Expectations have been set for BlackRock to achieve $10.73 in EPS for Q3, surpassing the consensus by 5%, and for the firm to report flows that exceed consensus, bolstered by an uptick in new assets. The expansion of the private markets business is anticipated to hasten growth, along with the potential for investor re-risking to enhance flows.

The belief is that the market is progressively approaching a 'normal' environment, with the initial public offering and merger markets beginning to stir, and the anticipation of interest rate changes contributing to a resurgence of optimism. Nonetheless, it has been observed that activity in Q3 was softer than anticipated.

The firm notes that most capital markets stocks face downside risks leading into Q3 reports, primarily due to lower interest rates and a slow recovery in deal activity. While faster rate cuts and stronger equity markets have encouraged a risk-on attitude among many capital markets stocks, the sluggish pace of deal activity presents ongoing challenges, particularly for alternative managers with highly stretched valuation multiples. Traditional managers have seen organic growth weaken in Q3, and the analyst highlights that lower interest rates pose a significant threat to earnings for brokers and wealth managers. However, exchanges and trust banks are identified as relatively positive areas looking into the Q3 results.