View from the Observation Deck
 
Today's charts are intended to give investors a visual perspective on historical and estimated earnings performance for the S&P 500 Index (“LargeCap Index”), the S&P MidCap 400 Index (“MidCap Index”), and the S&P SmallCap 600 Index (“SmallCap Index”). The charts track each Index’s quarterly earnings per share (EPS) from Q1’24 through Q4’25. They also include Bloomberg’s estimated EPS for Q1’26.

As the chart reveals, two of the three indices saw EPS increase year-over-year (y-o-y) in Q4’25.

Year-over-year EPS increased by 12.1% (LargeCap Index) and 7.3% (SmallCap Index) in Q4’25.

By contrast, MidCap Index EPS are estimated to decline by 4.7% y-o-y during the quarter. 

Looking ahead, estimated 2026 calendar year EPS for each Index were as follows (not in the charts): S&P 500 Index ($314.39); S&P MidCap 400 Index ($207.66); S&P SmallCap 600 Index ($101.66). 

Year-over-year earnings growth rates implied by these estimates are as follows: S&P 500 Index (+16.8%); S&P MidCap 400 Index (+15.2%); S&P SmallCap 600 Index (+16.1%). Calendar year 2026 estimates are particularly notable for the MidCap and SmallCap Indices, which are estimated to see EPS decline by 1.8% and 8.8% y-o-y, respectively, in Q1’26. In our view, this may imply that analysts expect an increasingly fruitful climate among small and mid-sized companies as the year unfolds. 

Takeaway: Our last post provided insight into the earnings and revenue growth rate estimates of the S&P 500 Index and its sectors. Today’s discussion expands our view to include the earnings climate for the mid and small-cap segments of the market. We believe that corporate earnings drive the direction of stock prices over time, especially when the major indices are trading at or near record highs. Near-term data is mixed, in our opinion, with MidCap and SmallCap Index EPS estimated to decline by 1.8% and 8.8%, respectively, in Q1’26. That said, the EPS for each of these Indices are estimated to reach record highs in 2026. As always, these are estimates and are subject to change (and have changed since our last post). We will continue to report back as developments warrant.

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 companies used to measure large-cap U.S. stock market performance. The S&P MidCap 400 Index is a capitalization-weighted index that tracks the mid-range sector of the U.S. stock market. The S&P SmallCap 600 Index is a capitalization-weighted index that tracks U.S. stocks with a small market capitalization.

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View from the Observation Deck

Today’s post provides an update to 2025 and 2026 earnings and revenue growth rate estimates for the S&P 500 Index (“Index”) and each of its eleven sectors. The Index closed at 6,838 on 2/23/26, below its all-time high of 6,979 (1/27/26), and up a staggering 38.7% (total return) from its most recent low of 4,983 (4/8/25). For comparison, from 1928-2025 (98 years) the Index posted an average annual total return of 9.8%.

Earnings growth rate estimates marched higher for both 2025 and 2026 since our last post on this topic.

The Index’s year-over-year (y-o-y) earnings growth rate estimates were observed at 13.3% and 13.7% in 2025 and 2026, respectively, on 2/23/26. Estimates for both years have increased since our last post when they stood at 11.2% (2025) and 12.8% (2026). Click here to view that post. Just two sectors are estimated to see earnings decline y-o-y in 2025: Energy (-8.3%) and Consumer Staples (-1.7%). In 2026, however, earnings are estimated to increase for each of the Index’s 11 sectors, with Information Technology and Materials leading the way.

Revenue growth rate estimates remain favorable as well. In fact, observations for both 2025 and 2026 also increased since our last post on this topic.

As of 2/23/26, the Index’s 2025 estimated y-o-y revenue growth rate stood at 7.2%, up from 6.3% on 10/31/25. Ten of the Index’s eleven sectors reflect positive y-o-y revenue growth rate estimates in 2025, with eight of them estimated to surpass 5.0% (up from seven in October). Information Technology commands the highest estimated revenue growth rates at 17.4% and 20.5% in 2025 and 2026, respectively. 

