BlackRock Institute: Three Major Forces Supporting the Future Direction of the U.S. Stock Market

According to the Zhitong Finance APP, BlackRock's think tank stated that the recent situation of Sino-U.S. trade once again confirms an unbreakable economic law, which is that supply chains cannot be reconstructed overnight. This unbreakable economic law will constrain trade policies from going to extremes. Coupled with the resilient economic growth in the U.S., lower interest rates, and the AI theme, these factors collectively support the U.S. stock market. Therefore, compared to the European stock market, the institution is more optimistic about the U.S. stock market. However, BlackRock's think tank also stated that it will still selectively focus on specific sectors, paying attention to the impact of tariff policies and AI spending. When focusing on the U.S. stock market's third-quarter earnings season, BlackRock's think tank believes that three major factors will drive overall earnings growth in the U.S. stock market.

First, the U.S. economic growth is resilient. This year, U.S. GDP is expected to grow by 1.5%. Although this growth rate is lower than in previous years, it is far from falling into recession. Second is policy easing. Weak labor market data provides the Federal Reserve with room to cut interest rates and indicates that there may still be further rate cuts, which also temporarily calms doubts about the independence of the Federal Reserve. Third is AI-related investments. Relevant data shows that the expected year-on-year profit growth for the "Seven Tech Giants" in the U.S. stock market in the third quarter is 14%. Meanwhile, the overall earnings growth momentum in the U.S. stock market is gradually expanding, with the earnings growth expectation for other components of the S&P 500 index at 7.8%, significantly narrowing the gap with the tech giants compared to previous quarters.

Despite the improvement in corporate earnings, BlackRock's think tank is more focused on the actual revenue that these expenditures can bring, as well as the productivity improvements that AI may bring to various industries. At the same time, BlackRock's think tank is also paying attention to the supportive role of regulatory policy easing on the financial industry. Relevant data shows that leading U.S. banks have strong earnings, with the overall earnings growth expectation for the financial industry at 16%. Last week, the stock prices of U.S. regional banks fell due to credit issues, but this situation seems to be limited to two banks. Although U.S. companies appear to have resisted the impact of tariffs through cost pass-through and inventory consumption, some industries will face greater shocks, such as home appliance manufacturers that rely on imports and small businesses with weaker flexibility and pricing power.

Looking beyond the U.S., European corporate earnings growth is weak, so BlackRock's think tank holds a neutral view on European stocks. Due to the strengthening of the euro and a decline in market demand caused by tariffs, the overall earnings growth expectation for European companies in 2025 has dropped from nearly 3% on July 1 to 0.5%. Earlier this year, European stocks once outperformed U.S. stocks, but the institution believed at that time that the two necessary conditions for sustaining a rebound in European stocks had not been met: that European economic growth exceeded expectations more than that of the U.S., and that European corporate earnings growth was relatively stronger. This is precisely why BlackRock's think tank has always been relatively optimistic about the U.S. stock market, and this view has ultimately been rewarded