Once again, S&P 500 companies posted fundamentally strong results. This earnings season, which is near its end, will almost assuredly finish out reporting double-digit earnings growth on a year-over-year basis for the fifth straight quarter.
As of this writing, 82% of S&P 500 companies have reported actual results. Of those, 76% have beaten their per-share earnings estimates.
More importantly, the companies are beating earnings estimates by 7.2%, which is above the 10-year average of 7.0%.
There’s been a significant increase in the overall earnings growth rate compared to estimates from Dec. 31, 2025. Back then, the estimated growth rate was 8.3%. Today, it stands at 12.8% – significantly higher in comparison.
Even more stunning is that for companies yet to report, the expected earnings growth rate is 20.1%. If accurate, the S&P 500 will close the fourth quarter with a blended earnings growth rate of 13.9%:
Even more eye-opening is that this record earnings growth is less than the 14.4% growth analysts predict for 2026.
We’ve spent a lot of time analyzing the efficiency gains in relation to their contribution to this earnings strength. From an overall economic strength standpoint, we’d be remiss to not acknowledge the additional contribution of this quarter's revenue growth strength too.
Currently, the blended revenue growth rate for Q4 year-over-year is 9%. It would be the highest revenue growth rate reported since 2022.
The 9% revenue growth rate is also significantly higher than the estimate from Dec. 31, 2025, which was 7.8%.
More importantly, this revenue growth strength is broad. Across the sector level, 10 of the 11 sectors show year-over-year revenue growth:
The largest contributors to this revenue growth come from the technology, health care, communications, and industrials sectors:
This level of fundamental corporate strength directly contradicts much of the emotional headline hysteria arguing for a market collapse in the beginning of the year. To be clear, when we look at the data, we see rotation and targeted, forced liquidation, not overall market weakness.
Let’s now further unpack that supporting underlying data. Let’s start with the Big Money Index (BMI) from MoneyFlows. The BMI is a 25-day moving average of netted institutional investor activity. It’s held steady at 68%-72% this year.
This is a reading indicating strength, not a broad market top, as some would argue. When we look under the surface, it looks like digestion as leadership has shifted. It’s clear in the following four charts.
We can see the BMI over the S&P 500, which hasn’t gained any traction:
It’s a similar situation with the Nasdaq Composite Index, which is virtually flat going back to early fall:
But we can see that the Dow Jones Industrial Average has been fine as money has rotated into the companies within that index:
Similarly, the Russell 2000 has also been good as small-cap stocks have drawn inflows:
Additionally, 63% of all flows this month were buys:
Overall market weakness would flip that dynamic. We’d see a lot more selling and not much money rushing into smaller stocks – the opposite of the chart above.
Furthermore, exchange-traded funds inflows continue to be supportive, indicating the broader market uptrend remains intact:
This is especially significant since most of the ETF inflows indicate confidence in the overall U.S. equity market. Money is going to broad total market, large-cap, and high dividend yield funds:
Conversely, and maybe more importantly, most ETF outflows focus on investment grade, cryptocurrency, and thematic funds:
The fact that much of the investment grade outflows are rotating into U.S. equity inflows is also bullish. Plus, the outflows in thematic ETFs are almost exclusively concentrated within the software subsector.
It’s the exact opposite of a risk-off market.
Taking this data analysis down one level further by subsector, we can now see the full and complete picture. Buyer demand is broad across banks, manufacturing, real estate, oil and gas, chemicals, utilities and other cyclical and value areas:
This makes it clear that investors are chasing cyclical growth companies. Even contrary to popular opinion, there have been significant inflows into the semiconductor technology subsector.
There’s a line of thought around “damage taking place within the technology sector overall.” We think that’s somewhat lazy. Yes, technology has accounted for 37.6% of all outflows:
But if you just take the time to dig a little further, you find the damage is consolidated within software and internet and data services, where nearly all of overall flows within those sub sectors have been sellers:
So, what does all of this tell us?
Well, in a weak market, data would show investors fleeing the risk. That is clearly not the case. Instead, we see healthy and normal reallocation of risk and opportunity.
While the media will continue to search for a storyline, fundamentals and flow data reflect overall confidence.
* Links to third-party websites are being provided for informational purposes only. CoreCap is not affiliated with and does not endorse, authorize, or sponsor any of the listed websites or their respective sponsors. CoreCap is not responsible for the content of any third-party website or the collection or use of information regarding any websites users and/or members.
*Past performance does not guarantee future results.
*Investing involves risk and you may incur a profit or loss regardless of strategy selected.
* The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market.
Securities sold through CoreCap Investments, LLC. Advisory services offered by CoreCap Advisors, LLC. Cornerstone Financial and CoreCap are separate and unaffiliated entities.