If you're wondering why the U.S. market trades at higher multiples than the rest of the markets around the world, look no farther than earnings growth. Q3 estimates for the S&P 500 earnings were 3.6% before the earnings season started. After Q3 reporting came in, the S&P surprised to the upside and finished at 5.9% earnings growth. This also represents the fifth consecutive quarter of positive year-over-year earnings growth for the S&P 500

There is no doubt that the U.S. market is expensive relative to other world markets, however, just look at the analyst expectations for earnings growth in 2025. As you can see from the chart below, analysts anticipate U.S. companies will grow their earnings by 16% in the next 12 months, with the rest of the world potentially growing at 6.3%. The U.S. is doing something right, and market participants will pay them premiums for that growth. Maybe the rest of us in other countries should stop, look in the mirror, and question if what we are doing is right!

Source: Dynamic Funds. (2024). Macro Musings

I have also included a report from our CIBC Economics team entitled “Why not?”.

As always, if you have any questions, please feel free to give us a call.

Have a great weekend.

Milan