View from the Observation Deck

Today's blog post features the cumulative total returns of five major equity indices (three domestic and two foreign) since the start of 2000. We chose to highlight 5-year rolling total returns to smooth out intra-year volatility. This post is updated on an annual basis. Click here for last year’s version.

Since 2007, U.S. large-, mid-, and small-capitalization (cap) stocks have taken the top spot in our table. U.S. large-caps, as represented by the S&P 500 Index, have provided the best performance in eight of the last 5-year rolling periods. From our perspective, this is likely the result of continued globalization (despite tariffs) and a stronger U.S. dollar (+9.32% from 2021 – 2025).

Regarding the U.S. dollar: a strong dollar can cause a decline in returns for U.S. investors holding positions in unhedged foreign securities, while a weak dollar can have the opposite effect. From 2000-2009, the U.S. Dollar Index declined by 23.57% − a nice tailwind for foreign holdings. From 2010-2019, the same index appreciated by 23.80% − a notable headwind for foreign holdings. The U.S. Dollar Index increased by 2.01% in the current decade (2020-2025), standing at 98.32 on 12/31/25, well above its 20-year average of 90.43.

While it is no secret that U.S. companies generate a significant portion of their revenue from overseas, many investors may not be aware of just how dependent they have become on international sales. Notably, 42.1% of S&P 500 Index revenues were generated outside of the U.S. as of 12/31/25.
For additional context, the average annual total returns for each of the five equity indices in today’s table were as follows (12/31/99 – 12/31/25): S&P MidCap 400 (9.57%); S&P SmallCap 600 (9.36%); S&P 500 (8.06%); MSCI Daily TR Net Emerging Markets in USD (6.62%); and MSCI World ex-U.S. (4.74%), according to data from Bloomberg.

Takeaway: The returns depicted in today’s table offer a powerful reminder that the buy and hold strategy can still serve investors well. Despite rising geopolitical tensions, wars, government lockdowns, and a bear market (in the S&P 500 Index in 2022), each of the indices in today’s table reflect positive total returns over the most recent 5-year rolling period. While the S&P 500 Index remains a clear outlier, there is no way to predict what indices could outperform next. Emerging market and international equities, as represented by the MSCI Emerging Markets and MSCI World (ex-US) Indices, increased by 33.57% and 31.85%, respectively, in 2025 alone. The dollar declined during the year, shedding 9.37% of its value. Will continued pressures on the dollar coupled with restrictive tariffs and resurgent global economies lead to a change in our best performer over the coming years? While we can’t know, we trust today’s data discourages an overly myopic view among equity investors with long time horizons.

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is a capitalization-weighted index comprised of 500 stocks used to measure large-cap U.S. stock market performance. The S&P MidCap 400 Index is a capitalization-weighted index that tracks the mid-range sector of the U.S. stock market. The S&P Small Cap 600 Index is a capitalization-weighted index that tracks U.S. stocks with a small market capitalization. The MSCI World (ex-U.S.) Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets excluding the U.S. The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets. The U.S. Dollar Index (DXY) indicates the general international value of the dollar relative to a basket of major world currencies.

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View from the Observation Deck

We are often asked what our favorite sectors are. Sometimes the answer is evident while other times hindsight offers the best clarity. Today’s blog post is one that we update each quarter to lend context to our responses. While the above chart does not contain yearly data, just three sectors in the S&P 500 Index (“Index”) have been the top-performer in back-to-back calendar years since 2005. Information Technology was first, posting the highest total return in 2019 (50.29%) and 2020 (43.89%). Energy was second, posting the highest total return in 2021 (54.39%) and 2022 (65.43%). Communication Services was the most recent addition to this exclusive club, posting a total return of 40.23% in 2024 and 33.56% in 2025, according to data from Bloomberg.

• The top-performing sectors and their total returns in Q4’25 were as follows: Health Care (11.68%), Communication Services (7.26%), and Financials (2.01%). The Index’s total return was 2.65% over the period. The other eight sectors generated total returns ranging from 1.53% (Energy) to -2.87% (Real Estate).
  
