Two and a half weeks into the current corporate earnings reporting window, the S&P 500 has stayed essentially flat, falling short of the historical pattern of gains seen during these periods, according to strategists at Deutsche Bank led by Bankim Chadha.
Historically, the index tends to appreciate by about 2% during the first four weeks of earnings season. This time, however, the market’s movement has amounted largely to retracing losses that arose from geopolitical developments, rather than delivering fresh upside.
Deutsche Bank’s review of company-level stock reactions shows an unusual dynamic. Companies that reported results above analysts’ profit expectations, on average, underperformed the S&P 500 by 0.3 percentage points on their reporting day. That outcome contrasts with the historical tendency for such companies to outperform the index by roughly 0.5 percentage points.
Meanwhile, firms that missed earnings estimates underperformed the index by 1.4 percentage points on average, which is a slightly smaller penalty than the historical underperformance of 1.6 percentage points.
Behind the muted price action, corporate fundamentals have not deteriorated. Aggregate sales among S&P 500 constituents rose 7.9% in the fourth quarter, an improvement from the 7.6% year-on-year sales growth recorded in the third quarter. At the same time, profit margins across the index hit a new record high of 14.2%, a development Deutsche Bank attributes to margin expansion concentrated among megacap growth and technology companies.
On forward-looking estimates, Deutsche Bank noted that consensus earnings projections for 2026 have held steady at $316 over the past five weeks. That consensus sits slightly below Deutsche Bank’s own forecast of $320 for 2026.
The combination of solid top-line growth, record aggregate margins, and a flat market performance creates a disconnect between corporate fundamentals and investor price reactions during this earnings season, according to the bank’s strategists. The data points underline a market in which positive sales and margin metrics are not translating into the typical positive stock moves associated with reporting periods.
Summary
Deutsche Bank strategists led by Bankim Chadha report that the S&P 500 is essentially flat two and a half weeks into earnings season, a departure from the usual 2% rise in the first four weeks. Companies beating estimates have underperformed on average, while misses have underperformed slightly less than historical norms. Despite this, index-wide sales growth accelerated to 7.9% in Q4 and aggregate profit margins set a record at 14.2%. Consensus 2026 earnings estimates remain at $316, just below Deutsche Bank’s $320 forecast.