Insights 
VT 
The Q3 earnings season is progressing, with nearly 80 companies poised to report, including 35 S&P 500 members. Notably, big banks like JPMorgan and Bank of America take centre stage this week, alongside other significant players such as Johnson & Johnson and United Airlines.
Earnings growth for Q3 is anticipated at 5.7% on 6.1% higher revenues year-over-year. This contrasts with expectations at the start of Q3 in July, which projected 4.2% earnings growth. Historically, actual earnings often surpass projections; however, if earnings growth remains at 5.7%, it would mark the slowest pace since Q3 2023.
Revisions And Trends
Revisions have improved for 6 out of the 16 Zacks sectors, particularly in Tech, Finance, and Energy. In contrast, sectors like Basic Materials and Consumer Staples face declines. Finance and Tech’s positive revisions have buoyed overall trends, as these sectors account for a significant portion of total earnings.
The positive revisions trend extends into 2025 Q4, affecting Finance, Tech, Energy, and others. Upcoming results from JPMorgan and Bank of America are pivotal. JPMorgan’s earnings are expected to grow by 10.5% on 5.2% higher revenues. Meanwhile, Bank of America anticipates a 16.1% growth in earnings with a 7% revenue increase.
We’re heading into this Q3 earnings season with a positive setup, as analysts have been raising their forecasts for months. The recent September inflation report, which came in at a manageable 2.8%, further supports a stable market environment. This reduces the chances of another surprise interest rate hike from the Federal Reserve.
With S&P 500 earnings expected to grow 5.7%, we see this as a floor, since companies historically beat these initial expectations. Given this, we should consider bullish strategies on broad market indices like the SPX. The CBOE Volatility Index (VIX) is currently near 16, suggesting low fear but also potentially cheap protection if we expect surprises.
Opportunities And Strategy
The spotlight this week is on the big banks, which will validate the positive outlook for the entire Finance sector. JPMorgan reports tomorrow, and its results will set the tone for the market. We’ll be watching to see if they can justify the positive estimate revisions that have pushed their expected earnings per share up over 7% in the last three months.
We should look at the clear divide between sectors for potential pairs trades. While Tech and Finance have seen strong upward revisions, sectors like Basic Materials and Consumer Staples have lagged significantly. This suggests opportunities in buying call options on leaders in the XLK and XLF ETFs while simultaneously considering put options on laggards in XLB and XLP.
The positive revisions trend extends into the fourth quarter, which could support the market through the end of the year. The slight pullback in the 10-year Treasury yield to around 4.3% also provides a better backdrop for growth-oriented sectors. We will be looking for company guidance this week to confirm that this positive momentum is likely to continue into 2026.
