5 catalysts for year-end

Summer was stronger than most expected. US stocks set several records, Treasury yields eased, and global equities from Europe to China joined in the rally.

The resilience was striking—and it raises the bar for autumn. Growth slowed but didn’t crack. Profits smashed forecasts. The Fed signalled it was ready to ease. And companies doubled down on AI and pushed past tariff noise.

Risks remain. A federal appeals court ruled that most Trump 2.0 tariffs are ‘illegal,’ with the dispute now likely heading to the Supreme Court. Even if the ruling stands, the administration’s agenda suggests tariffs are unlikely to vanish, with other avenues of implementation viable (see our thoughts here). Meanwhile, existing levies could still fuel inflation, Fed independence is under scrutiny, global political tensions add pressure (see France last week), and valuations remain stretched.

For now, though, markets are mostly looking past the noise.

That sets up the final stretch of the year as a season where catalysts matter more than ever. Here are five forces to watch this autumn.

The Fed’s cutting cycle

At Jackson Hole, Chair Powell signalled that a September cut was on the table. Markets agree, assigning ~90% odds and pricing in more than 100 bps of easing over the next year.

The Fed is managing a split backdrop. Payroll growth slowed to ~35,000 a month this summer, underscoring a cooling labour market. Yet, headline inflation nudged up from 2.4% to 2.7% year-on-year in July, and cheaper petrol masked tariff-driven goods inflation.

While court drama brings more tariff fog, Powell’s message has been clear: as long as inflation expectations remain anchored, the Fed won’t chase one-off price shocks. The focus is jobs, where both demand and supply have cooled.

Political pressure last week also added noise but no detour. President Trump’s attempt to remove Fed Governor Lisa Cook—now under legal challenge—revived concerns about central bank independence. Still, markets didn’t blink; expectations for cuts remain intact.

Why it matters: The Fed is threading the needle—easing into a softer labour market without losing its inflation anchor. The only real macro hurdles are the August jobs report (5 September) and CPI print (11 September). Unless they surprise, a September cut looks set—and more may follow.

Corporate profits

Second-quarter earnings crushed expectations. With nearly all S&P 500 companies reported:

• Profits grew 12% year-on-year—more than double initial Street forecasts below 5%.
• Margins hit 12.8%—up from 12.2% a year ago and well above the five-year average.

Despite tariffs—including delays, tit-for-tat moves, and pending court rulings—companies have defended pricing and managed costs with discipline.

Looking ahead, consensus expects softer Q3 results—but that was also the setup for Q2, before upside surprises rolled in. Several tailwinds could help. Court clarity around tariff policy could reduce planning risk, AI and infrastructure spending (also backed by the One Big Beautiful Bill) should support tech and utilities, and prospective Fed cuts could provide an extra lift for growth-sensitive leaders.

Why it matters: With valuations stretched, earnings durability is critical to sustaining momentum.

AI spending 

Many doubted hyperscalers would stick to ambitious AI spending plans. So far, they’ve proved sceptics wrong. Microsoft, Alphabet, Meta, and Amazon are on track for nearly $350 billion in capex in 2025—an 80% jump from last year—with data centres and AI infrastructure leading the way.

But the limiting factor is physical: the power to run it all. After two decades of flat demand, US electricity use is projected to grow 2.5% annually through 2030. Data centres are the main driver, already consuming ~4% of US electricity and on track to reach ~9% by 2035. Northern Virginia’s “Data Center Alley” alone accounts for ~45% of global demand.

The grid is stretched. Nine of 13 US regional power markets are close to falling short, and most are expected to slip below safe levels within five years.

Why it matters: The AI super-cycle is real, but power will set its pace. Opportunity extends beyond hyperscalers to utilities, grid operators, power suppliers, and AI enablers.

Europe’s growth story

Activity has been slowly improving, and inflation has cooled. Historic fiscal stimulus—led by Germany—and major investment in semiconductors, clean energy, and manufacturing are driving new orders, with many projects set to ramp up in 2026. Defence spending is rising too, as governments lock in multi-year budgets.

Monetary policy is supportive. After eight cuts, the ECB has paused, with rates neutral rather than restrictive—a boost for credit growth. US tariffs capped at 15% instead of harsher levels also give businesses and consumers more confidence. Together, these forces stand to support earnings into year-end.

Headwinds remain. The stronger euro is squeezing exporters: a 10% rise typically trims earnings per share for Europe’s top 50 companies by ~4%, with the drag felt most in globally focused sectors.

Politics add another layer. In France, Prime Minister François Bayrou faces a 8 September confidence vote he is expected to lose, forcing President Macron to either appoint a new PM or call elections—each bringing uncertainty.

Why it matters: Fiscal stimulus, capex, and defence demand provide strong anchors. Domestic-oriented firms tied to these trends may benefit, while exporters remain more exposed to currency and tariff risks.

China’s structural strains vs. tech upside

China’s macro picture remains weaker. July saw negative loan growth for the first time in 20 years. Inflation is flat, property prices continue to slide, and industrial activity is sluggish. The property sector’s drag is far from resolved.

Tech tells a different story. Valuations are attractive versus global peers. Regulation has stabilised, and domestic AI development is advancing—DeepSeek’s progress shows innovation continues even under constraints. Large platforms with strong balance sheets and clear AI/cloud monetisation strategies are emerging as standouts.

Why it matters: China is a two-speed story. Macro headwinds remain heavy, but select tech leaders could still offer upside. Selectivity is key.

What it means for you

As autumn begins, markets are balancing a Fed ready to ease despite tariff fog, profits that keep surprising, an AI capex boom constrained by power, a stronger euro offset by Europe’s industrial and defence push, and China’s slowdown tempered by tech resilience.

Plenty of moving parts—but also plenty of opportunity. Now is the time to sharpen exposures, stress-test portfolios, and align with the catalysts that matter most. Your JPMorgan team is here to help.