Jessica Inskip's 3-Pillar Economic Framework: Market Analysis and Risk Assessment

This analysis is based on Jessica Inskip’s appearance at the NYSE on November 6, 2025, where she presented her “3-pillar approach” for monitoring economic growth [1]. Inskip, Director of Investor Research at StockBrokers.com with 15 years of brokerage experience, outlined three key conditions for continued economic expansion: 1) An easing Fed cycle, 2) Earnings growth, and 3) Strong economic conditions [1].

The market backdrop shows mixed but generally positive conditions, with major indices posting gains over the past 30 days: S&P 500 (+2.11%), NASDAQ (+3.92%), and Dow Jones (+2.08%) [0]. However, sector performance reveals divergence, with energy (+0.85%) and healthcare (+0.82%) leading, while technology (-0.88%) and consumer cyclical (-0.83%) lagged on November 6, 2025 [0].

The framework receives partial support from current data. The Fed has implemented an easing cycle with two consecutive 25-basis point cuts, bringing rates to 3.75%-4.00% [2]. However, Fed Chair Powell has indicated further cuts are not guaranteed due to persistent inflation at 3% and cooling labor markets [2]. Q3 2025 earnings season strongly supports the second pillar, with S&P 500 blended earnings growth of 10.7% year-over-year, exceeding expectations of 7.9% [3]. Economic conditions present a mixed picture, with strong corporate performance offset by inflation concerns and labor market uncertainty [2][3].

The market’s forward P/E ratio of 22.9 represents the highest level in more than 5 years, suggesting markets may be pricing in significant future growth that may not materialize if earnings growth slows or Fed easing stalls [3]. This elevated valuation creates vulnerability, particularly given that 83% of companies have already beaten earnings estimates, setting a high bar for future quarters [3].

Technology sector performance highlights a concerning trend - despite leading earnings growth at 13.8% on 8.1% revenue gains [4], the sector underperformed on November 6 (-0.88%) [0]. This suggests market participants may be questioning sustainability of tech sector growth, potentially due to valuation concerns or expectations of slowing growth rates.

The ongoing government shutdown has created significant data gaps, forcing reliance on private-sector indicators [2]. This data reliability issue compounds the uncertainty around Fed policy decisions, as officials must balance employment risks against inflation without complete official economic data.

While U.S. markets showed modest gains, Chinese markets outperformed significantly on November 6 (ChiNext +2.89%, Shenzhen Component +2.1%) [0]. This regional divergence may reflect different monetary policy trajectories or economic recovery patterns, suggesting global growth remains uneven.

• Inflation Persistence:
  Consumer prices at 3% remain significantly above the Fed’s 2% target, potentially limiting further monetary easing [2]. The analysis reveals that inflation persistence could undermine Pillar 1 (Fed easing) if the Fed maintains higher rates longer than expected.
• Valuation Vulnerability:
  The elevated forward P/E ratio of 22.9 suggests markets may be vulnerable to earnings disappointments [3]. This creates systemic risk, particularly if Q4 earnings guidance falls short of optimistic expectations.
• Labor Market Deterioration:
  Fed officials have cited “increasing downside risks to employment” as a key concern [2]. Weakening labor conditions could impact both corporate earnings and consumer spending, affecting multiple pillars simultaneously.
• Data Reliability Issues:
  The ongoing government shutdown has created gaps in official economic data, increasing reliance on potentially less reliable private-sector indicators [2]. This information deficit complicates decision-making and risk assessment.

• Earnings Momentum:
  With 83% of companies beating EPS estimates and 64% of S&P 500 companies still to report Q3 results [3], there may be continued earnings-driven upside potential.
• Sector Rotation Opportunities:
  The divergence between strong-performing defensive sectors (energy, healthcare) and lagging growth sectors (technology, consumer cyclical) [0] may present tactical positioning opportunities.
• Policy Clarity Potential:
  Resolution of the government shutdown could restore data reliability and provide clearer signals for Fed policy, potentially reducing market uncertainty [2].

The Fed’s December meeting represents a critical decision point that could validate or challenge Inskip’s framework. Additionally, the remaining Q3 earnings reports could either reinforce current optimism or introduce disappointment.

Major indices have shown resilience with 30-day gains ranging from 1.23% (Russell 2000) to 3.92% (NASDAQ) [0]. However, daily sector performance on November 6 revealed rotation away from growth sectors toward defensive positions [0].

Q3 2025 earnings season has been exceptional, with S&P 500 blended earnings growth of 10.7% year-over-year, significantly above the 7.9% expectation [3]. Companies are reporting earnings 5.3% above estimates, with 83% beating EPS targets [3].

The Federal Reserve has implemented a moderate easing cycle with two consecutive 25-basis point cuts, but further easing remains uncertain due to inflation persistence at 3% and labor market concerns [2].

Forward 12-month P/E ratio stands at 22.9, above the 5-year average of 19.9, suggesting markets are pricing in significant future growth expectations [3].

The government shutdown has created significant gaps in official economic data, increasing uncertainty around policy decisions and economic assessments [2].

Analysts project 11.2% earnings growth for 2025 and 14.0% for 2026, though these optimistic projections may be vulnerable to policy uncertainty and economic headwinds [3].