  
• By comparison, the total returns of the top-performing sectors in the fourth quarter of 2024 were as follows (not in chart): Consumer Discretionary (14.25%), Communication Services (8.87%), and Financials (7.06%). The worst-performing sectors for the period were: Real Estate (-7.94%), Health Care (-10.30%), and Materials (-12.42%).
  
  
• Click here to access our post featuring the top-performing sectors in Q1’24, Q2'24, Q3'24 and Q4’24.

Takeaway: As we observe from today’s chart, the top-performing sector often varies from quarter to quarter. The fourth quarter of 2025 was no exception, with Health Care and Financials joining Communication Services to round out the trio of top sectors. For the first time since 2021, each of the 11 sectors that comprise the broader Index saw positive total returns over the calendar year. Also notable: Communication Services was the top performing sector in back-to-back calendar years, marking just the third time this has happened since 2005. From our perspective, massive AI-focused investment helps account for the performance of communication services and technology companies (the top performing sector in Q2’25 and Q3’25) last year. In its 2025 AI Index Report, Stanford University noted that U.S. private AI investment totaled $109.1 billion in 2024. Private investment in generative AI increased 18.7% year-over-year to $33.9 billion during the period. Despite the rapid increase, AI capital needs continue to grow. In April 2025, McKinsey reported that $5.2 trillion in data center investment will be required by 2030 to meet global AI demand, according to Reuters. Will a different sector rise to the top in the first quarter of 2026? We look forward to seeing what the data reveals.

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions or other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 stocks used to measure large-cap U.S. stock market performance. The respective S&P 500 Sector Indices are capitalization-weighted and comprised of S&P 500 constituents representing a specific sector.  

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View from the Observation Deck

This post is one in a series we update that investigates which of the two styles (growth or value) has been delivering the better results. Click here to see our last post on this topic.

• We have often noted that value stocks tend to outperform growth stocks when the yield on the benchmark U.S. 10-year Treasury note (T-note) rises and underperform them when the yield on the 10-year T-note falls. The yield on the 10-year T-note increased by 325 basis points (bps) over the 5-year period ended 12/9/25. For comparison, the yield on the 10-year T-note declined by 38 bps YTD through 12/9.

• The S&P 500 Index stood at 6,870.40 on 12/5/25, representing a price-only return of 37.88% from its most recent low (4,982.77 on 4/8/25). For comparison, the S&P MidCap 400 and S&P SmallCap 600 Indices were 2.07% and 4.19% below their respective all-time highs as of the same date.
  
  
• The total returns in today’s chart are as follows (Pure Growth vs. Pure Value):

          25-year avg. annual (8.42% vs. 9.79%) 
          15-year avg. annual (12.89% vs. 11.78%)
          10-year avg. annual (12.06% vs. 10.30%)
          5-year avg. annual (8.98% vs. 13.34%)
          3-year avg. annual (15.33% vs. 11.80%)
          1-year (7.92% vs. 11.69%)
          Year-to-date YTD (13.06% vs. 16.04%)

• As many investors are likely aware, weak labor market data and potential overcapitalization among AI companies caused volatility to spike in November. Volatility, as measured by the CBOE Volatility Index, surged from 17.44 on 10/31/25 to 26.42 on 11/20/25. Technology, consumer discretionary, and industrial stocks were hit hardest, declining by 4.29%, 2.39%, and 0.85% (total return) during the month. For comparison, November’s top performing sectors were Health Care (9.31%), Communication Services (6.35%), and Materials (4.17%). 
  
  
• Sector weights had a significant impact on performance over the short run, in our opinion. At a combined weight of 69.5%, the Pure Growth Index had outsized exposure to the worst performing sectors in November (Information Technology, Consumer Discretionary, and Industrials). For comparison, these sectors made up just 20.1% of the weight of the Pure Value Index as of the same date.

• On 11/28/25, the Health Care sector accounted for 18.6% of the weight of the Pure Value Index vs. just 4.3% of the Pure Growth Index, according to S&P Dow Jones Indices. As mentioned above, Health Care was the top performing sector in November. 

