid corporate balance sheets, and strong earnings delivery. Performance remains broad-based across sectors, and major indices such as the S&P 500, Nasdaq, and Dow are all registering healthy double-digit gains for the year. We remain mild overweight on US equities and diversify tech exposure with Industrials and Utilities, which are the clear beneficiaries of the AI trade.

• US equity valuations have moderated compared with earlier peaks. The S&P 500 fwd P/E ratio remains in line with long-term historical averages, and the current cycle shows one of the lowest multiple expansions of the past several decades. While markets are not inexpensive, they are certainly not displaying signs of historical excess
• The US retains a notable earnings advantage over other regions. Profit growth in 2026 is expected to outpace Europe and parts of Asia
• The combination of lower policy rates and the end of QT provides a supportive financial backdrop for risk assets. Lower policy rates are accretive to corporate earnings and should help keep valuations in check. Technology, AI, and productivity-linked sectors stand to benefit from lower real yields and improving macro conditions, where we maintain our preference. Importantly, we believe markets do not require the Fed to continue easing aggressively next year, as the underlying economy remains robust with corporate earnings projected to grow by roughly 14.5 per cent in 2026
• The One Big Beautiful Bill, taking effect in 2026, introduces an array of permanent tax cuts, new deductions, and pro-investment incentives that materially improve the fiscal and regulatory landscape. These measures meaningfully support household disposable income, corporate cash flow, and capital formation across manufacturing, semiconductors, and infrastructure