Now that 97% (484) of the stocks in the S&P 500 have announced their third-quarter results, here is where we stand. Revenues are up 8.2% (a 12-quarter high), while earnings are up 16.5% (a 16-quarter high), and the average earnings surprise is a whopping 9.6% (a 16-quarter high). So, revenue is running at the highest pace in three years, while earnings and earnings surprises are running at the highest pace in four years. Believe it or not, revenue and earnings are forecasted to accelerate in 2026 due to higher guidance, especially from the data center companies that have a growing order backlog.
At the Forbes cruise that I am on, there is anxiety about an AI bubble, but I am doing my best to assure investors that the unscrupulous short sellers were merely trying to ruin the party. In the end, these short sellers will be buried by strong revenue, earnings, surprises, and positive guidance. The truth of the matter is that 2026 is shaping up to be an incredible year as soon as investors realize that they are in the strongest earnings environment in the past four years.
reported on Wednesday that 32,000 private payroll jobs were eliminated in November, which was well below economists’ consensus estimate of a 10,000 gain. However, ADP revised October payrolls to a 42,000 gain after reporting a decline of 5,000, so October represented the first monthly private payroll increase since July. Naturally, due to lackluster private , the Fed has to cut key interest rates due to its unemployment mandate.
The deterioration in the manufacturing sector is another reason that the Fed has to continue to cut key . The Institute of Supply Management () announced that its manufacturing index declined to 48.2 in November, down from 48.7 in October. Any reading below 50 signals a contraction, and this was the ninth straight month that the ISM manufacturing index declined. The new orders component declined to 47.4 in November, down from 49.4 in October, while the backlog of orders component plunged to 44 in November, down sharply from 47.9 in October. One “green shoot” is that the production component rose to 51.4 in November, up from 48.2 in October. Fully 11 of the 15 manufacturing industries surveyed reported a contraction in November.
Due to (1) low crude oil prices, (2) the fact that the U.S. is importing deflation from China, and (3) weak economies around the world, robust U.S. growth is not expected to be inflationary. Furthermore, the Fed is in the midst of continuing to lower key interest rates to help further stimulate economic growth. In my opinion, 2026 will go down in history as “economic nirvana” where the U.S. will be characterized by 5% GDP growth without any significant inflation.