Patrick Moonen, principal strategist Multi Asset at NN Investment Partners, expects US companies to meet comfortably the 3.6% rise in earnings anticipated by the market for the Q3 reporting season, which starts this week.
The hurdle rate has been lowered over the past weeks from 5.2% to 3.6% and this does not look challenging given the strength of the economy in Q3 and the positive impact of a weaker USD on US earnings. The insurance sector, however, will publish weaker results following increased costs linked to natural disasters.
In the US, the focus has turned towards the tax plan. This would take the form of a corporate tax cut that would increase the budget deficit. For the markets this is good news, especially the small caps, which have a higher average tax rate.
Of course, given the sometimes difficult relationships Trump has, even within his own party, it may take some time before a plan will get approval by Congress. However, we see the probability of a tax cut being passed as higher than 50%.