Stock markets face a test in September: earnings growth versus uncertainty over interest rates and AI

‘Sell in May and go away’. Everyone is familiar with this well-known adage, which urges investors to take a break from the stock markets during the summer months, which are traditionally very volatile and less profitable. Few are likely to recall the advice to return to the markets soon, contained in the rest of the saying, which in fact concludes with ‘but remember to come back in September”. To tell the truth, this year the stock market has seen few lulls, even during the hottest part of the year, despite the continuing uncertainty surrounding events in the Middle East and the tensions on the bond market that have been all too evident in recent weeks.

Prior to the volatility that characterised the second half of August – which is now drawing to a close – the world’s major stock markets had in fact managed to set a series of records, and since the end of April the overall picture has been positive almost everywhere. The MSCI World Index rose by around 7 per cent, in line with Wall Street and Europe as a whole, whilst other markets – including Tokyo, Madrid and Milan – even posted double-digit gains. The well-known proverb advising caution in summer therefore seems not to have held true this time round, and perhaps for this very reason, traders returning from their holidays are wondering whether the corollary associated with September and the autumn months – which are statistically more favourable for the stock markets – might also hold true.

Analysts and fund managers, currently busy fine-tuning their strategies for the four months leading up to the close of a 2026 that has so far been a year to remember, appear to be focusing primarily on the profitability that listed companies have demonstrated to date and on the sustainability of a decidedly strong earnings cycle. There are those who, for example, find the ongoing upward revisions to consensus forecasts across broad sections of the market particularly encouraging. ‘Historically, at this time of year, estimates for the following year tend to be revised downwards,’ admits Christian Stocker, equity strategist at UniCredit – and the fact that they are currently moving in the opposite direction provides a strong indication that the earnings cycle remains solid and can continue to support the equity markets.”

There is no doubt that the main driving force behind this comes from the United States, where profit growth has reached its fastest pace since 2021 and could reach 33.3 per cent this year, according to consensus estimates compiled by LSEG I/B/E/S for the companies comprising the S&P 500 index. The support in this case primarily from the enormous volume of investment directed towards artificial intelligence, which tends first and foremost to boost the profitability of the technology sector; however, the strong performance of the energy sector, fuelled by soaring oil and gas prices, also plays an undoubtedly significant role.

This time, however, Europe too has delivered more positive surprises than usual, occurring in around 60 per cent of cases when looking at all companies listed on the Stoxx 600. Expectations have also been consistently revised upwards throughout the earnings season: from the +13.8 per cent forecast for 2026 at the start of the summer, the figure has now risen to a more substantial +17.9 per cent recorded just this week, and companies on the Milan Stock Exchange have posted the most significant improvement, with a rise of over 50 per cent in their earnings per share.