A slightly squishy reporting season so far
In our last podcast we noted that it had been a “sleepy” start to 4Q25 reporting season, as the first tranche of companies had been slow to roll out and the stats and commentary weren’t bad, but were uninspiring and somewhat mixed. With another 100 companies in the S&P 500 having released results this past week, we now think it’s fair to replace “sleepy” with “slightly squishy” as the phrase we’d use to describe results so far. Here’s what we’re seeing on the stats:
- The bottom-up consensus has stabilized. On the positive side, the bottom-up consensus S&P 500 forecast for 2026 has moved up a little above $313 again. In last week’s update, we noted that this stat had drifted slightly below that level. It’s now headed in a better direction. That being said, the 13% growth rate that the $313 implies is now only a modest improvement vs. 2025 where the growth rate is now tracking at 12%.
- Meanwhile, our broader gauge of earnings sentiment continues to look weak. At 51.4%, the rate of upward EPS estimate revisions for the S&P 500 continues to sit well below the highs of last September (65%). We also continue to see fading dominance on this stat for Large Caps relative to Small Caps, and, within the S&P 500, of the biggest market cap names relative to the rest of the index. This is something we think has helped the leadership rotation or broadening out trade in the US so far this year. Note that it will take a little more time for the results of the mega cap Growth companies that reported this week to filter into the stats and we’re eager to see the next update here.
- Beats have also taken a hit. In our last podcast we noted that the percent of companies beating consensus forecasts on EPS was tracking similar to the last reporting season. In our more recent update, the stats are now showing that within the S&P 500 just 77% are beating on EPS while 73% are beating on sales, down from 82% on EPS and 76% on sales in the prior quarter. The beat rates for the Russell 2000 Small Caps continue to look better than last quarter, however.
With another 121 companies in the S&P 500 expected to report results in the current week, it’s possible these stats will change significantly. But we think the current snapshot is still worth noting as it suggests that geopolitics is far from the only reason the price action in the stock market has been choppy in recent weeks.
One chart we are keeping a close eye on is the rate of upward EPS estimate revisions for the S&P 500 Technology sector which continues to sit near typical peaks, alongside deterioration in this stat for most other sectors.
What we read last week continues to suggest that the macro backdrop is mixed
As usual, our team combed through S&P 500 earnings call transcripts, looking for breadcrumbs on the macro backdrop and other commentary on key themes in the equity community. Here are some of our general impressions of what we read:
The discussion of the macro backdrop and general outlook continues to be difficult to summarize by using anything other than the word mixed or varied. Overall, we’re not seeing any red flags in the commentary that would point to a major problem. But at the same time, there are clear puts and takes. On the positive side, strength in defense, capital markets activity and pipelines, certain end markets or geographies which varied by company, strength in data centers and AI, and optimism on the year ahead continued to show up in these discussions. On the negative side, companies continued to highlight uncertainty, weak consumer sentiment and affordability challenges, mixed end markets in their own businesses, tariff impacts, and geopolitics.
Overall, what we’ve read in reporting season so far hasn’t changed our constructive outlook on the US equity market this year. It does reinforce our view that stock market returns in 2026 will likely be anchored to and reflective of earnings growth, with little in the way of moves in the P/E multiples.
What else jumps out from our other updates
Optimism on the stock market stalled slightly on the latest Conference Board survey. We have viewed this question in the Conference Board survey as one way to track stock market dynamics for the closely watched retail investor. This indicator recently returned to levels in line with most past peaks, other than the latest one, and has been signaling the potential for more froth in the US equity market than what we’ve been seeing in the AAII survey question on the stock market outlook or CFTC data on US equity futures positioning which have both been elevated but well below all-time highs.
