Market Insights November 03, 2025

Trump and Xi are stalling for time, confrontation deferred

After several weeks of heightened tensions, Washington and Beijing have reached a fragile truce in South Korea. Donald Trump and Xi Jinping agreed to reduce US tariffs on Chinese goods from 57% to 47%, with Trump abandoning threats of an additional 100% surcharge. In return, Beijing committed to curbing fentanyl exports, resuming purchases of American soybeans, and suspending for one-year additional restrictions on rare earth exports.

Despite Trump’s overly optimistic statements, the agreement provides only temporary relief. Sensitive issues such as Nvidia’s access to the Chinese market, the situation in Taiwan, and the TikTok dispute were left unaddressed. The prospect of an annual renegotiation, longer than a quarterly truce but still short-term, adds to the prevailing uncertainty, suggesting merely a pause in an economic confrontation that is likely to persist. 

An already exceptional earnings season...

Last week marked the peak of the earnings season in the United States, with nearly half of the S&P 500 (by market capitalization) having reported their figures for the third quarter of 2025.

While the coming weeks should remain relatively busy, it is already safe to say that earnings releases for the past three months have been exceptionally strong. Nearly 84% of companies managed to beat analysts' expectations in terms of earnings per share.

The true surprise lies in earnings growth, which has proven far more robust than markets had anticipated. The prevailing pessimism since April, triggered by Donald Trump's announcement of new tariffs, had led to a significant downward revision in investors’ growth expectations. Despite a solid second quarter, expectations remained too cautious. This likely explains the scale of positive surprises witnessed during last week’s announcements. For the third quarter, earnings are now expected to rise by 10%, a figure that may well continue to be revised upward in the coming weeks.

As for the “Magnificent 7,” the largest US tech and internet firms, they are on track for a 23% surge in earnings, driven by massive investments in infrastructure critical to the development of artificial intelligence. Excluding these seven giants, earnings growth for the rest of the index still stands at a respectable +5%.

This performance helps sustain the exceptionally generous valuations seen across major US equity indices. For now, these elevated multiples are not a concern. As long as earnings forecasts continue to be revised upward and the macroeconomic environment remains supportive, particularly with the ongoing monetary easing by the Federal Reserve, each potential market pullback is likely to be viewed by investors as a buying opportunity.

It would seem that in 2025, the year-end rally began… in early April!

This week’s figure: $5’000 billion

Nvidia is the first company in history to reach this level of valuation. It now accounts for more than 8.5% of the S&P 500 index and is, moreover, larger than six of the index’s eleven sectors. The upcoming earnings of the leading manufacturer of semiconductors essential to AI development are therefore critical for the markets.