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The S&P 500’s estimated bottom-up operating EPS was flat during the second month of Q3 results (Chart 1). With reporting essentially complete, the final Q3 figure will be roughly 1.5% below what was ultimately projected before the quarter’s announcements began. That’s a decent divergence from Q1 and Q2, which came in at 0.7% and 0.3% ahead of their respective “pre-reporting” estimates. The shrinkage in Q3 EPS is more in tune with long-term trends but also marks the end of a nice window of higher results—which is a rarity. Traditional EPS erosion is also evident in the snail trail for the anticipated outcome in Q4 .

The most notable gainer in last week’s Trump Bump 2.0 was the Russell 2000. That index’s weekly surge of +8.6% was its best since the wild pandemic gyrations of April 2020. Yet, this latest Trump-associated upswing fell short of the Russell 2000’s election-week return of +10.2% in 2016 when Trump was the clear underdog.

The S&P 500’s estimated bottom-up operating EPS shrank 2% during the first month of Q3 reporting (Chart 1). A similar, slightly larger drop in the EPS estimate was experienced in July, as results were tallied for Q2’s first month of reporting. That initial Q2 deficit was recouped over the next two months and actual results eventually ended higher than what was projected at the beginning of earnings season. To maintain this year’s strong earnings streak, where results match estimates (not common), we’ll need another “spring-back” scenario at the back end of Q3.

It’s been awhile since readers have looked to The Leuthold Group for a rosier take on the stock market than what they can get from Wall Street. But there’s a time and place for everything.

Some were unnerved this week to hear the usually cheery strategist of a major U.S. investment bank predict S&P 500 total returns for the next decade of just +3% per year. While depressing, our work does not find that forecast out of line. We estimate that if S&P 500 5-Yr. Normalized EPS grow at their 1957-to-date annualized rate of +6.3% for the next ten years, and the P/E multiple on those future EPS were to revert to its median level for the same time period (19.4x versus today’s 31.6x), the S&P 500’s annualized total return out to late 2034 would be +2.6%.