The Zhitong Finance App learned that J.P. Morgan strategists predict that the profit growth rate of US companies in this earnings season may greatly exceed that of European peers. The bank's strategist Mislav Matejka (Mislav Matejka) pointed out that this is a reflection of the drastic reduction in the threshold for S&P 500 index constituent companies. Despite strong growth in the US economy, analysts “drastically” lowered earnings expectations for the S&P 500 index this quarter.
Meanwhile, the situation in the European market is more complicated. Matyeka said European profit expectations for cyclical and defensive stocks are at a “stronger” level, but it may be more difficult for companies to reach this target. “This puts Europe at greater risk, especially when comparing the pace of economic activity,” he wrote in the report. This is certainly yet another bad news for European stock markets. This year, the European stock market's performance relative to the US fell to a multi-year low, making it the worst year for performance.
According to data compiled by Bloomberg, last year, the European Stoxx 600 index lagged more than 17 percentage points behind the S&P 500 index in local currency, the second-worst performance since the benchmark index was created in 1998. Strong growth in the US economy and strong demand from tech giants are the main reasons for this gap.
Among them, the performance of large US banks was particularly prominent. Banks such as J.P. Morgan Chase (JPM.US), Goldman Sachs (GS.US), and Wells Fargo Bank (WFC.US) all rose after releasing better-than-expected earnings reports. However, pharmaceutical company LLY.US (LLY.US) shares fell sharply as revenue forecasts fell short of expectations.
According to Bloomberg industry research data, the profit growth of S&P 500 index constituent companies is currently at a higher than expected level of 7.7%, and companies that account for nearly one-tenth of S&P's market capitalization have released reports so far.
By contrast, the performance of the European market was mixed. Companies such as British Petroleum (BP.US) and Taylor Wimpey Plc performed disappointing, while Richemont SA reported excellent quarterly sales, reaching record highs.
In response, Matyeka pointed out that due to the uneven recovery of China's economy, the outlook for the European stock market is “full of challenges,” which will cause European stock market profits to lag behind that of the US throughout 2025.
Meanwhile, Citigroup strategist Scott Chronert (Scott Chronert) also predicted that S&P 500 index constituent companies' profits in the fourth quarter would be “above average.”
Overall, despite many uncertainties about the US economy and corporate profits, strategists at J.P. Morgan Chase and Citigroup all believe that US companies will outperform their European peers this earnings season.
Matyeka said that US analysts' median forecasts showed earnings for the fourth quarter increased 3% over the same period last year, while European median forecasts showed earnings for cyclical stocks and defensive stocks increased by 5% and 9%, respectively.