JPMorgan Chase & Co. strategists expect the third-quarter earnings season to once again emphasize the divergence between U.S. and eurozone corporate results, with consensus forecasts calling for a 6% year-on-year increase in S&P 500 earnings compared to a 1% decline for the STOXX Europe 600.
Analyst projections have remained stable leading up to earnings releases, unlike the usual trend of downward revisions. Strategists noted that “activity momentum improved during the quarter,” supported by firmer PMI data. The team, led by Mislav Matejka, also pointed out that this unusual stability in forecasts over the past two months “raises the potential for positive surprises.”
Roughly 60% of the S&P 500’s market capitalization is set to report over the next two weeks, compared with around 50% for European stocks. Mega-cap technology names remain the engine of U.S. earnings growth, with the so-called Magnificent 7 expected to deliver 15% earnings growth after a 27% surge last quarter—nearly double initial forecasts.
For the rest of the S&P 500, earnings are projected to grow around 4%. JPMorgan noted that non-Mag 7 companies achieved their strongest earnings expansion in three years last quarter at 9%, and strategists see room for similar upside this season.
Eurozone corporates, by contrast, saw a 1% earnings contraction in the previous quarter, reinforcing the bank’s cautious outlook for the region since March. Even so, strategists anticipate the gap with the U.S. may narrow “by a smaller magnitude” this quarter, thanks to exporter earnings that have already been heavily rebased, opening the door for a potential “inflection.”
Median earnings growth paints a more even picture, with both regions expected to post about 4% year-on-year gains, leaving room for upside surprises if revenue trends hold.
Revenue momentum remains a risk factor, however, with weaker Brent crude prices and softer U.S. labor and retail indicators hinting at potential top-line pressure. Lower bond yields—down more than 60 basis points from their peak—have boosted defensive sectors like Utilities and Healthcare over the past one to three months in both the U.S. and Europe.
Strategists say this supports their long-duration positioning, but they also stress that “cyclicals sector earnings could start to look better” heading into 2026 as economic activity improves. They cite rising PMI readings, stronger credit impulses in Europe, and better consumer sentiment and liquidity conditions.
Looking further ahead, JPMorgan sees cyclical sectors benefiting from improving macroeconomic trends, including a potential rebound in Chinese consumer demand, which could lift luxury and industrial companies. While eurozone earnings forecasts for 2025 are still being revised downward, 2026 estimates suggest a rebound of nearly 15%, driven by favorable base effects and stronger domestic and external demand.
“We are now bullish Eurozone, post the sideways trading and amid a range of pushbacks,” the strategists wrote.
“If the latest tariff standoff and credit concerns result in some more equity weakness, we do not think Eurozone needs to be a beta on the way down, given more favourable positioning and valuations, and given an already weak recent relative performance,” they added.
They also reiterated their view that the recent political turbulence in France should be treated as a buying opportunity.
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