Takeaway: Equity market returns remain exceptional. The Index rewarded investors with average annual total returns of 21.1% over the three-year period ended 2/23/26. For comparison, the Index averaged an annual total return of 9.8% from 1928 to 2025. Index earnings and revenue growth rates remain persistently positive, with estimates for 2025 and 2026 increasing since our last post. We find calendar year 2026 estimates particularly notable as they reflect difficult comparisons for most sectors. As revealed above, Information Technology and Materials stand out among their peers for 2026 earnings growth rate estimates. Time will ultimately reveal the accuracy of these estimates, but we maintain that higher revenues could be the best catalyst for earnings growth, which in turn, may provide ballast to lofty multiples.

This chart is for illustrative purposes only and not indicative of any actual investment. There can be no assurance that any of the projections cited will occur. The illustration excludes the effects of taxes and brokerage commissions or other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 companies used to measure large-cap U.S. stock market performance. The respective S&P 500 Sector Indices are capitalization-weighted and comprised of S&P 500 constituents representing a specific sector.

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View from the Observation Deck  

In our last blog post (click here for "S&P 500 Index Geographic Revenue"), we provided a geographic breakdown of the revenue streams of the S&P 500 Index (“Index”). While a myriad of factors affect market performance and returns, we were curious as to what the data would reveal if we sorted the Index by sector. The chart above shows just that, with each sector ranked by its percentage of revenue generated outside of North America.

Information Technology, Materials, Communication Services, Energy, and Industrials have the highest exposure to revenue from outside of North America.

Of all the sectors in the Index, Energy (+22.7%), Materials (+16.3%), and Industrials (+14.3%) have the highest total returns year-to-date (YTD) through 2/20. They also happen to generate a sizeable portion of their revenue from overseas (see chart). Communication Services and Information Technology companies have not fared as well this year, shedding 0.14% and 3.42% (total returns), respectively, through 2/20.

Total returns for each of the Index’s eleven sectors are positive over the trailing 12 months ended 2/20/26.

The three top performing sectors and their total returns over the period are as follows: Industrials (30.3%); Communication Services (24.9%); and Energy (23.4%). The three worst performing sectors and their total returns were: Real Estate (6.9%); Financials (3.5%); and Consumer Discretionary (3.2%). For comparison, the Index posted a total return of 14.4% over the period. 

Takeaway: Market breadth has improved this year, with a greater share of the Index’s constituents outperforming the Index itself through 2/20/26 than over the same period in 2025. Companies generating significant overseas revenues are among the top performers (Energy, Materials, and Industrials). Two notable outliers are the Communication Services and Information Technology Indices. Despite generating a significant share of their revenue from overseas, these two sectors shed -0.14% and -3.42% (total returns) YTD through 2/20. As we noted in a recent discussion (S&P 500 Index Sector Prices vs. All-Time Highs), we appear to be in the early stages of a broad rotation. Technology stocks, which have been the second-best performing sector for the past two years, remain below their all-time high from October 2025. By contrast, Materials, Communication Services, Energy, Industrials, Utilities, and Staples each set their all-time highs in February 2026. While we cannot know what the future holds, we expect overseas revenue streams to have a positive impact on the near-term performance of U.S. companies.

This chart is for illustrative purposes only and not indicative of any actual investment. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 companies used to measure large-cap U.S. stock market performance, while the S&P sector indices are capitalization-weighted and comprised of S&P 500 constituents representing a specific sector.

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View from the Observation Deck  

International equities have been front and center in many of our conversations recently. Given their relative performance, there is little wonder as to why. The MSCI World (Ex U.S.) Index produced a 32.7% total return in 2025 compared to 17.9% for the S&P 500 Index (“Index”); the first time the MSCI World Index outperformed the Index since 2022 (when both were negative). Investors have taken notice, especially given the international market’s comparatively low valuations, recent declines in the U.S. dollar, and increasingly expansionary economic policies from several major global economies. In today’s discussion, we break down the Index’s revenues by geography and investigate the potential impact of international tailwinds on the broader U.S. equity market.

The 100 largest public U.S. corporations account for an outsized share of the Index’s total revenues.