• The top three performing S&P 500 Index (“Index”) sectors and their YTD total returns (through 12/9) are as follows: Communication Services (33.76%); Information Technology (27.47%); and Industrials (17.47%).

Takeaway: How quickly things can change! In our last post on this topic (click here), we posited that sector allocation played a significant role in the Pure Growth Index’s persistent outperformance vs. its Pure Value counterpart. It appears that sector allocation is playing a similar role, yet again. Notably, two of the Index’s top-performing sectors YTD (Information Technology and Industrials) were among its worst performers in November, shedding 4.29% and 0.85% (total return), respectively. Those sectors comprise an outsized share of the Pure Growth Index (47.4%) vs. just 7.5% of the Pure Value Index as of 11/28. As a result of this reversal, the Pure Growth Index now lags its Pure Value counterpart YTD and over the trailing 12-months. Valuations may signal continued opportunity ahead for value-oriented investors. The Pure Value Index had a Price to Earnings (P/E) ratio of 13.07 on 12/9 compared to the Pure Growth Index’s P/E of 24.81 at market close on the same date.

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions or other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 companies used to measure large-cap U.S. stock market performance. The S&P 500 Pure Growth Index is a style-concentrated index designed to track the performance of stocks that exhibit the strongest growth characteristics based on three factors: sales growth, the ratio of earnings-change to price, and momentum. It includes only those components of the parent index that exhibit strong growth characteristics, and weights them by growth score. Constituents are drawn from the S&P 500 Index. The S&P 500 Pure Value Index is a style-concentrated index designed to track the performance of stocks that exhibit the strongest value characteristics based on three factors: the ratios of book value, earnings, and sales to price. It includes only those components of the parent index that exhibit strong value characteristics, and weights them by value score. 

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The next post will occur on 1/13/25.

View from the Observation Deck

We update today’s table on a regular basis to provide insight into the variability of sector performance by market capitalization. The table above presents the total returns of three major U.S. equity indices and their sectors over two distinct time frames: the 2024 calendar year, and year-to-date (YTD) through 12/5/25. 

• The S&P 500 Index stood at 6,870.40 on 12/5/25, representing a price-only return of 37.88% from its most recent low (4,982.77 on 4/8/25). For comparison, the S&P MidCap 400 and S&P SmallCap 600 Indices were 2.07% and 4.19% below their respective all-time highs as of the same date.
  
  
• Large-cap stocks, as represented by the S&P 500 Index, posted total returns of 25.00% in 2024, outperforming the S&P MidCap 400 and S&P SmallCap 600 indices, with total returns of 13.89% and 8.64%, respectively, over the period (see table).
  
  
• A similar trend is playing out this year, with the S&P 500 Index increasing by 18.20% vs. 7.82% and 6.70% for the S&P MidCap 400 and SmallCap 600 indices, respectively, over the same time frame.
  
  
• Sector performance can vary widely by market cap and have a significant impact on overall index returns. Communication Services and Information Technology were two of the more extreme cases last year. This year, Communication Services and Consumer Staples exhibit the largest performance difference between market capitalizations.
• Communication Services and Information Technology are the two top-performing sectors in the S&P 500 Index, with total returns of 35.97% and 26.08%, respectively, YTD. By comparison, those sectors returned 30.16% and 14.50%, in the S&P MidCap 400 Index and -9.43% and 23.24%, respectively, in the S&P SmallCap 600 Index over the period. 

Takeaway: As revealed in today’s table, mid-cap and small-cap stocks continue to trail their large-cap counterparts in 2025. At the sector level, large-cap stocks outperformed their small and mid-sized peers in seven of the eleven sectors presented today. Consumer stocks have largely underperformed across all size categories. When we last wrote on this topic in May, (click here) we suggested that investors focus on fundamental drivers of equity returns (earnings growth), rather than short-term conditions (tariff turmoil at that time). Notably, the S&P 500 Index (“Index”) surged by a staggering 39.04% between 4/8/25 (the height of tariff concerns) and 12/5/25. Presently, concerns regarding overcapitalization within the AI trade and the Index’s lofty valuations have taken center stage. To be clear, we expect the Index’s price-to-earnings (P/E) ratio will return to its long-term average at some point, but also believe profit margins (a record 13.1% in Q3’25) and earnings estimates (a record 309.16 in 2026 as of 11/28/25) may lend support to the Index’s valuation, for now. For context, FactSet reported that the Index’s trailing 12-month P/E stood at 28.3 on 12/5/25, compared to its 10-year average of 22.9. As before, we suggest that investors watch adjustments to year-end earnings estimates closely in the new year.

