The Australian sharemarket continued on its positive streak last week, advancing a further 2.0% as stronger than expected corporate earnings drove optimism and performance. Key earnings from JB Hi-Fi and BHP provided confidence in consumer and materials sectors, while solid results from Sonic Healthcare added midweek momentum. The Energy (4.9%) sector outperformed on a 5.4% increase in crude oil after escalating US–Iran tensions. The stock specific standout over the week was HUB24, which surged 27.3%, after the company reported net profit for the first 6 months, up 70% from last year.
US sharemarkets rebounded last week, with the S&P 500 closing 1.1% higher with robust earnings announcements also the tone of the week. The Communication Services (2.3%) and Consumer Discretionary (1.7%) sectors were the best performers, while Consumer Staples (-2.3%) and Health Care (-0.6%) softened. Amazon reported strong earnings, which saw the share price add 5.7%, while US based building and service provider Comfort Systems, rallied 9.3% after their fourth quarter results significantly surpassed market expectations. In other news the US Supreme Court ruled against President Trump’s use of emergency tariff authorities, however, in a statement Trump said he would continue pursing his tariff agenda through alternative avenues.
European sharemarkets also advanced over the week, closing near all-time highs as the STOXX Europe 600 increased 2.1%. Performance was relatively widespread, with eight from twelve sectors closing in positive territory. The Banks were the standout, advancing 4.9%. Societe Generale, a top tier European bank was a key driver, reporting strong revenue growth, which saw its share price jump 10.6%. Economic data over the week supported a gradual easing tone, as UK CPI for January came in the lowest it has in nearly 12 months, while pay-rolled employment fell for the fifth month in a row.
Stock & sector Movements
The US earnings season is nearly over, and we’ve learned so far that corporate America remains in relatively good shape. Looking deeper, what caught our eye was the broadening out of strength beyond just the big tech names.
With around three-quarters of companies having reported, the S&P 500 has so far delivered annual earnings growth of 13.2% for the December 2025 quarter. If that holds, it will mark the fifth consecutive quarter of double-digit earnings growth. Revenue growth is running at 9.0%, the strongest pace in three years. Meanwhile, net profit margins have climbed to 13.2%, above both last year and the 10-year average. If maintained, this will mark the highest level of profitability seen by FactSet since it started tracking it back in 2009!
It’s no longer just the mega-cap tech story
Over the past two years, market returns have been heavily concentrated in a small group of US technology giants. That story hasn’t gone away. The Information Technology sector is still delivering earnings growth north of 30% and revenue growth above 20%. Artificial Intelligence remains a powerful structural tailwind.
But it’s no longer a one-sector show. What’s different now is that other parts of the market are starting to contribute more meaningfully. Industrials are reporting earnings growth of 26%, boosted by data centre related demand. Communications and parts of Financials have also seen solid upgrades.
This is good news for those investing in the US, as broader leadership promotes a more healthy and dynamic market.
Valuations full, but not frothy
The forward P/E ratio for the S&P 500 sits at around 21.5x, above the 10-year average of 18.8x. So yes, valuations look elevated compared to the past. But importantly, as mentioned, the overall market has become much more profitable, which we think justifies higher valuations. Additionally, earnings estimates have been revised higher as prices have been largely flat since year-end (in local currency terms). That means some of the valuation pressure has eased through earnings growth rather than falling prices.
In our view, these points reduce the risk of an overheated market narrative.
What this means for portfolios
We remain constructive on equities. Earnings growth is real, margins are expanding and company forward guidance is on balance more positive than negative. While valuations require discipline, the underlying profit cycle is supportive.
Earnings growth is broadening out across sectors and regions when compared to 2024 and 2025. For investors, we think this will present plenty of opportunities to generate above average returns in 2026.
Locally this week we will be focused on the latest inflation figures, set to be released on Wednesday. Economists are expecting headline inflation to increase 0.4% in the month of January, with the annual rate easing to 3.7%.
Oversees, the US have a raft of economic data coming out, including manufacturing activity, home prices, initial jobless claim and the producer price index.