As the first pie chart shows, the 100 largest U.S. companies account for nearly 55% ($10.12 trillion of $18.54 trillion) of the Index’s total revenue. Additionally, nearly 33% of those revenues are sourced outside of North America (right-side chart). 

In a break from long-term trends, international equities significantly outperformed their U.S. counterparts last year.

International equities, as measured by the MSCI World (ex U.S.) Index, posted average annual total returns of 9.2% over the 10-year period ended 12/31/25. For comparison, average annual total returns for the Index were 14.8% over the time frame. As mentioned in the opening paragraph, the MSCI World (ex U.S.) significantly outperformed the Index in 2025. This trend persisted into 2026. The MSCI World (ex U.S.) Index posted a total return of 8.3% compared to the S&P 500 Index’s 0.7% year-to-date through 2/18.

Global GDP growth is estimated to outpace U.S. GDP growth over the near-term. 

In its January 2026 edition of the World Economic Outlook, the International Monetary Fund (IMF) projected that U.S. GDP is expected to increase by 2.4% and 2.0% in 2026 and 2027, respectively. Comparatively, the IMF forecasts that total world GDP will increase by 3.3% and 3.2%, respectively, during those years.

Takeaway: International equities enjoyed their best performance since 2009 last year, driven by attractive valuations, a weakening U.S. dollar, and a favorable global economic outlook. The trend has continued so far in 2026, with the MSCI World (ex U.S.) Index increasing by 8.3% through 2/18. That said, several of the factors driving international equity performance appear to be benefitting U.S. companies as well. American companies with comparatively large non-U.S. revenue exposure are boasting significantly higher Q4’25 y-o-y earnings growth. FactSet reported that the Q4’25 blended y-o-y earnings growth rate for companies generating more than 50% of sales outside the U.S. stood at 17.7% on February 9, 2026. For comparison, the Q4’25 y-o-y earnings growth rate for companies generating 50% or more of sales inside the U.S. stood at 10.0%. As we see it, each of these earnings growth rates reflect strong U.S. corporate performance, but companies with a larger share of international sales exposure are clearly being rewarded.

This chart is for illustrative purposes only and not indicative of any actual investment. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 companies used to measure large-cap U.S. stock market performance. The MSCI ACWI ex USA Index captures large and mid cap representation across 22 of 23 Developed Markets countries (excluding the US) and 24 Emerging Markets countries.

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View from the Observation Deck

While many have predicted that petroleum usage will decline over the long-term, global oil demand remains resilient, increasing by 1.9% and 0.8% in 2023 and 2024, respectively, according to the International Energy Agency (IEA). That said, the IEA reported that oil accounted for less than 30% of total energy demand for the first time ever in 2024, suggesting a potential long-term shift in global energy supply may be underway. Today’s post contrasts the price per barrel for West Texas Intermediate (WTI) crude oil to U.S. crude oil production, measured in thousands of barrels per day (b/d), on a weekly basis. We begin the chart on 3/4/22, several days before oil’s most recent peak which occurred on 3/8/22.

• The price of WTI crude oil stood at $62.89 per barrel at the close of trading on 2/13/26, down 45.6% from its closing price of $115.68 on 3/4/22 (start of chart), according to data from Bloomberg.
  
  
• The average daily price of crude oil was $77.22 per barrel during the period captured in the chart. The highest and lowest daily closing prices were $123.70 and $55.27 per barrel on 3/8/22 and 12/16/25, respectively.
  
  
• For comparative purposes, the S&P 500 Energy and S&P 500 Indices posted average annual total returns of 13.5% and 14.4%, respectively over the same time frame. The top-performing energy subsector, of which there are five, was the S&P 500 Oil & Gas Refining and Marketing subsector, with an average annual total return of 26.9%.
  
  
• U.S. oil production increased from 11.6 million b/d on 3/4/22 to 13.7 million b/d as of 2/6/26, according to data from the U.S. Department of Energy.

