Corporate profits sustain the bull market

Earnings boom makes valuations look more reasonable
S&P 500 price-to-earnings ratio, 12-month forward EPS estimates

Source: FactSet, as of September 30, 2026.

Third-quarter corporate earnings reports will be arriving fast and furious throughout October. Consensus estimates call for total S&P 500 earnings to rise 29.5% from a year earlier, marking a third consecutive quarter of gains above 25%. While energy and technology companies are expected to lead the way, all 11 sectors are projected to post profit growth.

This earnings strength is even more notable in the context of the economic cycle. Growth rates like these are typically seen as the economy emerges from a recession and profits rebound from depressed levels. Yet the economy is now several years into an expansion.

One important byproduct of rapidly rising profits is that they make market valuations more reasonable. As the chart shows, the most widely used stock valuation measure, the price-to-earnings (P/E) ratio, has declined over the past year even as the S&P 500 reached all-time highs last week. That is because earnings have grown faster than stock prices. The P/E ratio now stands right at its 10-year average.

What we’re watching this week

Wednesday: The Consumer Price Index for September will be released. Economists expect a slight acceleration in the annual inflation rate.

Thursday: September retail sales will be reported, with estimates pointing to a small increase from the prior month.

Throughout the week: America’s largest financial institutions will report third-quarter earnings.