MacroResearchBoard

U.S. Corporate Profits: Can It get Any Better? – June 2, 2025

A just-published report updated our outlook for U.S. corporate profits following yet another solid quarterly performance.

Although analysts have lowered S&P 500 EPS estimates for 2025 and 2026, consensus forecasts are still too optimistic based on our analyses. Such forecasts include the implicit assumption that already historically elevated profit margins will increase significantly further, which is most unlikely.

Consequently, we expect additional earnings downgrades in the coming months. With the U.S. equity market trading at over 21 times 12-month forward earnings and bond yields likely to rise, this implies downward pressure on valuations. Investors should not chase the broad equity index and instead focus on selective opportunities within the market, including financials (large banks), health care, software, and selective industrials.