Rudi's View | 10:00 AM
Corporate earnings are not everything for share market investors, but they do explain a lot.
By Rudi Filapek-Vandyck, Editor
Better-than-expected corporate profitability and growth in the US is the key reason Wall Street strategists are upgrading their year-end targets.
8,000 has become the new December 2026 number for the S&P500 from the likes of Goldman Sachs and Morgan Stanley. BCA Research and Citi have upgraded to 8,100.
RBC Capital just upgraded its target to 8,150 from 7,900.
Between now and then, a general pullback in the order of 5%-10% is still seen as a genuine possibility, also with an eye towards inflation and the midterm elections later in the year, but strong corporate results are underpinning general confidence the underlying trend remains 'up'.
Following a much better-than-forecast Q1 results season, in which average EPS growth amounted to 30% year-on-year, consensus is now positioned for 23% growth in Q2.
At face value, this seems like analysts have lowered the bar for ongoing success, but history shows such growth numbers this late into a cycle are nothing short of extraordinary.
Some of the more level-headed market commentators are therefore expecting higher volatility, also because share prices are seen as already reflecting this year's accelerated growth, raising the question: for how long can corporate America continue surprising to the upside?
Australia Is Different But The Same
The dynamics for corporate Australia are different. Here, average forecast EPS growth for FY26 stands at 12%, which is well above the historical average of circa 5% growth, but that number is also heavily dominated by miners and energy producers.
Strong earnings growth momentum for cyclical mining companies is equally a feature in the US, but that sector represents a much smaller index weighting over there.
For artificial intelligence (AI), the commonality applies the other way around.
Besides, with demand for metals and minerals boosted by investments in AI infrastructure, one could make the argument that AI is very much a central theme in both markets.
It's just that the exact impact and magnitude are different.
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