Callum Thomas — Chart of the Week: Earnings Euphoria
"As things stand right now it is clearly in euphoria mode." Consensus 3–5-year S&P 500 earnings-growth expectations — Wall Street analyst sentiment — have just made a new all-time high.
One-line take: A single-chart macro note — no specific tickers named (the S&P 500 appears only as the index the data is aggregated for). Thomas's chart plots the estimated annualized compound earnings-growth rate sell-side analysts expect over a 3-to-5-year horizon, aggregated for the S&P 500 — i.e. consensus long-term earnings-growth expectations, which he reads as a proxy for "Wall Street analyst sentiment." Like any sentiment gauge it mixes truth and emotion: in booms euphoria takes hold, analysts chase prices and "new-paradigm" narratives higher, and estimates overshoot even the best fundamentals; in busts pessimism dominates and estimates undershoot even the worst downturns. The gauge has just printed a new all-time high — "clearly in euphoria mode." He concedes some of the optimism is well-reasoned, but a powerful sentiment/story dynamic has swept up "even the most sober analysts."
Talking points
What the chart actually measures — consensus long-term earnings growth
- The series is the estimated annualized compound earnings-growth rate that sell-side analysts expect over a three-to-five-year horizon, aggregated for the S&P 500 — consensus long-term earnings-growth expectations.
- Thomas reframes it as "Wall Street analyst sentiment": a single number that distils how optimistic or pessimistic the sell side is about the trajectory of corporate earnings.
Why it works as a sentiment gauge — truth mixed with emotion
- "Like all good sentiment indicators there are elements of truth and elements of emotion all mixed up in it." The estimates are nominally analytical, yet they track mood as much as fundamentals.
- That dual nature is what makes the extremes informative: the number tells you less about future earnings than about how the consensus feels about them right now.
The boom/bust asymmetry — estimates overshoot at tops, undershoot at bottoms
- Boom times: euphoria takes hold, analysts raise estimates as prices punch higher, "new paradigm" narratives take over, and expectations end up overestimating even the best fundamentals.
- Doom times: pessimism reigns, analysts slash estimates as the economy stalls and prices plunge, and gloomy estimates dramatically undershoot even the worst downturns in earnings.
- So the indicator is most useful read contrarily — euphoric peaks and despairing troughs are precisely where the consensus is most likely to be wrong.
Where we are now — a new all-time high, "clearly euphoria mode"
- The gauge has just made a new all-time high: consensus long-term earnings-growth estimates are at their most optimistic on record.
- Thomas grants the bulls a point — "some of it is well-reasoned and true" — but flags that "a powerful sentiment and story dynamic" has swept up "even the most sober analysts," calling it "a good example on both fronts."
- Bottom line: consensus earnings-growth estimates have reached an all-time high — the sentiment side of the gauge is flashing euphoria.
Key points & figures extracted from the public Chart Storm post (in transcript.txt) for personal study. Not investment advice. © Chart Storm / Topdown Charts for source material.