The most interesting question we received from a client last week focused on recent trends in 2026 S&P 500 forecasts. As we dug into the data a couple of things stood out.
- The increase in 2026 EPS growth rate forecasts for the S&P 500 has been fairly modest in nature. The growth rate for the index next year embedded in consensus estimates bottomed at 13.1% on May 16th, and had risen to 13.47% as of June 6th. The high for the year was 14.2% in mid March.
- Second, the increase that has been seen since mid May has been fairly broad based. Improvement in recent weeks has been seen for the Mag 7 as well as the index ex the Mag 7 (with a bit more strength in the Mag 7) and for all sectors aside from Consumer Discretionary, Consumer Staples, and REITs.
- Third, the decline that has been seen relative to YTD highs is also fairly broad based. Despite recent improvements, the expected growth rates embedded in consensus remain below YTD highs for the broader index, the Mag 7, and the index ex the Mag 7, as well as all sectors. The sectors that are closest to their YTD highs are Tech and Financials.
While we see this as a positive data point for the broader US equity market, we see it as a slight one that will also go through an important stress test in the next reporting season when 2Q results come in.
For now, this data is sending us the same signal as our earnings revisions indicators, which have been on the mend for the S&P 500 including the top 10 market cap names and the index excluding those top ten market cap names, but not off to the races.
