US Corporate Profit Growth Wanes as Investors Eye Earnings Slowdown

A strong year for corporate profit growth is driving US stock market gains, but investors are hesitant that the good times will roll on without a hitch.

Full-year earnings from S&P 500 companies are expected to rise by 35%, which would mark the highest rate since 2021. This robust growth has lifted the S&P 500 about 12% this year, overcoming risks including rising interest rates and the US Federal Reserve's hawkish turn.

However, investors are starting to question the durability of these huge numbers, with some warning that earnings growth may slow down in the coming years. Michael Arone, chief investment strategist at State Street Investment Management, said 'I do think that the rate of earnings growth will slow.'

The sustainability of earnings growth is a key threat to a bull market nearing its fourth year. Investors are watching AI spending closely, as companies building infrastructure have seen profits surge due to AI-related expenses.