Stock Market Update: Corporate Earnings Going Global

• Japan, emerging markets, and the TSX are 2026's best performing markets, correlating directly with their positive earnings revisions
• Canada's TSX earnings growth is concentrated entirely in materials (primarily gold), raising concerns about sustainability given the volatility of commodity earnings
• U.S. technology remains a standout for earnings revisions, with broader sector participation recently emerging, helping the market show resilience amid negative headlines

Market Summary: Global Earnings Drive 2025 Investment Opportunities

Key Insights

While short-term market returns are driven by valuation multiple expansion/contraction, long-term performance is fundamentally determined by earnings growth, which has historically dominated returns for the S&P 500 over 5-10 year periods.

Regional Performance & Earnings Trends

Strong Performers:

• Emerging Markets (EM): 2026 calendar year earnings estimates have risen 12% since summer 2025
• Japan: Leading global market performance in 2026 with strong positive earnings revisions
• TSX (Canada): Significant earnings revisions, though heavily concentrated in materials sector, particularly gold

Lagging Markets:

• Europe and U.S.: Positive returns but underperforming Japan, EM, and Canada

Sector Analysis

TSX Concern: All earnings growth comes from materials/gold sector. While gold companies are generating strong cash flow, the market may not assign premium valuations to such volatile earnings streams.

U.S. Bright Spot: Technology sector shows strong earnings revisions, with improving trends spreading to additional sectors despite recent tech softness.

Market Implications

The shift toward more globally diversified earnings growth (versus U.S.-concentrated growth in prior years) represents a positive development. This broad-based earnings improvement is providing market resilience despite challenging headline news environment. However, current risk appetite appears elevated, suggesting potential downside vulnerability in coming months.

Investment Preference: Japan and emerging markets appear most attractive; TSX less compelling due to narrow earnings concentration.