BlackRock: The U.S. stock market's third-quarter earnings season starts strong, supported by AI and interest rate cuts, maintaining an overweight position in U.S. stocks

According to the Zhitong Finance APP, BlackRock Investment Institute (BII) recently published a report titled "U.S. Earnings Reports: Resilience is Key," which pointed out that the earnings season for U.S. stocks in the third quarter started strong, with expected revenue growth of nearly 11%, driven by economic resilience, Federal Reserve interest rate cuts, and the AI investment boom, enhancing the attractiveness of U.S. stocks. Despite renewed tensions in U.S.-China trade, BlackRock believes that "unchanging economic laws" will limit extreme policies, and supply chains cannot be restructured overnight. The report maintains an overweight position on the U.S. stock market but emphasizes the need to select industries carefully and closely monitor the effectiveness of AI spending and tariff impacts; in contrast, European corporate performance lags behind, maintaining a neutral allocation. Market background shows that although U.S. stocks briefly retreated last week due to concerns over regional bank credit, they quickly rebounded, ending the upward trend; gold prices continued to hit new highs, while U.S. Treasury yields reached a six-month low. U.S.-China trade frictions resurfaced, with the U.S. President proposing a 100% tariff on China last week, triggering the largest single-day drop in U.S. stocks, but as the meeting path became clearer and expectations for easing auto tariffs emerged, sentiment quickly stabilized. BlackRock analyzes that such events resemble the pattern after the tariff announcement in April, where economic laws (such as supply chain inertia and consumer cost pass-through) will promote trade cooling, supporting corporate performance. Analysts have revised the 2025 S&P 500 overall earnings growth estimate from 9% in the second quarter to nearly 11%, with charts showing that historical analyst forecast lines are gradually rising, reflecting optimistic revisions. Looking ahead to the earnings period, BlackRock summarizes three major growth drivers: first, the strong resilience of the U.S. economy, with GDP expected to grow by 1.5% this year, below trend but far from recession; second, policy easing, with weak labor market data providing the Federal Reserve with room to cut interest rates and temporarily alleviating independence concerns; third, AI-related spending, with LSEG data showing that the "seven major tech giants" had a 14% year-over-year earnings increase in the third quarter, while other S&P 500 companies reached 7.8%, narrowing the gap and indicating growth diffusion. However, the report warns that risk diversification needs to be examined: the market is enthusiastic about large tech AI investments, but subsequent revenue and cross-industry productivity improvements need to be validated; the financial sector benefits from regulatory easing, with expected earnings growth of 16%, and leading banks have reported good results, while regional bank stocks only slightly declined last week due to credit issues at two institutions, with limited impact. Regarding tariffs, companies are largely coping through inventory digestion and price pass-through, but industries reliant on imports, such as home appliances, and small and medium-sized enterprises may face pressure. In comparison overseas, European corporate performance is weak, affected by a strong euro and reduced tariff demand, with the 2025 earnings growth expectation dropping from nearly 3% in July to 0.5%. The earlier brief outperformance of U.S. stocks has not been sustained, and BlackRock does not see conditions for growth surprises or relative earnings improvements, thus maintaining a preference for U.S. stocks. Investors are focused this week on the delayed September CPI data (to be released on October 24), which will provide clues about inflation stickiness and assist the Federal Reserve in assessing the interest rate cut path before the next meeting. In summary, BlackRock is optimistic about the combined support of economic laws, resilient growth, low interest rates, and the AI theme for U.S. stocks, but trade policies and AI investments need to be selected cautiously. Past performance is not a guarantee of future results, and investment decisions should consider risks