Corporate America just did the one thing Wall Street doubted it could pull off; it posted the fastest earnings growth in four years even while Donald Trump’s trade war sat on its neck. Median profits across the Russell 3000 surged by 11% year over year in the third quarter, up from 6% the previous quarter, according to Morgan Stanley. Out of the 11 main sectors that make up the S&P 500, six managed to pull off average earnings gains in the last three months through September. That’s a huge leap from the second quarter, when only financials and mega-cap tech were in the green. Deutsche Bank ran the numbers and confirmed that this sudden uptick was across multiple industries. Trump’s sweeping tariffs were expected to choke profits, wreck supply chains, and push up costs. But somehow, companies kept pushing. “Companies have found ways to absorb the tariff impact and consumers will keep spending so long as they have a job,” said Dec Mullarkey, managing director at SLC Management, which manages $300 billion. That corporate toughness is showing up all over the earnings sheets. Multiple sectors defy expectations in Q3 David Kostin, chief equity strategist at Goldman Sachs, wrote in a note this week that most S&P 500 companies have already reported Q3 results, and a massive portion beat analyst forecasts. “In our 25-year data history, this frequency of earnings surprises has been surpassed only during the Covid reopening period in 2020-2021,” said David. Meanwhile, expectations for Q4 profits are still rising. Analysts now project a 7.5% increase, based on numbers tracked by FactSet. Some of that optimism is thanks to the deal-making Trump pulled off with Japan and the European Union . And after Trump sat down with Xi Jinping, both leaders agreed to a one-year trade truce, which calmed market nerves across the board. Carmakers like Ford and General Motors said their expected tariff pain shrank thanks to Trump’s extension of import relief on car parts. In energy and transport, companies like NRG Energy benefited from more data center construction, and Southwest Airlines saw revenue jump as travel demand kept climbing. In banking, firms like Goldman Sachs, Citigroup, and JPMorgan Chase posted high profits driven by renewed deal activity and stronger trading income as market volatility picked up. On the tech side, Alphabet and Microsoft blew past forecasts. Google’s ad business and Microsoft’s cloud both pulled heavy weight. Meta, on the other hand, rattled investors with its massive capital spending, but the broader Big Tech group still held up. Consumer strain and weak sentiment cloud outlook But this party isn’t for everyone. Businesses selling directly to consumers are feeling the sting. Miguel Patricio, CEO of Kraft Heinz, said holiday sentiment was “one of the worst” he’s seen in decades. McDonald’s reported that more customers are ditching its pricier meals. Deutsche Bank pointed out that goods companies, especially those depending on consumer wallets, are dragging behind service‑focused businesses. The absence of official job numbers, caused by the government shutdown, made things worse for investors trying to track the labor market. But alternative indicators, like those from the National Federation of Independent Business, the San Francisco Federal Reserve, and state-level claims, all suggest the job market “is still doing well,” said Torsten Sløk, chief economist at Apollo Global Management. That’s despite nearly 80,000 layoffs from at least 17 S&P 500 firms, including Amazon, UPS, and Target, since early September, data from Goldman Sachs showed. The University of Michigan’s consumer sentiment index hit a three-year low in November. Its director, Joanne Hsu, said the drop hit across all age groups, income levels, and political leanings. There was one exception: people holding large stock portfolios. That group saw sentiment rise by 11%. Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management, said the top 40% of earners now hold 85% of the country’s wealth, and two-thirds of that wealth is tied directly to stocks. With equities up over 90% in the past three years, Lisa warned that “forecasting the labour market may increasingly be less important than forecasting the direction of the stock market itself in order to understand consumption levels.” Sign up to Bybit and start trading with $30,050 in welcome gifts
