📈 The Compound CHART PACK

HAPPY CHART PACK THURSDAY, folks!

Today is the first edition of 📈 THE CHART PACK 📈, a weekly collection of charts every week tag-teamed by Chart Kid Matt and myself (who work on the same research team IRL!). Like a conversation we have on the desk, but for the whole world to see.

If you like this collaboration (or have constructive feedback), shoot me an email at [email protected]. And if you want more where this came from, subscribe to Matt’s newsletter here.

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Chart #1: Earnings call the bears’ bluff 

Chart Kid Matt: If there was one chart I could show to “cut through the noise” and articulate what is happening (fundamentally) to companies in the S&P 500, it’s this one. We are looking at S&P 500 forward 12-month, 24-month, and 36-month earnings estimates. Yes, much of this is coming from tech, but nonetheless, I’m still encouraged by these series continuing to make new all time highs.  

OptimistiCallie: This chart justifies the April bounce well. Wall Street analysts think corporate America’s largest companies are nimble enough to get through tariffs unscathed. That’s been a fair bet, with S&P 500 companies beating estimates by a healthy margin.

But I have to wonder – are earnings estimates moving higher just because Wall Street still has no idea how to model the impact of constantly changing policy? Or is this a reflection of how dominant tech’s profitability is?

*Checks data* Bloomberg sell-side estimates show that Wall Street expects all sectors to return back to year-over-year growth in 2026. I dig it.

Chart #2: Spreading the love (and profit growth)

Chart Kid Matt: Analysts expect Magnificent Seven earnings growth to stabilize over the next six quarters, but still deliver double-digit growth. The baton is being passed to the S&P 493, whose earnings are expected to accelerate into the mid double-digits by Q3 2026. The expected acceleration in S&P 493 profit growth is telling of the underlying earnings breadth in the market.

OptimistiCallie: This is what I saw when I checked the data a minute ago. It’s good news! You want every sector to be contributing to profits. I see two trends here: earnings growth leveling off for the most highly valued sector, especially as its biggest participants spend a huge chunk of cash on AI (without much proof of profits).

By the way, we haven’t seen a quarter with every sector experiencing year-over-year profit growth since 2018. A year of high expectations that investors ultimately couldn’t stomach.

Chart #3: Hang this recovery in The Louvre

Chart Kid Matt: Coming out of the vicious drawdown we had in April, the bulls want to see risk-on sector relative returns. And that’s exactly what we’re getting. Tech and communication services have had the two highest sector relative returns since the April low, while staples and health care have been the biggest laggards. Seeing cyclicals outperform and defensives lag is textbook behavior in the early stages of a new uptrend.

OptimistiCallie: If you’re a technician watching momentum and stock participation, you couldn’t be happier with this market recovery. The sector rotation has been textbook – out of defensive stocks, into cyclical and growth stocks. There’s a reason why this was the fastest S&P 500 recovery from an 18% decline in recent history (I’m talking the last seven decades). Market breadth (or the number of stocks rising versus falling) was also super strong coming out of mid-April. It looked like  a bounce back from a crisis, not a series of tricky headlines. The market’s mood changed extremely quickly.

Chart #4: Nvidia — bubble or breakout?

Chart Kid Matt: If there was one chart I could point to say we are not in a stock market bubble, it is this one. While many point to Nvidia’s eye-popping returns over the past several years as evidence the stock market is “bubbly,” it’s often overlooked that Nvidia’s forward price-earnings ratio has actually declined since 2018 at the same time that the stock went from 5 to 178. There’s only one way for the forward P/E ratio to decline while a stock goes up - earnings growth. And Nvidia is seeing lots of it.

OptimistiCallie: Same brain wave, I love whipping this stat out at parties. You can’t judge a stock by price alone! This is also a good reminder that valuation metrics like the price-earnings ratio deserve context. I wouldn’t overlook a stock with a high P/E if the E is growing. Oh yeah, and you can’t call a bubble easily. We say the b-word around here 😉

Huge thanks to Chart Kid Matt (aka Matt Cerminaro) for the charts and thoughts this week. Subscribe to his newsletter, and check out Exhibit A, the Compound’s visual storytelling platform that you need for your clients.

Thanks for reading!

Callie

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