For the First Time Since 1955, S&P 500 Profits Exceed Long-Term Trend by 14%
For the first time since 1955, the S&P 500's earnings per share (EPS) have risen approximately 14% above their long-term historical trend channel, according to a recent report. This highlights a significant fundamental shift: strong corporate profits, not just AI narratives or liquidity, are now underpinning the market's high valuations.
The strength of current earnings is evidenced on multiple fronts. Actual quarterly results are consistently beating analyst expectations, with the percentage of S&P 500 companies exceeding profit forecasts and the magnitude of sales surprises near multi-year highs. Furthermore, analysts are *raising* future EPS estimates instead of the typical post-quarter downgrades, with full-year 2026 growth expectations revised sharply upwards from ~13% to nearly 28%.
This profit growth is broadening beyond the mega-cap "Magnificent Seven" tech stocks. While these giants remain the primary engine, the majority of S&P 500 sectors are contributing, with median company earnings growth around 13.8%.
However, this exceptional strength creates a higher bar for future performance. With profit levels already so elevated, merely meeting elevated expectations may not suffice to push stocks higher. Any disappointment in revenue growth, profit margins, or forward guidance could trigger significant pressure on stretched valuations. Therefore, the sustainability of the earnings support will depend on continued sales expansion, stable margins, the payoff from massive AI investments, and, crucially, whether the positive trend of upward earnings revisions can persist.
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