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Address 500 Centre Street SE 27th Floor Calgary AB, T2G 1A6
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Milan Cacic

December 06, 2024

Money Financial literacy Economy Commentary Weekly update Weekly commentary Annual commentary
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THE ANSWER IS EARNINGS GROWTH!!

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!

A chart showing the difference between trailing earnings for the US and the rest of the world for the past 10 years. another chart showing the difference in EPS growth for the US and the rest of the world for previous year and estimate for next year.

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

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<p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-size:10.0pt">Commentary is for informational purposes only and is not being provided in the context of an offering of any security, sector, or financial instrument, and is not a recommendation or solicitation to buy, hold or sell any security. </span></span></span></p> <p>&nbsp;</p>
 

Commentary is for informational purposes only and is not being provided in the context of an offering of any security, sector, or financial instrument, and is not a recommendation or solicitation to buy, hold or sell any security.

 

 
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CIBC Private Wealth” consists of services provided by CIBC and certain of its subsidiaries through CIBC Private Banking; CIBC Private Investment Counsel, a division of CIBC Asset Management Inc. (“CAM”); CIBC Trust Corporation; and CIBC Wood Gundy, a division of CIBC World Markets Inc. (“WMI”). CIBC Private Banking provides solutions from CIBC Investor Services Inc. (“ISI”), CAM and credit products. CIBC Private Wealth services are available to qualified individuals. Insurance services are only available through CIBC Wood Gundy Financial Services Inc. In Quebec, insurance services are only available through CIBC Wood Gundy Financial Services (Quebec) Inc.


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