I. FEMO in Q3
We have spent much of the past few months marveling at Corporate America's Fabulous Earnings Momentum (FEMO). S&P 500 earnings per share growth approached 30% y/y in Q1 and accelerated to more than 50% in Q2, although unusually large mark-to-market investment gains boosted both figures. Even excluding those gains, earnings grew roughly 20% and 25%, respectively. Q2 also marked the fifth consecutive quarter with record earnings.
Q3 is shaping up to be another blockbuster quarter. As Joe reported this week, industry analysts' consensus forecast for Q3-2026 S&P 500 EPS growth started the quarter at an already remarkable 27.6% y/y. Rather than declining as it typically does during the quarter, it climbed 3.0 ppts to 30.6%. The level of expected Q3 EPS rose 2.2% over the quarter, ranking as the 12th-largest upward revision in the 130 quarters since Q2-1994. That's no small feat!
Better yet, FEMO is broadening across Corporate America. Analysts expect all 11 S&P 500 sectors to deliver positive y/y growth in both revenues and earnings. Only once before, in Q2-2021, has such a perfect sweep occurred in the 25 years we've tracked the data. Overall, S&P 500 revenues are expected to grow 11.6% y/y, compared with earnings growth of 30.6% (chart).
