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Investing.com -- The S&P 500 continues to outperform global peers this year, but strategists say the edge is narrowing to a few key sectors and U.S.-focused firms still look stronger heading into 2026 (FY26).
“Earnings beats remain strong, and margins, FY25 growth outlook and FY25/FY26 EPS revisions outpace global peers,” strategists led by Venu Krishna said in a Tuesday note.
The U.S. market’s leadership is now heavily concentrated in a handful of industries, they noted, such as Consumer Discretionary, Communication Services, and Utilities, with Big Tech still dominating overall performance.
“The S&P 500’s leadership remains heavily driven by Big Tech,” the team said, highlighting that the combined weight of the top 10 constituents by both market cap and earnings contribution has reached a long-term peak.
Several Big Tech companies are set to report earnings this week, which will offer critical signals on the next phase of the AI investment cycle, they added.
“Notably, options markets are implying earnings-related moves for AI-exposed Big Tech names that, while modestly larger than were recently realized, nonetheless are broadly well contained, likely suggesting markets don’t foresee any outsized vulnerability,” strategists said.
Looking ahead, FY25 earnings growth for U.S. equities is projected to outpace that of major global peers, with consensus forecasts pointing to a clear acceleration.
Strategists added that “U.S. dominance in earnings revisions for next year continues as well,” with margin expansion a key differentiator. Even excluding technology, U.S. companies are expected to maintain superior profitability compared with Europe and Asia.
S&P 500 trades at valuations near the upper end of its historical range—currently in the 94th percentile over the past decade—well above levels in Europe and Asia-Pacific, at the 81st and 89th percentiles, respectively.
Nearly all U.S. sectors sit in at least the top quintile of their 10-year valuation ranges, Barclays highlighted.