Wall Street has staged a remarkable rebound, with the S&P 500 index climbing 12.5 per cent from its March 30 Iran war low. This recovery, while partly reflecting rapid market positioning shifts, also signals robust US profit growth. The March-quarter profit season shows impressive initial figures: aggregate earnings are up almost 30 per cent. Excluding a massive jump from computer chipmaker Micron Technology, growth remains a strong 17 per cent.
The outlook remains strong, with aggregate analyst forecasts projecting 18 per cent profit growth for 2026, followed by 17 per cent in 2027. Artificial intelligence is a key driver, with AI infrastructure spending estimated to fuel about 40 per cent of earnings per share growth in 2026. This widespread strength suggests the US economy can sustain growth despite global conflicts, attributed to energy independence, stimulative policies, and enduring dynamism.
In stark contrast, Australia’s economy faces significant headwinds, with the ASX 200 up just 4.8 per cent from its wartime lows. Dion Hershan, chairman and head of Australian equities at Yarra Capital Management, an investment firm focusing on Australian markets, notes Australia’s “long period of economic mediocrity is being badly exposed.” He cites stalled growth, policy ineptitude, and broad-based profit downgrades from ASX companies like waste group Cleanaway, engineering giant Worley, and hearing-device giant Cochlear.
While the ASX 200’s projected earnings appear healthy—13.2 per cent profit growth for financial year 2026—these figures are largely skewed by strong commodity prices boosting miners. Excluding this factor reveals tepid underlying domestic earnings growth. Hershan warns that Australia’s economic fundamentals have been mediocre and are set to worsen, making it less attractive for new capital compared to the US.
