Management Confidence Is Sending a Signal

• 72 S&P 500 Index member companies issued positive 3Q earnings guidance.

• That’s above the 44.8 average based on data going back to 2018.

• Above average guidance tends to align with solid forward returns.

Occasionally, the market hands you a tell, and right now corporate guidance is flashing bright green…

Yesterday, we looked past the constant noise of the financial media to focus on what truly drives long-term market returns: forward earnings power. We discussed investing for the road ahead. Right now, the structural shift driven by the artificial intelligence capital-expenditure cycle is boosting corporate margins and lifting the broader economy. Improving operating efficiencies means overall S&P 500 Index expectations need to move up.

Wall Street analysts are already adjusting to this reality, revising calendar-year 2027 earnings estimates from $358 to $417 since the start of the year. If we apply a 20x fair-value multiple (five-year average) to those figures, the math points to a year-end S&P 500 target of 8,340, nearly 9% above current levels.

While diving into the data for that analysis, the chart above caught my eye. According to financial data provider FactSet, the number of S&P 500 member companies raising their financial guidance for the third quarter increased to 72 compared to 63 in the second quarter. In fact, corporate management teams are so confident in their momentum that positive guidance revisions just made a new high.

Naturally, I wanted to see how the stock market typically responds to similar environments in the past. Based on the historical data I surveyed, equities show a clear pattern: stocks tend to perform well both during and after these quarterly release cycles. This cluster of rising corporate guidance should act as a tailwind for a steady rally in the S&P 500.

But don’t take my word for it, let’s look at what the data’s telling us…

After compiling the data for the number of companies issuing positive forward guidance, I figured the best place to start was with the average. Based on the table, there are typically 45, or almost 10%, S&P 500 companies issuing positive forward guidance when they report results. Consequently, I used that as a dividing line for above- or below-average quarters.

Once I had the marker established, I calculated how many times quarterly guidance has come in above the average based on data going back to 2018. In the following table I have the instances and the quarters listed…\

My next move was to calculate the results for those quarters (first three months) as well as the 6-, 12-, and 24-month returns. Now given that the quarterly guidance is given for the quarter looking forward, that means the numbers will come out after that period is complete. So, the starting date for the performance measurement begins at the end of the quarter, just before the results are published. Based on what I found, the numbers are impressive…

The above table tracks S&P 500 performance on a price basis. As you can see, when forward guidance is above average, those quarterly reporting seasons tend to see the stock market rise by 4.4% on average. Further out, the index average improves by 11.3% after a one-year period, and by 17.1% after a two-year period. In addition, each window has a high success rate.

Taken together, the message from the data is unmistakable: when corporate America leans forward with above‑average guidance, the market doesn’t just drift higher, it tends to build durable momentum. The quarterly lift, the strong one‑year follow‑through, and the high success rates across each window all point to the same conclusion. We’re in an environment where earnings strength, management confidence, and historical precedent are aligned. That combination doesn’t guarantee outcomes, but it does give investors a powerful, evidence‑based foundation for staying constructive on the S&P 500 as this cycle continues to unfold.

Five Stories Moving the Market:

Iranian officials have privately expressed pessimism about reaching a deal to end hostilities with Washington and reopen the Strait of Hormuz before U.S. midterm elections in November; Iran and the US made little progress during talks in New York on the sidelines of the United Nations General Assembly last week and the Islamic Republic believes there’s a high chance of the conflict escalating after the November 3 vote – Bloomberg. (Why you should care – a loss of leverage would hurt Tehran’s ability to negotiate the best possible deal)

Iran’s ability to choke off oil flowing through the Strait of Hormuz—and use that as leverage in talks with the U.S.—is breaking down, raising the risk it will resort to military escalation to bolster its position; the erosion of Iran’s position comes as the U.S. Navy and Gulf oil producers have become better at fending off or evading Iranian attacks, allowing more tankers to cross the strait – WSJ. (Why you should care – Iran losing its grip on the Strait of Hormuz is counter to the media narrative investors have been digesting of late)

Anthropic is making a massive bet that AI will ​transform the global economy more profoundly than industrialization, electricity and the internet, according to its IPO prospectus; the company reported a net loss of $42 billion in 2025, and plans to spend $518 billion on cloud, computing and infrastructure obligations in coming years – Reuters. (Why you should care – revenue has increased over ten fold from 2024 to 2025)

Saudi Arabia has restored about half the flows through its cross-country oil pipeline bypassing the Strait of Hormuz, after drone strikes halted the key export route earlier this month – Bloomberg. (Why you should care – Saudi Arabia is now exporting barrels of oil via the Strait of Hormuz as well as the Red Sea)

Advanced Micro Devices said it would acquire Fei-Fei Li's AI startup, World Labs, in an all-stock deal valued at $8.2 billion, a ​move that would give the chipmaker a foothold in research on ​physical AI systems that can understand and simulate the world – Reuters. (Why you should care – physical AI will be the next catalyst for increased compute capacity)

Economic Calendar:

Earnings: CCL

Reserve Bank of Australia Monetary Policy Announcement (12:30 a.m.)

RBA's Bullock (Governor) Press Conference (1:30 a.m.)

Japan - Leading Economic Index for July (1 a.m.)

Spain - CPI for September (3 a.m.)

ECB's Cipollone (Executive Board Member) Speaks (3 a.m.)

U.K. - Mortgage Approvals and Consumer Credit for August (4:30 a.m.)

Eurozone - Economic Sentiment for September (5 a.m.)

Eurozone - Consumer Confidence for September (5 a.m.)

U.S. - Redbook Weekly Retail Sales (8:55 a.m.)

U.S. - S&P/Case-Shiller Home Price Index for July (9 a.m.)

U.S. - FHFA House Price Index for July (9 a.m.)

U.S. - JOLTS Job Openings for August (10 a.m.)

U.S. - Consumer Confidence for September (10 a.m.)

U.S. - Dallas Fed Services Index for September (10:30 a.m.)

Fed's Bowman (Board, Vice Chair for Supervision) Speaks (11 a.m.)

BoE's Taylor (MPC Member) Speaks (11:30 a.m.)

Treasury Auctions $54 Billion in 52-Week Bills (11:30 a.m.)

Treasury Auctions $85 Billion in 6-Week Bills (11:30 a.m.)

Fed's Barr (Board, Voter) Speaks (12:40 p.m.)

Fed's Goolsbee (Chicago, Non-Voter) Speaks (1 p.m.)

Fed's Cook (Board, Voter) Speaks (1:25 p.m.)

Fed's Musalem (St. Louis, Non-Voter) Speaks (1:30 p.m.)

Fed's Williams (New York, Voter) Speaks (2 p.m.)

Fed's Waller (Board, Voter) Speaks (3 p.m.)

U.S. - American Petroleum Institute Crude Oil Inventory Data (4:30 p.m.)

Japan - Industrial Production for August (7:50 p.m.)

Japan - Retail Sales for August (7:50 p.m.)

Australia - CPI for August (9:30 p.m.)

China - NBS Manufacturing, Non-Manufacturing, Composite PMI for September (9:30 p.m.)

China – Caixin China Manufacturing, Services, Composite PMI for September (9:45 p.m.)