The Weekly Update 10/03/2025™
More All Time High Valuations!
As you have read here over the last several years, the profits of Corporate America are the key driver of market valuations. How are these profits doing? Excellent! Below is a concise chart of the earnings for Corporate America back to 2012, that also includes a peek around the corner to estimates for 2026 (Just three months away). Sourced from FactSet.
Just a hunch on my part, but I would bet dollars to donuts that the estimates above for 2026 are much too low. Think more like $325 per share.
Why? Well as detailed here, again for the last several years, inflation has been at or below the Federal Reserve’s target of 2% for almost one year. Remember how housing costs, which represent over 35% of inflation, are very slow to show up in the BLS dataflow? Below is the most recent “live” inflation report from Truflation on 9-27-2025.
This data stream puts a near 100% chance on the Federal Reserve reducing interest rates two more times this year (2025) and perhaps a few more reductions in 2026. If correct, and I strongly believe it is, the reduction in interest rates will drive the earnings even higher than those posted above in Chart #1, likely causing the valuations of Corporate America to continue the upward trend.
Add in additional productivity gains from AI and technology, along with a few hot headlines we could see, like “China Tariff Trade Deal Settled”, and a possible “Cease Fire In Ukraine” to mention just two and we could see higher earnings and valuations for well into 2026 and beyond.
Once again, I did not say market valuations go straight up, and I did not say without volatility, yet the data flow suggests the good old USA has a very bright outlook. Think “Five Year Money” (Read it Here).
My idea of our economy is below. A picture is worth a thousand words!
I’m interested in your thoughts, comments and observations. Feel welcome to call, email, or stop by the office and say Hi.
Respectfully,
James O. Lunney, CFP®
CERTIFIED FINANCIAL PLANNER™ Professional
*The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. Investing involves risk. Loss, including loss of principal, may occur. No strategy assures success or protects against loss. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
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