S&P 500 Earnings Outlook: 2026 EPS Growth Projection Still Around 14%

The following spreadsheet shows the weekly progression of S&P 500 EPS estimates (since mid-April), for 2025, 2026 and 2027 SP 500 EPS estimates.

Usually in May of every year, this blog gives readers a look at the next year’s expected EPS growth rate for the SP 500, but it was decided to wait this year given Liberation Day, and now the Federal Reserve tiff, to see what the weekly revisions indicate.

Remarkably both 2025 and 2026 SP 500 EPS are expecting 10% EPS growth in 2025 and 14% for 2026.

If this EPS growth materializes, (2025 is less in doubt than 2026), this would be the best two-year rate of growth for SP 500 earnings since 2017 and 2018’s +12% and +23% respective EPS growth from President Trump’s last term (excluding Covid or 2020 and 2021).

In 2021, SP 500 EPS grew 49% likely on the back of zero interest rates and the massive government stimulus passed by Congress in 2021.

What’s interesting for Fed watchers this week, is that SP 500 EPS grew only 1% in 2019, which happened to be the year Jay Powell started reducing the fed funds rate after pushing the fed funds rate higher (Yellen and then Jay Powell) in late 2016.

Here’s a quick history of SP 500 EPS growth:

• 2027: $344.16 (estimate) expected 13% EPS growth
• 2026: $304.59 (estimate) expected 14% EPS growth
• 2025: $267.77 (estimate) expected 10% EPS growth
• 2024: $24.73 (actual) 10% actual EPS growth
• 2023: $221.36 (actual) 1% actual EPS growth
• 2022: $218.09 (actual) 5% actual EPS growth rate
• 2021: $208.12 (actual) 49% actual EPS growth
• 2020: $139.72 (actual) -14% decline in SP 500 EPS yoy;

Source: LSEG

What readers might find fascinating is that – or this decade – 2020’s actual SP 500 EPS of $139.72 compared to 2026’s expected $304.59, results in an annualized SP 500 EPS growth rate of 13% – 14% over that 7-year period.

If you are wondering what the back of this secular bull market was built on, there’s your answer.

There is another component too that matters and that is “PE expansion / contraction”.

There’s a lot of talk about how the SP 500 will trade next week, with a 25 basis point rate cut. For me that only means the fed funds rate drops down to 4.125%, still above the 4% threshold. Ive wondered if the FOMC would reduce the fed funds rate by .375 basis points to bring the fed funds rate to 4%.

The forward 4-quarter estimate (FFQE) for the SP 500 this week was $284.02, up from $283.85 last week, for a forward PE of 23.2x to end the week of 9/12/2025.

The SP 500 “earnings yield” ended the week at 4.31%, still well down where I’d like to see at 5%, which implies a 20x PE for the SP 500.

There has only been one week in the last 11 that the SP 500 FFQE has declined sequentially.

Everything is way overbought within the SP 500. Don’t be surprised to see some selling next week. There is more hype than usual built into the FOMC meeting given the tension between the President, Treasury Secretary and Fed Chair Jay Powell.

Personally, I do think the FOMC could drop the fed funds rate 50 bp’s lower to 3.87% and it wouldn’t likely ignite inflation expectations. Rick Rieder, Blackrock’s major domo, made a very interesting comment on his monthly bond call Thursday morning, 9/11/25. Rick mentioned that while the FOMC’s inflation objective is 2%, the Fed’s goal is “price stability”. Yes, Rick is in the candidate pool for the next Fed Chairman following Jay Powell’s term so he might be playing to the so-called Washington crow a bit, but he has a point, too.

Thanks for reading.

***