The relentless upward revision of corporate earnings forecasts is beginning to look less like a sign of economic strength and more like a warning signal for equity markets.
Profit growth estimates for companies in the S&P 500 have climbed by 20% over the past six months, a pace that several market veterans now describe as unsustainable.
This rapid acceleration in expectations has fueled considerable optimism among investors, but it also sets a high bar for future performance.
When consensus estimates rise this quickly, the margin for error shrinks dramatically.
Any company that merely meets, rather than beats, these inflated forecasts risks being punished by the market.
According to MarketWatch, this earnings exuberance may be a problem for the broader stock market.