Risk from the election recedes as the fate of the US stock market once again depends on corporate performance.

Noted, as Trump won the US presidential election, investors' attention has shifted back to economic growth, and corporate performance will be one of the biggest driving forces of the US stock market. According to data compiled by Bloomberg Industries, as the third quarter earnings season comes to a close, profits of companies in the S&P 500 Index rose by 8.4%, double the expected growth rate. BI reported that Wall Street is more optimistic about the outlook for next year, with analysts predicting a 13% increase in corporate profits, marking the largest increase since 2021. For strategists at Goldman Sachs, this is a positive sign for the stock market as the Federal Reserve views inflation risks as "balanced." Goldman Sachs strategist David Kostin wrote in a report on November 8, "We expect profits to be the main driver of future stock returns." Last week, US preferential trading (buying assets when the US outperforms other countries in the world) pushed the S&P 500 Index to a new high as traders bet that Trump would introduce growth-stimulating policies and shield the world's largest economy from overseas competition. The Federal Reserve also cut interest rates, with policymakers noting that progress is being made towards achieving the central bank's inflation target. However, Trump's idea of imposing tariffs of 10% to 20% on all imported goods is a major concern for investors, as retaliatory measures and reduced consumer spending threaten to reignite inflation. The S&P 500 Index has risen by 26% this year, poised to achieve its biggest gain since 2021. Some market participants warn that stock exposures and valuations are too high. Earnings Revision Since September, continuous downward revisions to earnings expectations have raised concerns about next year's profit forecasts. But Kostin of Goldman Sachs said that after an exceptionally strong eight months until 2024, the correction trajectory is returning to "normal." The strategist estimated that for every 1 percentage point decrease in statutory domestic tax rates, earnings per share of S&P 500 Index constituents would increase by less than 1%. He also believed that potential deregulation would support the index, while tariffs could suppress profits of its constituents. Lori Calvasina, strategist at RBC Capital Markets, warned that the stock market could decline in the coming weeks as there is "not much capacity to absorb disappointing news." In a report, Calvasina wrote, "The uncertainty of the election has dissipated, and the US stock market is optimistic about government policy direction." "We also believe that based on our positioning and valuation data, there is still a short-term risk of a pullback. Overall, we are preparing to face a more dynamic backdrop, which requires greater flexibility in trading in the coming year."