The S&P 500's 50% Earnings Boom Comes With A Giant Asterisk

Alphabet posted a 216% EPS beat this season. Then I backed out the $6.26 in unrealized equity gains and got $2.85 against a $2.88 estimate. The index grew Q2 earnings by 50.4%, the fastest since Q2 2021. Without Alphabet and Amazon, it's 32.0%, so the two companies supplied 18.4 points of that headline. Blended net profit margin hit 16.9%, a record since FactSet began tracking in 2009. Without Alphabet and Amazon, it's 15.0%, still a record. FactSet had 2026 earnings growing 15.0% last December and 30.0% by August 7. Doubling a growth forecast in eight months is not something I see that often. Short term, I'm still bullish on the broader markets. That said, I'm considering rotating some of my SPY and IWM positions into momentum names (e.g., memory).

Let me start this piece with a fun fact. Alphabet (GOOGL) sits inside FactSet's ten biggest EPS surprises this season, a beat of roughly 216% ($9.11 vs. $2.88). In my view, that isn’t a reason to This article was written by Deep Value Investing 14.33K Followers Follow Thematic. Top down. I often find the theme before I find the stock. My philosophy is that themes are often born quiet and die loud. I try to catch them while they're still finding their voice. When the music plays, I mainly chase pockets that rhyme with growth, momentum, perception shifts, and sometimes even the most absurd narratives (mostly AI-related). When the music slows and the tape deteriorates, I don't wait around. I raise cash/rotate out, and watch for the next setup. A parabolic run may trigger a similar move. During a bull run, you won't find much common ground between the deep value crowd and me. I liked the core ideas of deep value investors, and I briefly followed that philosophy. However, it demands patience, and the AI supercycle broke whatever patience I had left. The market changed, and so did I. My style is not set in stone. I’m mostly long when the music is playing. When it stops/slows down, I may dabble with shorts via put options, although it’s not my forte. My style is highly speculative. I have a high risk tolerance that most rational investors would find alarming. I don’t have a favorite timeframe. That said, I trade mostly the mid-term and the short-term. I have a pathetic low six-digit portfolio, and I consider myself part of the mid to low end of the K-shaped economy. It sometimes drops to the five-digit range when life has other plans. I've been in the game since mid 2024, although my first dabbles with stocks (i.e., burning $100 trading accounts in a matter of days) go back to the early/mid 2010s. I have a B.Sc. in aeronautical engineering and experience as a consultant in the aerospace sector. The latter statement is not relevant to my investment style, but I thought to add it for self-indulgent purposes. I live on the wrong side of the Atlantic. The opening bell is my lunch bell. I like astrology, so I’m a follower of technical analysis (mainly trends and support/resistance/psychological levels). I also look at the fundamentals of individual names, although the theme and the macro often prevail in my decision-making. I dislike empty suits, high-level BS, deep-level BS (especially), unnecessary jargon, and self-indulgent, third-person written introductions with an air of superiority.