This table is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 companies used to measure large-cap U.S. stock market performance. The S&P MidCap 400 Index is a capitalization-weighted index that tracks the mid-range sector of the U.S. stock market. The S&P SmallCap 600 Index is a capitalization-weighted index that tracks U.S. stocks with a small market capitalization. The S&P 500 Equal Weighted Index is the equal-weight version of the S&P 500 Index. The 11 major sector indices are capitalization-weighted and comprised of S&P 500, S&P MidCap 400 and S&P SmallCap 600 constituents representing a specific sector.

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View from the Observation Deck

Today’s post compares the performance of consumer stocks to the broader market, as measured by the S&P 500 Index, over an extended period. Given that consumer spending has historically accounted for roughly two-thirds of U.S. gross domestic product, we think the performance of consumer stocks may offer insight into potential trends in the broader economy.

Consumer discretionary stocks staged a stunning recovery this year.

Consumer discretionary stocks plummeted by 13.80% (total return) in Q1’25, compared to an increase of 5.23% for consumer staples over the same period. The tables have turned since, with the discretionary sector surging by 22.13% (total return) from 3/31/25 – 12/1/25 compared to 0.22% for staples over the same period. We find this notable given persistent concern regarding the U.S. consumer’s ability to maintain (and increase) current levels of expenditure.

So, just how healthy is the U.S. consumer?

Real consumer discretionary spending totaled $9.37 trillion YTD thru August, an increase of 3.2% from $9.08 trillion over the same period last year. One reason for increased spending could be burgeoning U.S. household net worth. The Federal Reserve reported that American’s net worth totaled a record $176.3 trillion in Q2’25, an increase of more than $7.0 trillion from the previous quarter, according to Reuters. Consumer sentiment remains muted despite massive wealth gains. The University of Michigan’s Index of Consumer Sentiment plummeted by 29.0% year-over-year (y-o-y) in November to its lowest reading in over three years.

Takeaway: As shown in today’s table, total returns for the S&P 500 Consumer Discretionary Index generally outpace those of the S&P 500 Consumer Staples Index, over time. The early lead staples built over its discretionary counterpart has eroded this year, with the discretionary sector increasing by 22.13% vs. a gain of just 0.22% for staples between 3/31/25 – 12/1/25. As we see it, U.S. consumers’ capacity to spend remains healthy, in large part due to stock market gains. The Federal Reserve reported that U.S. household net worth stood at record levels ($176.3 trillion) at the end of Q2’25. Given the S&P 500 Index’s recent total returns (+10.34% since 6/30/25), we expect this number crested even higher in Q3. Consumer sentiment fell sharply in November, but we think investors should take this survey data with a grain of salt. In our view, exogenous factors, such as the government shutdown and continued tariff threats likely clouded respondents’ outlooks. Notably, data from Adobe revealed that a record $11.8 billion was spent shopping online during Black Friday this year, an increase of 9.1% from last year’s total. Should the consumer remain healthy, the possibility of the U.S. experiencing a notable recession could be diminished. Stay tuned!

This table is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 stocks used to measure large-cap U.S. stock market performance. The S&P 500 Consumer Discretionary Index is a capitalization-weighted index comprised of companies spanning 19 subsectors in the consumer discretionary sector. The S&P 500 Consumer Staples Index is a capitalization-weighted index comprised of companies spanning 12 subsectors in the consumer staples sector.  

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View from the Observation Deck

Today’s blog post is intended to provide insight into the movement of bond prices amidst the current investment climate and prevailing interest rate policy. Aside from the most recent data, other dates in the chart are from prior times we’ve written on this topic. Click here to view our last update to this series.

