US Stock Market: July-September Quarterly Earnings Outlook

■ Earnings per share (EPS) for S&P 500 companies are expected to increase by 8.8% year-over-year. Watch for how much actual results surpass expectations. 

■ Stock prices are expected to stay high and rise gradually, but any corrections will need careful analysis. 
 
   Starting with the release of financial reports from major US companies on the 14th, the earnings reports for the April-June quarter have officially begun. This week, along with major US financial institutions, Taiwan's semiconductor foundry giant and the Netherlands' leading semiconductor equipment manufacturer will also release earnings. During the third week (20th-24th), major US companies in video streaming, semiconductors, and electric vehicles will upload their earnings. The fourth week (27th-31st) will feature earnings from transportation, capital goods, high-tech, and smartphone companies. With this, six of the seven major technology firms, known as the "Magnificent Seven" (M7), will have released their reports, marking a peak in the earnings season. From the first week of November (November 3rd-7th) to the second week (November 10th-15th), semiconductor and communications giants will report earnings. The third week (November 17th-21st) will include major retailers, and on the 19th, the last semiconductor giant in the M7 will also release its earnings. Therefore, it is essential to closely monitor earnings trends across various companies in the coming period. 

 
   According to financial data firm LSEG I/B/E/S as of the 10th, earnings per share (EPS) for S&P 500 companies for the July-September quarter are expected to go up by 8.8% year-over-year. The market sees the impact of tariff hikes on corporate performance as limited, with EPS growth projected at 13.3% over the next year. The S&P 500's one-year forward price-to-earnings ratio (PER) stands at 22.3 times, significantly above its 2018 average of 19.1 times, indicating a high risk of overvaluation. Despite this, Taiwan's leading semiconductor equipment manufacturers show strong monthly sales growth, driven by robust demand for artificial intelligence (AI). The IT sector is expected to be the main driver of EPS growth. Additionally, with the US Federal Reserve (FRB) resuming rate cuts in September and expectations of a soft landing for the US economy strengthening, these factors will support stock prices. However, concerns about the profitability of AI-related investments and declining demand for electric vehicles have grown. Even with profit growth expectations, sectors like communications services and consumer staples, including major tech companies, remain notably overvalued, limiting opportunities for rotation within the M7. Short-term, stock prices are expected to fluctuate upward after some adjustment within the high range, with an overall gradual upward trend. 

 
   Furthermore, Federal Reserve Chairman Powell remarked in his speech on September 23rd that asset prices seem significantly overvalued. The International Monetary Fund (IMF) also stated in its Global Financial Stability Report released on October 14th that the overvaluation of risky assets has intensified after a brief correction in April. The IMF warned that financial market instability—driven by rising global fiscal deficits, bloated government bond markets, and expanding non-bank financial intermediaries (NBFIs)—could have a bigger negative impact on the broader financial system than previously thought. Any future stock price corrections will require careful evaluation to determine if they are mere valuation adjustments or if they will further harm the economy and corporate performance.