While geopolitical issues dominate the headlines, markets are expected to turn their attention back to the earnings season for the fourth quarter of 2025 from mid-January. Especially for investors with a medium- to long-term investment horizon, corporate earnings and profitability, along with economic policy decisions, are often much more decisive for the success of their investment strategy than (geo-)political developments and events.
The US earnings season is particularly relevant for investors, as US companies account for about two-thirds of global market capitalization. Last year, the S&P 500 recorded double-digit earnings growth in each of the first three quarters—and even more importantly, on average, results were about 6 percentage points above expectations, according to estimates from Goldman Sachs. For the fourth quarter, consensus estimates point to an earnings increase of around 7 percent; we believe this forecast may also be too conservative.
For 2026, we forecast earnings per share growth of 12 percent in the S&P 500—equivalent to about USD 310. While technology stocks are likely to remain solid, we expect investors to increasingly look for opportunities beyond the large US tech companies this year: European equities (also supported by new stimulus programs in Europe, especially Germany) and Asian or Chinese stocks should be considered for stronger diversification. In particular, fiscal incentives and a marked acceleration in earnings growth could create new momentum in Europe. In Asia and China, we see opportunities to broaden portfolios and benefit from different growth drivers. Chinese technology stocks remain an exciting theme for us, and after a rather weak year, India may offer long-term investors an interesting entry point, even though stocks remain relatively expensive. In Switzerland, our focus continues to be on dividend stocks.
Valuations are one of the few drawbacks: they are high—the MSCI World is at the 90th percentile of its 25-year average, and the US is even higher. Emerging market equities are also somewhat more expensive compared to their historical levels. This may make it harder for markets to rise sharply. However, thanks to the outlook for solid corporate earnings, we expect equities to remain attractive compared to defensive assets, such as bonds, in the US, Europe, and Asia, and especially in Switzerland, where interest rates are close to zero.
Our conclusion? Those who focus on corporate earnings and economic policy frameworks—and do not let themselves be guided solely by geopolitical headlines—should also have good prospects for solid returns in equity markets in 2026. And although we again expect double-digit returns for the US—thanks in part to the ongoing boom in artificial intelligence—international diversification is likely to remain a key theme. This favors Europe, selective stocks in Asia, and also Switzerland, which should again offer similarly high return potential in 2026.