Takeaway: The price of WTI crude oil stood at $62.89 per barrel on 2/13/26, 49.2% below its most recent high of $123.70 which occurred on 3/8/22, just after Russia’s invasion of Ukraine. While today’s chart reflects a persistent decline, oil’s price has rebounded of late, increasing by 9.5% so far in 2026 (through 2/13). We discussed this topic last week (click here for "Drilling Into Energy Stocks"), citing geopolitical instability in the Middle East and increasing global demand as catalysts for the Energy sector’s blazing start to the year. OPEC+ nations are expected to increase supply as we head into the summer months, which could dampen short-term price expectations. That said, this year’s price outlook is heavily dependent on demand, which continues its march higher. OPEC+ recently estimated demand for its crude will increase by 600,000 barrels per day in 2026.

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 companies used to measure large-cap U.S. stock market performance. The S&P 500 Energy Index is a capitalization-weighted index comprised of 500 stocks representing the energy sector. The S&P 500 Energy Index is comprised of five subsectors.

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View from the Observation Deck
Persistent earnings growth, continued developments in Artificial Intelligence, and strengthening economic data propelled the S&P 500 Index (“Index”) to an all-time high of 6,978.60 on 1/27/2026. Notably, the sectors we have grown accustomed to seeing as top performers (Communication Services and Technology) have largely sat out this year’s rally. We discussed our view on the catalysts behind this rotation in several recent pieces. Click here for one such insight. Given this trend, we thought a deeper dive into where each of the Index’s sectors sit relative to their all-time highs was warranted.

• Ten of the 11 sectors that comprise the Index were within ten percentage points of their all-time highs on 2/10/26, with eight of those ten having reached record highs in 2026.
• Excluding Materials and Industrials, which set their all-time highs on the day we pulled this dataset, Energy was closest to its record high (-0.08%), which was set just one day prior (2/9/26). Real Estate was furthest (-16.44%) from its all-time high which was attained on 12/31/2021.
  
  
• Energy, Materials, Consumer Staples, and Industrials are off to a phenomenal start this year, exhibiting price returns of 20.22%, 15.54%, 12.32%, and 12.11%, respectively, through 2/10. 
  
  
• Communication Services and Technology, which were the two top performing sectors in 2025, saw respective year-to-date (YTD) price returns of 1.03% and -2.06% through 2/10.
  
  
• The Index’s breadth has expanded meaningfully in 2026, with 330 stocks outperforming the broader Index YTD through 2/10, compared to just 253 over the same period last year.
  
  
• A Bloomberg survey of 22 equity strategists found that their average year-end price target for the S&P 500 Index was 7,561 as of 1/21/26. The highest current estimate was 8,100, while the lowest was 7,000.

Takeaway: Equities are off to a strong start in 2026, with the broader Index reaching a record high in January. Seven of the 11 sectors that comprise the Index are positive YTD through 2/10, with four of them already boasting double-digit returns (see the third bullet point above). From our perspective, we could be in the nascent stages of a broad rotation. As the chart reveals, the two sectors that have led the Index’s multi-year upward trajectory (Communication Services and Technology) currently lie 4.73% and 8.21% below their all-time highs. Tellingly, the Technology sector has been unable to best its previous price record (set in October 2025), despite the broader Index’s compelling surge to nearly 7,000 at the start of the year. By contrast Materials, Industrials, Energy, and Consumer Staples each achieved their record highs at the start of February 2026. Expanding market breadth lends further support to this theory. Will the trend continue as the year drives onward? Be sure to check back regularly for updates!

This chart is for illustrative purposes only and not indicative of any actual investment. There can be no assurance that any of the projections cited will occur. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 stocks used to measure large-cap U.S. stock market performance, while the 11 major S&P 500 Sector Indices are capitalization-weighted and comprised of S&P 500 constituents representing a specific sector.   

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View from the Observation Deck

Today's post compares the performance of energy-related stocks to the broader equity market, as measured by the S&P 500 Index, over an extended period. Given global dependence on oil, natural gas, and electricity, the prices of companies in those industries are subject to a myriad of influences. Click here to view our last post on this topic.

