Article By Colin Attard
On the face of it, the headlines of recent weeks could easily have prompted investors to reduce risk. Geopolitical tensions have intensified, oil prices have moved above the psychologically important US$100 per barrel level, inflation continued to increase and government bond yields have risen sharply. In Europe, fiscal pressures and political developments, particularly in France, remain a source of concern, while China continues to struggle with weak domestic demand and a prolonged property-market downturn. In the United States, investors also have to contend with the approaching mid-term elections and the possibility that higher energy prices could further complicate the inflation outlook.
These risks are real. But markets are not driven by headlines alone. They ultimately reflect the interaction between economic growth, corporate earnings, interest rates and investor expectations. Indeed, it is striking that equity markets have so far absorbed these headwinds relatively well.
The S&P 500 finished September with a modest 0.35% monthly decline, but remained around 12% higher for the year (in US Dollar terms). The STOXX Europe 600, meanwhile, declined 2.4% in September, its first monthly fall in six months, but remained approximately 10.2% higher year-to-date on a total-return basis. This resilience is important because it suggests that investors are looking beyond the headlines and focusing on corporate and macroeconomic fundamentals.
In the United States, earnings have been a particularly powerful support. According to Bloomberg, S&P 500 blended earnings growth reached around 29% year-on-year, marking a second consecutive quarter of growth above 20%. Artificial intelligence remains at the centre of the US investment story, but its significance extends beyond a handful of technology companies. Big Tech delivered earnings growth of around 35% in the second quarter, up from approximately 30% in the previous quarter, while the remainder of the technology sector recorded even stronger growth. At the same time, the enormous investment required in data centres, semiconductors, networking equipment and electricity infrastructure is creating demand across a much wider part of the economy.
Capital expenditure by the largest technology companies is becoming an input into activity across construction, industrial equipment, semiconductors, utilities and energy. There are, of course, questions surrounding the eventual return on this investment and whether spending levels can continue to accelerate indefinitely. But for the moment, the economic multiplier effect is becoming increasingly visible.
The energy sector has benefited directly from the substantial increase in oil prices. Integrated oil and gas companies have reported earnings more than doubling in some cases, while exploration and production companies have also experienced substantial increases.
Financial companies have been another major contributor to S&P 500 earnings growth. Major US banks have benefited from trading activity, advisory fees and net interest income, with investment banking and capital-market activity providing additional support.
Eight of the eleven S&P 500 GICS sectors have reported positive earnings growth this year, providing some evidence that the strength of the US equity market is broad. This reflects a labour market that remains relatively strong, while consumer spending continues to provide support. August retail sales increased by 1.4%, reinforcing the impression that households have so far been able to absorb higher financing costs and elevated prices.
There is also an important structural consideration when assessing the impact of interest rates. The US economy today may be less sensitive to rates than in previous cycles. Higher borrowing costs clearly tighten financial conditions, but their effect on some areas of the economy, particularly the housing market and technology investment, may be less direct than in the past.
The European picture is similarly more nuanced than the headlines might suggest. Euro-area GDP expanded by 0.6% quarter-on-quarter in the second quarter of 2026. This was the strongest quarterly were a significant contributor to growth. Eurostat data show that household consumption contributed positively to second-quarter growth, while net exports made an even larger contribution. Manufacturing activity is also expanding in most parts of Europe.
China remains the weak link within the broader Asian growth story, but it is important not to treat China and Asia as synonymous. Across East Asia, investment linked to semiconductors and AI infrastructure continues to support activity. Semiconductor manufacturing, advanced electronics and related capital expenditure are benefiting from the rapid growth in computing demand.
None of this means that the risks have disappeared. The point is rather that risk and resilience can exist simultaneously. Financial markets rarely wait for uncertainty to disappear before recovering. Equally, strong corporate earnings do not make markets immune to higher interest rates, geopolitical shocks or excessive valuations. The investment challenge is therefore not to determine whether the latest headline is positive or negative, but to assess whether the underlying fundamentals and the risks surrounding them have materially changed.
Colin Attard is Chief Investment Officer at Curmi & Partners Ltd.
The figures quoted refer to the past and past performance is not a reliable indicator of future results. Data as at 30th September 2026; sources: Bloomberg, Eurostat, US Census Bureau. The information presented in this commentary is solely provided for informational purposes and is not to be interpreted as investment advice, or to be used or considered as an offer or a solicitation to sell/buy or subscribe for any financial instruments, nor to constitute any advice or recommendation with respect to such financial instruments. Curmi & Partners Ltd, with registered address Finance House, Princess Elizabeth Street, Ta Xbiex, Malta XBX 1102, is a member of the Malta Stock Exchange and is licensed by the MFSA to conduct investment services business.