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US EARNINGS OUTLOOK IN FOCUS AMID LOFTY VALUATIONS

With just weeks to go until the end of the year and the S&P 500 up more than 27% since last Dec. 31, investors are looking at how well 2025 earnings may support lofty market valuations.

Following this year's rally, the S&P 500 is trading at 23 times expected earnings, compared with a 10-year average of about 18, according to LSEG.

Daniel Morgan, portfolio manager at Synovus Trust in Atlanta, Georgia, said: "The Street is embracing a couple of scenarios right now - Don't fight the Fed and... the new administration coming in that's going to be friendly to the stock market and to the economy, and that's another positive."

"The area that is of concern is valuations... trying to place money becomes more challenging because the multiple on the market is excessive."

As of Friday, analysts are forecasting a 14.3% gain in 2025 S&P 500 earnings, up from an estimated 10.1% increase in 2024 earnings, according to LSEG data.

Technology .SPLRCT and healthcare .SPXHC are expected to lead sector year-over-year earnings growth, with technology forecast to rise 21.2% in 2025 and healthcare seen rising 20.3%.

For 2024, communication services .SPLRCL and technology .SPLRCT are leading earnings gains, with technology seen up 20.0% and communication services seen up 23.8%.

Companies still have to report fourth-quarter results for 2024, and analysts expect 9.6% year-over-year growth for the fourth quarter compared with an estimated 9.0% growth in the third quarter, per LSEG.

(Caroline Valetkevitch) *****

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