US Perspectives: Positive signals, positive stance: US growth engine is still on

Highlights: US equity markets have delivered strong year-to-date gains, with the S&P 500, Nasdaq, and Dow up 16.0 per cent, 22.1 per cent, and 11.7 per cent, respectively, all reaching record highs in late September. Market leadership has broadened, though Technology and Communication Services continue to anchor performance. Ten of the eleven S&P 500 sectors are in green this year, led by Technology (+29.7 per cent), Communication Services (+26.2 per cent), and Utilities (+18.4 per cent), reflecting strength across both growth and defensive segments. So, we continue to hold our mild overweight on US equities. 

• Since the 8 April trough, the US equity rally has accelerated meaningfully. The S&P 500 is up 36.9 per cent, the Nasdaq 54.4 per cent, and the Dow 26.2 per cent. Growth has outperformed value by more than two-fold, and the US has outpaced global peers, with stronger rebounds than the MSCI World ex-US, China, or Europe indices. Valuations have eased from earlier peaks as well. The S&P 500’s current forward P/E multiple has expanded 7.1x in this cycle, below the 10x average of prior cycles, suggesting that while the market is not cheap, it remains within historical norms rather than excessively priced
• 3Q earnings season has been robust, with 87 per cent of companies beating EPS estimates, the highest since mid-2021. Blended Q3 earnings growth is tracking at 9.2 per cent yoy, marking the ninth consecutive quarter of positive growth, led by Technology, Financials, and Utilities. Since April, the US remains the global equity leader, supported by earnings upgrades, resilient consumer spending, strong corporate balance sheets, and ongoing investments in AI and infrastructure. Earnings growth for this year and next remain in the double digit range and accelerating to 14 per cent in 2026 – double the historical average, with forecasts continuing to trend higher as more sectors participate in the expansion beyond the mega-cap names
• Collectively, the recent trade & tariff agreements could reduce near-term trade uncertainty, support global growth, and signal a tactical de-escalation in US-Asia economic relations. Most of the negotiated tariff deals have been far less draconian than the announcements on Liberation Day, 2 April 2025. For financial markets, any trade announcement or tariff deal should be viewed as a net positive, offering boost to risk sentiment and market momentum. These developments should be accretive to corporate profits and could result in further upward revisions to earnings in the next few quarters. For equity markets, the tariff deals that have been announced, have focused heavily on trade in goods—a sector that has been slow in the post-COVID world. We maintain an overweight US equities stance. The tech revolution, led by productivity enhancing AI, nearshoring/onshoring and the re-industrialisation of the US continue to lift growth prospects and valuations