The S&P 500 Energy Index (“Energy Index”) has been the top performer year-to-date (YTD), surging by 19.48% through 2/6.

The Energy Index’s YTD total return puts it 17.90 and 18.13 percentage points ahead of the S&P 500 Utilities Index (“Utilities Index”) and the broader S&P 500 Index, respectively. From a YTD total return perspective, the next-closest sectors are Consumer Staples (+14.21%), Materials (+12.51%), and Industrials (+11.67).

Natural gas price volatility spiked in January. 

The price of natural gas increased by a staggering 102.39% from 12/31/25 to 1/28/26 before plummeting 54.13% in the days following (1/28/26 – 2/6/26). As we see it, supply constraints resulting from winter storm “Fern” likely account for a significant portion of these wild swings. The Energy Information Administration reported that working natural gas stock declined by a record 360 billion cubic feet during the week ended 1/30/26, while natural gas consumption increased by 29% over the days the storm hit (1/23/26 – 1/26/26). 

Crude oil prices rebounded to start the year. 

WTI crude oil prices increased 13.57% to $65.21 per barrel in January before settling at $63.55 on February 6th. The increase comes on the heels of a 19.94% decline in crude oil prices in 2025. We see several catalysts behind surging crude oil prices. The first is persistent geopolitical instability in the Middle East. Just this week, U.S. vessels were urged to avoid Iranian territorial waters as they pass through the Strait of Hormuz, a waterway through which 20% of global liquid petroleum passes annually. We also note the persistent upward trend in global petroleum demand. The International Energy Agency (IEA) reported that global oil demand growth is forecast to average 930,000 barrels per day (bpd) in 2026, up from 850,000 bpd in 2025.

Takeaway: The Energy Index is off to a blazing start in 2026, increasing by 19.48% YTD through 2/6 and making it the top performer among the 11 sectors that comprise the S&P 500 Index over the period. From our perspective, geopolitical instability and rising demand for oil are significant catalysts behind the sector’s dominant performance. We find the IEA’s 2026 global oil demand estimates particularly noteworthy, as they may reflect a strengthening global economy. In Germany, for example, GDP increased by 0.2% year-over-year (y-o-y) in 2025, marking the first increase in GDP for the nation since 2022. The country’s GDP is expected to expand by 0.9% and 1.5% y-o-y in 2026 and 2027, respectively. In the U.S., GDP increased by a stunning 4.4% (annual rate) in Q3’25 - its fastest pace in two years. The Energy Index may also be benefitting from broader investor participation in recent months, which we wrote about in a recent post (click here). Will the Energy Index continue to outperform its peers this year? We will update this post with new information as warranted.

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 companies used to measure large-cap U.S. stock market performance. The S&P 500 Energy Index is a capitalization-weighted index comprised of 21 companies spanning five subsectors in the energy sector. The S&P 500 Utilities Index is a capitalization-weighted index comprised of 29 companies spanning five subsectors in the utilities sector. 

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View from the Observation Deck

For today’s post, we compare the delinquency rate on consumer loans issued by all U.S. commercial banks (“consumer delinquency rate”) to the price of the S&P 500 Consumer Discretionary Index, over time. We use data from the Board of Governors of the Federal Reserve System, retrieved from FRED, for the former set of observations. As delinquency data is released on a lagging time frame, our observations end in Q3’25.

The consumer delinquency rate eased further in Q3’25 and remains below its long-term historical average.

The consumer delinquency rate declined to 2.72% during the quarter, down from its most recent high of 2.77% (Q1’25) and below its long-term average of 3.06% (Q1’87 – Q3’25). 

Credit card delinquencies also continued their decline from recent highs, falling for the fifth consecutive quarter in Q3’25. 

The delinquency rate for credit cards issued by all insured commercial banks surged to 3.22% at the end of Q2’24, its highest level since the close of Q4’11. In Q3’25, however, the metric stood at 2.98%.

Consumer sentiment, as measured by the University of Michigan’s “Surveys of Consumers”, declined by 21.3% year-over-year in January 2026. 