Prices for five of the eight bond indices we track stand at their time series highs.

The Federal Reserve’s (“Fed”) October policy rate reduction, a shuttered U.S. government, continued geopolitical strife, and economic strain are just several catalysts that may account for the price appreciation revealed in today’s chart. An additional cut is expected in December, which could tease fixed income prices higher. On November 28, the federal funds rate futures market was priced for an implied policy rate of 3.67% by year’s end, down from its current level of 4.00% (upper bound).

Inflation remains elevated and lies above its historical mean.

Inflation, as measured by the trailing 12-month rate of change in the Consumer Price Index (CPI), stood at 3.0% in September 2025, up from its most recent low of 2.3% in April 2025. September’s observation pushes the metric even further from the Fed’s stated target of 2.0% and sets the CPI above its 25-year monthly average of 2.6%.

Takeaway: Six of the eight indices in today’s chart saw prices appreciate over the past 12 months (preferreds and 22+ year municipals being the exceptions). Interest rate policy likely played a significant role in these price movements, but we would be remiss not to mention the impact of recent equity volatility, persistent geopolitical tensions, and deteriorating economic data. Investors expect the Fed to lower interest rates in December, with the market implied end of year federal funds target rate sitting at 3.67% compared to 4.00% (upper bound) as of November 28. Do current fixed income prices fully reflect these expectations, or is there room to run? We plan to update this post with relevant information in 2026.

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions or other expenses incurred when investing. Investors cannot invest directly in an index. The Morningstar LSTA U.S. Leveraged Loan 100 Index is a market value-weighted index designed to measure the performance of the largest segment of the U.S. syndicated leveraged loan market. The ICE BofA U.S. High Yield Constrained Index tracks the performance of U.S. dollar denominated below investment grade corporate debt publicly issued in the U.S. domestic market. The ICE BofA 22+ Year U.S. Municipal Securities Index tracks the performance of U.S. dollar denominated investment grade tax-exempt debt publicly issued by U.S. states and territories, and their political subdivisions with a remaining term to maturity greater than or equal to 22 years. The ICE BofA Fixed Rate Preferred Securities Index tracks the performance of investment grade fixed rate U.S. dollar denominated preferred securities issued in the U.S. domestic market. The ICE BofA 7-10 Year U.S. Treasury Index tracks the performance of U.S. dollar denominated sovereign debt publicly issued by the U.S. government with a remaining term to maturity between 7 to 10 years. The ICE BofA U.S. Mortgage Backed Securities Index tracks the performance of U.S. dollar denominated fixed rate and hybrid residential mortgage pass-through securities publicly issued by U.S. agencies in the U.S. domestic market. The ICE BofA U.S. Corporate Index tracks the performance of U.S. dollar denominated investment grade corporate debt publicly issued in the U.S. domestic market. The ICE BofA Global Corporate Index tracks the performance of investment grade corporate debt publicly issued in the major domestic and Eurobond markets.

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View from the Observation Deck  

Today's charts are intended to give investors a visual perspective on historical and estimated earnings performance for the S&P 500 Index (“LargeCap Index”), the S&P MidCap 400 Index (“MidCap Index”), and the S&P SmallCap 600 Index (“SmallCap Index”). The charts track each Index’s quarterly reported earnings per share (EPS) beginning in Q4’23 through Q3’25. They also include Bloomberg’s estimated EPS for Q4’25.

As the chart reveals, headline EPS increased in Q3’25 (both quarter-over-quarter and year-over-year), with Q4’25 estimates signaling continued strength.

Year-over-year EPS increased by 11.27% (LargeCap Index), 4.86% (MidCap Index), and 7.57% (SmallCap Index) in Q3’25. Year-over-year earnings growth rate estimates for Q4’25 are currently as follows: 10.34% (LargeCap Index), 3.88% (MidCap Index), and 4.96% (SmallCap Index).

Estimated 2025 calendar year EPS for each Index were as follows (not in the charts): S&P 500 Index ($271.37); S&P MidCap 400 Index ($181.32); S&P SmallCap 600 Index ($86.22). 

