Corporate America's report card

There’s a chill in the air, football is on TV, and soon Skelly will be gracing every lawn in town. You know what that means: Corporate earnings season is kicking off.

Just like any classic annual tradition, there’s a whole lot of anticipation for what this earnings season could bring. But this quarter is set to be especially high-stakes, given that investors, analysts, and executives are still flying blind without solid new macro data.

“Earnings results will take on even greater prominence than usual for markets during the US government shutdown,” explained COO of Mortgage Capital Management Matt Gabbard in a note this week. “The longer the federal stoppage drags on, the more clouded the picture of the economy will become for investors as key data releases dry up, making it hard to divine the path of interest rates.”

No pressure!

The bulls are still bulling

Analysts see plenty of reason to go into this earnings season optimistic. After all, the US has avoided the worst of the economic downturn fears (so far), the AI spending boom fueling the entire economy is still going strong (despite concerns the circular trade could implode), and the past few quarters have been marked by explosive growth: The S&P 500 climbed 8% during Q3, while the Nasdaq surged 11%.

That’s why Wall Street is expecting 8% year over year earnings growth for the S&P 500, though Deutsche Bank thinks it will be more like 10.7%. A slew of analysts, including Ed Yardeni of Yardeni Research and Evercore ISI’s Julian Emanuel, have upped their S&P 500 price targets in preparation for the earnings deluge.

Can C’s still get degrees?

But there’s a palpable anxiety underneath Wall Street’s celebratory tone. After all, even while the economy has managed to defeat the “R word” allegations, the labor market and consumer spending remain on shaky ground. And we still have yet to see the ultimate impact of President Trump’s tariffs on a range of sectors.

Not to mention the obvious weakness in the economy: While AI is flying high now, tech could tank the entire market if a few key Silicon Valley favorites miss expectations. Over the past few quarters, investors have only raised the bar for tech favorites like Nvidia and the rest of the Mag 7, grading them on a harsh curve.

So if they’re not on their A game, it could be an immediate F.—LB