This metric’s deterioration is notable, but we are not alarmed by it. Consumer sentiment may have waned, but consumer activity continues at record levels. Adobe analytics reported a record $257.8 billion was spent shopping online over the holiday shopping season (November 1 to December 31, 2025), an increase of 6.8% year-over-year. As we see it, exogenous factors, unrelated to consumer behavior are likely behind the disparity unveiled by these surveys.

Takeaway: The consumer delinquency rate stood at 2.72% at the end of Q3’25, down from 2.77% in Q2’25 and well-below its all-time high of 4.85%. Delinquency rates for credit cards, which have now fallen for five consecutive quarters, settled at 2.98% in Q3’25, down from their most recent high of 3.22% in Q2’24. Consumption continues to increase despite waning consumer sentiment. We have stated it before but welcome the opportunity to repeat this maxim: feelings are not fact. As we see it, recent survey data likely represents exogenous factors rather than consumer’s baseline economic outlooks. Notably, U.S. households control more wealth than ever before (a record $181.6 trillion in Q3’25). Given their sizeable contribution to GDP, we recognize the importance of consumer health. That said, the data above (falling delinquencies, record spending, and surging household wealth) signal to us that the U.S. consumer remains well-positioned. We will continue to monitor the delinquency rate among consumers and report on changes.

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Consumer Discretionary Index is an unmanaged index which includes the stocks in the consumer discretionary sector of the S&P 500 Index. The S&P 500 Index is a capitalization-weighted index comprised of 500 stocks used to measure large-cap U.S. stock market performance. Consumer delinquency data is seasonally adjusted.

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View from the Observation Deck

Today’s chart offers a visual comparison of trends in money market fund assets vs. the federal funds target rate (upper bound), over time. As it reveals, investors tend to utilize money market funds during times of turmoil such as the financial crisis in 2008 – 2009 and the COVID-19 pandemic of 2020. Recently, however, investors have been piling cash into money market accounts (see chart) despite compelling returns in the U.S. equity markets and declining interest rates. A note about the chart: we use the federal funds target rate (upper bound) as a proxy for short-term interest rates, such as those offered by taxable money market funds and other savings vehicles. We believe this proxy may offer insight into the potential effect of short-term rates on investor behavior.

• Net assets invested in U.S. money market funds totaled $7.71 trillion on 1/28/26 (most recent weekly data), an increase of 12.2% from $6.87 trillion on 1/29/25. For comparison, the S&P 500 Index’s total return was 17.0% over the same period.
  
  
• Since September 2024, the Federal Reserve (“Fed”) has announced six reductions to its federal funds target rate (upper bound), lowering it from 5.50% to 3.75% where it currently sits. Money market investors appear unfazed by these reductions, adding $1.41 trillion in assets to the category between 9/18/24 (date the first cut was announced) and 1/28/26.
  
  
• Futures markets suggest additional interest rate cuts in 2026. The implied year end federal funds target rate stood at 3.11% on 1/30/26.
  
  
• The S&P 500 Index soared by 40.6% (total return) since its most recent low (4/8/25 - 1/30/26). 

Takeaway: As today’s chart reveals, money market fund assets remain relatively stable during periods of comparatively low interest rates, while inflows often occur as interest rate policy becomes increasingly restrictive. While this relationship generally holds, periods of heightened economic volatility can have the opposite effect, as evidenced by the years spanning the COVID-19 pandemic (2020 – 2022). Since then, investors have continued directing capital into money market securities despite easing monetary policy. Total assets invested in money market funds surged by $1.41 trillion between 9/18/24 and 1/28/26, while the federal funds target rate (upper bound) declined by 175 basis points. In our view, an overly myopic focus on the potential impact of tariffs and global politics may offer insight into this behavior. The opportunity cost has been significant, to say the least. While money market funds offer principal stability and income, their total return has lagged the S&P 500 Index, which surged by 40.6% (total return) since its most recent low on 4/8/25. It remains our view that an allocation to equities will generate a higher return on capital than cash over time.

This chart is for illustrative purposes only and not indicative of any actual investment. Investors cannot invest directly in an index. The S&P 500 Index is a capitalization-weighted index comprised of 500 companies used to measure large-cap U.S. stock market performance.