Year-over-year earnings growth rates implied by these estimates are as follows: S&P 500 Index (+13.89%); S&P MidCap 400 Index (+1.69%); S&P SmallCap 600 Index (+7.16%). Despite their estimated growth, annual EPS for the MidCap and SmallCap Indices remain below their all-time highs of $194.25 and $97.53, respectively, which were both set in 2022. The overall trend is positive, however, and may imply that analysts expect a favorable climate for small and mid-sized companies in the near-term. 

Takeaway: We wrote extensively about the S&P 500 Index’s earnings earlier this week (click here). Today we provide an extended view into the earnings climate of the mid and small-cap segments of the market as well. We believe that corporate earnings drive the direction of stock prices over time, especially when the major indices are trading at or near record highs. As the data shows, EPS are expected to trend higher across each of these Indices in Q4’25, with full year estimates reaching record highs for each Index tracked in 2026. As always, these are estimates and are subject to change (and have changed since our last post). We will continue to report back as developments warrant.

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 companies used to measure large-cap U.S. stock market performance. The S&P MidCap 400 Index is a capitalization-weighted index that tracks the mid-range sector of the U.S. stock market. The S&P SmallCap 600 Index is a capitalization-weighted index that tracks U.S. stocks with a small market capitalization. 

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View from the Observation Deck

We update this post on an ongoing basis to provide investors with insight regarding the earnings climate of the S&P 500 Index (“Index”). While quarterly earnings estimates are a useful indicator of a company’s financial performance, they are not guarantees. Equity analysts are continually adjusting these estimates as new information is obtained. As of the open on 11/6/25, 433 of the 503 stocks that comprise the Index had reported Q3’25 earnings, according to data from S&P Dow Jones Indices.

FactSet reported that the Q3’25 blended, year-over-year (y-o-y) earnings growth rate for the Index stood at 13.1% as of 11/7/25.

Should this hold, it will mark the fourth consecutive quarter of double-digit earnings growth for the Index. 

The percentage of Index companies that beat earnings expectations in Q3’25 (82% as of 11/7/25) is above the 4-year average of 76.3%.

Notably, the 4-year average in today’s chart reflects favorable comparisons to COVID-era earnings in 2020 and 2021. We expect the average will decline as those results are removed from our dataset.

The three sectors with the highest Q3’25 y-o-y earnings growth rates and their percentages were as follows (as of 11/7/25): Information Technology (27.1%); Financials (23.7%); and Utilities (23.2%) For comparison, Consumer Staples, Energy, and Communication Services experienced y-o-y earnings growth rates of -0.1%, -0.5%, and -7.1%, respectively.

Takeaway: At 82%, an above-average number of Index constituents reported earnings that exceeded estimates in Q3’25 (data thru 11/7). Calendar year earnings estimates hint at record observations in the years to come. FactSet reported that the Index’s bottom-up calendar-year earnings will total a record 269.64 and 306.06 in 2025 and 2026, representing y-o-y increases of 11.6% and 13.7%, respectively. For comparison, the Index’s y-o-y earnings growth rate averaged 9.5% over the past 10 years. Estimates for record earnings are notable, especially given recent multiple expansion. FactSet reported that the Index’s forward price-to-earnings (P/E) ratio stood at 23.1 on 10/29/25, well above its 10-year average of 18.6. Are equity markets overpriced, or are lofty valuations justified by burgeoning earnings growth? Stay tuned!

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 companies used to measure large-cap U.S. stock market performance, while the S&P sector and subsector indices are capitalization-weighted and comprised of S&P 500 constituents representing a specific sector or industry.

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View from the Observation Deck

Today’s post provides an update to 2025 and 2026 earnings and revenue growth rate estimates for the S&P 500 Index (“Index”) and each of its eleven sectors. The Index closed at 6,772 on 11/4/25, just shy of its all-time high of 6,891 (10/28/25), and up a staggering 36.84% (total return) from its most recent low of 4,983 (4/8/25). For comparison, from 1928-2024 (97 years) the Index posted an average annual total return of 9.71%.

Earnings growth rate estimates continue higher, with increases in nine of today’s 2025 observations since our last post.

