This Week in Review | US Federal Gov't Reopens, Q3 Earnings, Navigating Volatility

Transcript

Mackenzie Winner:

Hello and welcome to This Week in Review. This weekly segment is designed to highlight a few important developments you may have missed this week, what they mean for markets, and most importantly, the potential impact for investors.

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Now, let's review what happened this week.

First, the US federal government reopens.

The longest US government shutdown in history came to a close this week after a bipartisan agreement struck over the weekend was passed by the Senate on Monday. The House followed suit, passing the funding bill on Wednesday, and President Trump signed the bill later that evening, reopening the federal government and offering some relief to those directly affected.

Many have expressed concerns about the shutdown's impact on the US economy. In addition to affecting federal jobs and programs, the shutdown increasingly impacted air travel. Last week, the Federal Aviation Administration imposed a 10% reduction in flights at 40 major US airports, which started November 7th. Airlines responded with flight cancellations and some worry lingering disruptions will ripple into the holiday travel season. As inconvenient as all of this may be to many, from an economic standpoint, it's also important to note that the US airline industry's total contribution to US GDP is around 4%, making it less impactful on the US economy than some may fear.

This ties into something we've said before: While government shutdowns are frustrating, especially for those directly impacted, history shows that their broad economic and market impact is limited.

The Congressional Budget Office estimated this government shutdown could attract 11 to $14 billion from US GDP by year end. According to recent data from the Bureau of Economic Analysis, that amounts to only around 0.06% of US GDP. And while that certainly isn't nothing, the loss isn't large enough to derail America's private sector driven economy, nor derail this bull market. As history demonstrates, stocks have risen on average in the one-, three-, six- and 12-months following government shutdowns, and we believe today's broader market drivers continue to support an ongoing bull market.

Next, checking in on Q3 corporate earnings.

As of November 13th, with 92% of S&P 500 companies reporting, Q3 earnings growth stands at 13% year-over-year and revenue growth at 8.3% year-over-year. This marks the ninth consecutive quarter of earnings growth.

Many big US banks beat earning expectations, posting higher quarterly profits than the same quarter last year, suggesting economic activity seems to be chugging along nicely. Additionally, tariffs continue to prove less impactful than originally feared, while consumer spending remains resilient.

About 83% of companies reporting Q3 results through November 13th have beat earnings expectations, which exceeds the ten-year average for positive surprises. Nine of the 11 market sectors are reporting positive earnings growth this quarter, led by Information Technology, Financials, Utilities and Materials. Looking ahead, analysts are expecting year-over-year earnings growth rates of around 7.1% for Q4. All told for the calendar year, analysts are predicting an earnings growth rate of 11.6% year-over-year. Moving beyond 2025, analysts project solid double-digit earnings growth for the first half of 2026.

To us, this better-than-expected earnings strength suggests this bull market is underpinned by real gains in profitability and still has room to run.

Finally, tips for navigating short-term market volatility.

On Thursday, the S&P 500 dropped about 1.7% amid a variety of headlines. It's understandable for investors to feel unsettled by these day-to-day ups and downs, but it's important to remember that volatility is a natural feature in equity investing—not a signal to abandon a well-constructed plan.

Staying disciplined during these market fluctuations is crucial for capturing the long-term gains stocks offer, especially if your long-term goals necessitate equity-like growth. For example, since 1929, the average annualized return of the S&P 500 has been around 10%, and that's inclusive of all periods of negative market volatility like corrections and bear markets. In fact, over this same period, the S&P 500 delivered positive annual returns roughly 75% of these years and double-digit returns around 35% of these years.

While daily price moves can feel scary, the stock market's long-term trend remains driven by underlying market drivers and economic fundamentals, which in our view, remain positive. Instead of reacting to day-to-day noise, we'd encourage long-term investors to remember that patience and discipline are the keys to navigating volatility and capturing lasting returns.

That's it for this week.

Thanks for tuning in to This Week in Review. If you're looking for more insights, then don't miss our other series, 3 Things You Need to Know This Week, released every Monday.

You can also visit FisherInvestments.com any time for our latest thoughts on markets. Thank you again for joining us, and don't forget to hit like and subscribe.