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View from the Observation Deck

Today’s chart offers a study on the annual earnings per share (EPS) of four prominent U.S. equity indices over the 13-year period ended December 2025. Our data set includes the S&P 500, S&P 500 Equal Weight (“Equal Weight Index”), S&P Midcap 400 (“Midcap Index”), and S&P Smallcap 600 (“Smallcap Index”) Indices, with initial observations normalized to a factor of “100”.

Since 2012, the S&P 500 Index’s EPS growth has languished behind its peers.

This point is highly relevant, especially given the S&P 500 Index’s performance advantage over the time frame. Constituents in the Smallcap Index saw the lowest average annual total returns, despite the largest increase in normalized EPS over the period. Below are the average annual total returns for these indices (December 2012 – December 2025):

S&P 500 Index: 14.87%
S&P 500 Equal Weight Index: 12.45%
S&P Midcap 400 Index: 11.15%
S&P Smallcap 600 Index: 10.61%

Resurgent earnings among SMID caps hint at potential opportunity ahead.

In 2022, EPS for the Midcap and Smallcap Indices peaked at 193.81 and 90.87, respectively, before declining in 2023 and 2024 (the Midcap Index declined again in 2025). Analyst estimates call for a dramatic turnaround in 2026, with EPS estimated to surge to record levels by year’s-end. 2026 calendar year EPS estimates stood at 209.47 and 99.10 for the Midcap and Smallcap Indices, respectively, as of December 31, 2025, representing increases of 19.6% and 15.4% year-over-year. For comparison, earnings were estimated to increase by 14.9% for the S&P 500 Index and 10.4% for the Equal Weight Index as of the same date.

Persistent outperformance of the market-cap weighted S&P 500 Index would be unusual from a historical standpoint. 

The leading indices from December 2000 to December 2025 (see below) are nearly the inverse of those above, with the S&P 500 Index coming in last while MID caps took the lead. Average annual returns over the period were as follows:

S&P 500 Index: 8.81%
S&P 500 Equal Weight Index: 8.95%
S&P Midcap 400 Index: 9.25%
S&P Smallcap 600 Index: 9.23%

Takeaway: We recently wrote about the declining share of SMID cap stocks within the S&P 1500 Index (click here to read our thoughts). Today’s discussion serves to build on that theme by highlighting SMID caps’ persistent EPS growth over time. Notably, the S&P 500 Index has seen the highest total return over the period in today’s chart, despite having the lowest normalized EPS growth. This is not to say that the total returns we’ve seen are not warranted. Most investors are well-aware of the many ways AI could forge new paradigms across numerous industries. That said, we remain steadfast in our belief that corporate earnings drive the direction of stock prices over time. Given the combination of record high earnings estimates and unusually weak relative performance, we believe investors could benefit by broadening their equity holdings to include SMID cap equities. Several notes of caution: earnings estimates are just that – estimates which can change at a moment’s notice. Additionally, there is evidence that many small cap companies operate unprofitable businesses. Data from Capital IQ reveals that more than 20% of companies that comprise the Smallcap Index were unprofitable in 2025. While there are a myriad of ETFs and mutual funds focused on purchasing companies in these spaces, their constituent selection methodology could contribute meaningfully to returns, in our opinion.

This chart is for illustrative purposes only and not indicative of any actual investment. There can be no assurance that any of the projections cited will occur. The illustration excludes the effects of taxes and brokerage commissions or other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 1500 Index is a broad-based capitalization-weighted index of 1500 U.S. companies and is comprised of the S&P 500, S&P 400, and S&P 600 Indices. The S&P 500 Index is an unmanaged index of 500 stocks used to measure large-cap U.S. stock market performance. The S&P Midcap 400 Index is a capitalization-weighted index which measures the performance of the mid-range sector of the U.S. stock market. The S&P Smallcap 600 Index is a capitalization-weighted index that measures the performance of selected U.S. stocks with a small market capitalization. The S&P 500 Equal Weight Index is the equal-weight version of the S&P 500 Index. 

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