On 10/31/25, earnings for the companies that comprise the Index were estimated to increase by 11.2% year-over-year (y-o-y) in 2025, up from 9.2% in our last post on this topic in August (click here). Just two sectors are estimated to see earnings decline y-o-y in 2025: Energy (-9.9%) and Consumer Staples (-2.0%). In 2026, however, earnings are estimated to increase for each of the Index’s 11 sectors, with Information Technology and Materials leading the way.

Revenue growth rate estimates remain favorable as well. In fact, observations for both 2025 and 2026 increased since our last post on this topic.

As of 10/31/25, the Index’s 2025 estimated y-o-y revenue growth rate stood at 6.3%, up from 5.7% on 8/8/25. Ten of the Index’s eleven sectors reflect positive y-o-y revenue growth rate estimates in 2025, with seven of them estimated to surpass 5.0% (up from four in August). Information Technology commands the highest estimated revenue growth rates at 15.0% and 14.1% in 2025 and 2026, respectively. 

Takeaway: Equity market returns have been exceptional. The Index rewarded investors with average annual total returns of 23.29% over the three-year period ended 11/4/25. For comparison, the Index averaged an annual total return of 9.71% from 1928 to 2024. Recent results have many investors on edge, waiting for the inevitable shoe to drop. Stock markets can be fickle over short periods, as price discovery occurs amidst newfound information. One such example occurred earlier this year, when the Index plummeted by 18.75% (total return) in less than two months (2/19/25 – 4/8/25) amidst heightened geopolitical risk and bitter tariff negotiations. That said, Index earnings remained persistently positive, and investors largely traded earlier concerns for exuberance over financial performance. Analysts appear to share this sentiment, increasing earnings and revenue estimates yet again. Time will ultimately reveal the accuracy of these estimates, but we maintain that higher revenues could be the best catalyst for earnings growth, which in turn, may provide ballast to lofty multiples.

This chart is for illustrative purposes only and not indicative of any actual investment. There can be no assurance that any of the projections cited will occur. The illustration excludes the effects of taxes and brokerage commissions or other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 companies used to measure large-cap U.S. stock market performance. The respective S&P 500 Sector Indices are capitalization-weighted and comprised of S&P 500 constituents representing a specific sector.

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View from the Observation Deck

Today’s table reveals the trend in global government bond yields over the trailing 12-months ended 11/3/25. Policy rate reductions, which began in 2024, have persisted this year as the world’s central banks grapple with economic malaise and geopolitical turmoil. That said, concerns that inflation may not be fully contained (among other factors) remain, and may preclude further rate reductions over the near-term.

Inflation increased in nearly half of the countries in today’s table since our February post on this topic (click here).

Several of the world’s largest economies are experiencing resurgent inflation, which could smother dovish monetary policy over the near term. In the U.S., for example, the 12-month rate of change on the consumer price index stood at 3.0% in September, up from 2.3% in April. Inflation in the U.K. measured at just 2.5% in our February post, a far cry from its most recent reading of 3.8%. Australia was not immune to stubbornly high prices either, with its headline inflation rate increasing from 2.5% in our February post to 3.5% in today’s.

Real yields (yield minus inflation) offered by 10-year government bonds have come under pressure recently.

As shown in the column marked “12-Month Change (Basis Points)”, most 10-year government bond yields in today’s table have declined over the last year. This decline, combined with increasing inflation has caused real yields to narrow in recent months. That said, eight of the ten countries presented in today’s table offered a positive real yield on their 10-year note as of 11/3 (down from nine the last time we posted on this topic).

Takeaway: We maintain that central banks may find themselves with limited tools to fight recession should inflation remain elevated. While data from Bloomberg reveals muted near-term inflation expectations, these forecasts can change rapidly. Case in point: inflation’s resurgence in the U.K., Australia, Canada, and the U.S. in recent months. We expect central bank policy rates will remain elevated in countries where inflation has reaccelerated but recognize that these are multifaceted decisions. Should these economies face substantial stagnation, central banks may choose to lower short-term rates despite the risks posed by price increases. We will continue to monitor the situation and report back as new developments occur.

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing.

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