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US EQUITIES LOOK SET FOR A YEAR END SANTA RALLY

ADMIN || 10th November 2025

US equity contracts are leaping higher in early Monday action with investors hoping the US shutdown is finally coming to an end with a Senate test vote expected today. Senate appropriators released the text of a package of three long-term funding bills on Sunday that are part of a GOP plan to end the impasse. Senate majority leader Thune is pursuing a strategy that would involve voting to advance the House-passed continuing resolution and amending it to include the appropriations package known as a "minibus" as well as a longer extension of government funding. This plan needs support of at least 10 Democrats.

On earnings front, US companies had their best quarter in the last 4 years. Few observations:

a.    For Q3 2025 (with 91% of S&P 500 companies reporting actual results), 82% of S&P 500 companies have reported a positive EPS surprise and 77% of S&P 500 companies have reported a positive revenue surprise.

b.    For Q3 2025, the blended (year-over-year) earnings growth rate for the S&P 500 is 13.1%. If 13.1% is the actual growth rate for the quarter, it will mark the 4th consecutive quarter of double-digit earnings growth for the index.

c.    Median earnings growth year-on-year across the Russell 3000 index, a benchmark for the entire US stock market, hit 11 per cent in the third quarter, up from 6 per cent in the previous three months. That is the fastest growth rate since the third quarter of 2021.

d.    The above superlative earnings growth is in spite of Trump’s tariffs of an average 14%.

The larger question now in front of US equities is can it sustain current elevated valuations? With 2026 tax cuts coming into play and Fed’s pseudo-QE about to start soon, earnings support & liquidity both favor equities for now. The risk to this view is any geopolitical event involving Nato & Russia or a superlative hawkish Fed.

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