JPMorgan strategists say US firms could outpace Europe in profit growth

JPMorgan Chase & Co. strategists have predicted that US firms’ profit levels will likely outdo their European counterparts by a huge margin during these earning periods.

According to Mislav Matejka, a leading strategist at JPMorgan, the difference in profit margin may be a case of setting the bar much lower for S&P 500 companies. Analysts for the US benchmarking lowered their forecasts meaningfully as they headed to the season despite a resilient economy.

On the contrary, expectations for European cyclical and defensive shares were raised to more ambitious levels, which might be difficult for companies to meet. The situation makes Europe more risky compared to the speed of activity momentum.

US stocks have also extended their outperformance against international peers this year, powered by tech shares and the artificial intelligence frenzy. The economy remains resilient, and the Federal Reserve has embarked on an interest-rate-cutting cycle amid falling inflation.

President Trump may affect US firms’ stocks in 2025

Last year, the performance of the US and European markets were in line with predictions. In local currency, the Stoxx 600 index performed lower than the S&P 500 by 17 percentage points, the second-worst performance since the benchmark was created in 1998. America’s stock was driven by its robust economic growth and increased demand for tech supplies.

The year 2025 might be different; the swearing of President Trump in office may affect the market sentiments. Investors are finding it difficult to predict how Trump’s America-first policies and proposals to alter global tariffs will affect stocks in 2025

JPMorgan strategists noted that there is potential for convergence given the extreme positioning of US stocks and the valuation and performance gap against international peers. 

However, they continue to believe that more clarity on the trade and geopolitics fronts is needed before making conclusions. 

Matejka had a bearish view of European stock last year, but it didn’t pan out. He said the median US analyst estimate calls for 3% growth in fourth-quarter earnings versus a year earlier. In Europe, the median forecast signals a 5% and 9% increase for cyclicals and defensives, respectively. 

Regional profit trends reveal disparities in performance

Early trends come from high profiles, with some recording achievements, while others are missing the beat in the US and Europe.

So far, US banks are performing well. JPMorgan, Goldman Sachs Group Inc., and Wells Fargo & Co. have all experienced gains, with their reports exceeding expectations. However, rugmaker Eli Lilly & Co. saw a serious fall after a dismaying revenue forecast.

According to Bloomberg Intelligence, the profit margins are performing well at 7.7%, almost one-tenth of the S&P’s market cap already reported.

On the contrary, Europe is already experiencing many disappointments from firms like BP Plc and Taylor Wimpey Plc. However, some firms like the Swiss luxury giant Richemont SA, are performing extraordinarily, hitting a record high after high quarterly sales.

According to a JPMorgan analyst, European earnings will continue to trail behind the US in 2025 due to a “challenging” outlook for companies exposed to China’s uneven recovery.

From Zero to Web3 Pro: Your 90-Day Career Launch Plan