Earnings Analysis: Rising Tides

• S&P 500 posted exceptional results with earnings 28.3% above expectations and year-over-year earnings growth of 49.6%, maintaining its position as the global standard
• For the first time in this analysis series, all four market segments (US Large-Cap, Small-Cap, Europe, and Japan) showed positive improvement across all three earnings principles
• Japanese equities posted 61.1% year-over-year earnings growth (exceeding US Large-Cap), driven by AI spending and weak Yen, though a strengthening Yen could undermine future export-focused earnings

Summary: Rising Tides Earnings Analysis

Key Findings

US Large-Cap Performance (S&P 500):

• Earnings exceeded analyst expectations by 28.3%, with all sectors beating forecasts
• Revenue surpassed expectations by 3.3% (only Utilities sector missed)
• Year-over-year earnings growth reached 49.6%; sales grew 14.1%
• All eleven sectors posted revenue growth; only healthcare showed negative earnings growth
• Forward 12-month earnings expectations continue trending upward

International & Small-Cap Markets:

For the first time in this analysis series, all monitored segments showed positive momentum ("green all around"):

• US Small-Cap: Strong earnings and revenue across all three analytical principles, though still trailing Large-Cap performance. Breadth of earnings trends widening across sectors.

• Europe: Significant turnaround, particularly in revenue metrics. Both revenue growth and surprises shifted from negative to positive, with improvements widespread across sectors—supporting the thesis that moderating inflation is driving sales.

• Japan: Closest challenger to US Large-Cap, with year-over-year earnings growth of 61.1% (exceeding S&P 500's 49.6%). Driven by AI spending and weak Yen boosting exports. However, forward 12-month growth expectations remain lowest among peers. Yen strengthening poses potential risk to export-driven earnings.

Market Implications

Earnings strength continues insulating markets from geopolitical and inflation concerns. The analysis suggests potential for rotation from Large-Cap to more value-oriented assets (Small-Cap, European, and Japanese equities), contingent on sustained earnings performance over coming quarters. However, US Large-Cap maintains its "pole position" until other segments demonstrate consistent multi-quarter improvement.