S&P 500: Q3 Earnings Surge Amid Rising RisksS&P 500SP:SPXjuliakhandoshkoResilient Earnings Growth in a Challenging Environment Honestly, even with all the warning signs flashing red, the S&P 500 just pulled off something impressive. Companies in the index posted 10.7% annual earnings growth in Q3 2025 - and that’s no small feat. It’s a real testament to how resilient U.S. businesses are right now, no matter what. Four Quarters of Double-Digit Gains: A Rare Streak That said, staying long in this market is getting trickier. The stakes are rising. Valuations are stretched, policy signals are mixed, and while earnings are strong, the margin for error is shrinking. It’s one of those moments where you have to respect the strength - but also stay sharp. What stands out is this: we’ve now seen four straight quarters of double-digit earnings growth in the S&P 500 - something we haven’t seen since the post-COVID surge in 2021. Companies are still delivering, even amid inflation and high rates. In Q3 2025, 83% of firms beat EPS estimates, well above the 5- and 10-year averages. But the average surprise was just 5.3%, down from historical norms. Wins are frequent, but margins are narrowing. Sector Heavyweights Drive the Rally-But at What Cost? The bulk of the upside came from Financials, Tech, and Consumer Discretionary. JPMorgan JPM , Apple AAPL , Microsoft MSFT - the usual suspects - carried the weight. The Magnificent 7 are doing all the heavy lifting, which makes the market more fragile. If one stumbles, the whole index gets affected. It doesn’t feel comfy to me. Stretched Valuations Signal Vulnerability We must honestly admit that valuations are stretched. The S&P’s forward P/E is 22.9 - considerably above the 5-year average of 19.9. We’re clearly pricing in even stronger earnings ahead, but here’s what really worries me: if growth falters, this market could snap back hard. Instead of a smooth landing, we might get a sharp correction. There’s just too much optimism already baked into valuations. Beyond Earnings: Labor Market Cracks and Data Blackouts What’s even more concerning is what’s happening off the earnings sheet. The prolonged government shutdown is disrupting key macro data releases, leaving investors flying blind. For most of 2025, the labor market was in a “no hire, no fire” phase. But that’s changing. Amazon AMZN just cut 14,000 jobs. UPS’s headcount is down 48,000 year-over-year. Target, Paramount - all trimming staff. These no longer look like isolated moves, and they need more unbiased scrutiny and sober projections.