"You can't sit on the lid of progress. If you do, you will be blown to pieces." - Henry Kaiser
We’re now past the peak of earnings season, and it’s worth re-iterating just how strong the numbers have been this quarter. Along with strong results versus expectations, companies are raising their expectations on future growth at one of the highest clips of the past 25 years. As shown below, 14.2% of companies have raised guidance this season, which is the second highest reading of the last 20 years behind only the surge coming out of COVID.
While it’s great to see companies so positive on the future, any time we see extremes in expectations, it’s worth remembering that extremes tend to be followed by reversion. A bar set this high leaves less room for companies to clear it in the quarters ahead, raising the risk of disappointment if growth merely normalizes rather than continues to accelerate.
When we looked at our ETF matrix over the weekend, we noticed that the US stock market is now more overbought than any other asset class:
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