JPMorgan: U.S. Earnings Season Revision Momentum Nearing Exhaustion
nashnova research
JPMorgan's strategy team warns that the 'fuel' behind US earnings upgrades is running out — two leading indicators are weakening in tandem, and strong results alone can no longer push stocks to new highs.
Earnings season started strong — so why hasn't the market moved?
Goldman Sachs, Bank of America, Google, and Tesla all reported solid Q2 numbers. Johnson & Johnson, ServiceNow, and others raised full-year guidance.
Yet the S&P 500 closed Wednesday still more than 1% below its all-time high, essentially flat for the month.
This means → the market is past the stage where "good earnings = higher prices." The good news was already priced in; investors need a stronger catalyst.
What does JPMorgan mean by "running on fumes"?
JPMorgan's team, led by strategist Khuram Chaudhry, wrote Thursday: "Earnings upgrades are widespread, but the revision trend suggests the fuel may be about to run out."
In plain terms = analysts are still raising forecasts, but each revision is smaller and slower — the fuel gauge is tipping downward even though the tank isn't empty yet.
The team added that the Iran conflict has shifted the inflation trajectory, complicating both short- and long-term rate expectations. Even beats-and-raises are becoming less effective as stock-price catalysts.
What are the two leading indicators flashing?
First: the PPI–CPI spread — the gap between producer-price inflation and consumer-price inflation. JPMorgan's data shows corporate revenue correlates with this spread at roughly 47%, and EPS at roughly 29%. The spread now appears to have peaked and stalled.
This means → if the spread stops widening, there is very little room for analysts to keep raising revenue and earnings estimates.
Second: the ISM orders-to-inventory ratio, which has declined for three straight months. In plain terms = new orders are growing more slowly than inventories are piling up — companies are stocking goods faster than they can sell them, a pressure signal for future revenue.
What does the peaking of "high-dispersion stocks" tell us?
JPMorgan flags that stocks with the widest analyst forecast dispersion — where the gap between the highest and lowest EPS estimates is large — have hit an inflection point and begun giving back gains accumulated over several years.
This reflects a broader shift: stocks that outperformed by riding high "expectations elasticity" during uncertain times are losing that edge.
High-risk, high-leverage names face the same pressure: the market is rotating back toward stable earners with lower leverage.
What should investors watch next?
Whether the two leading indicators — the PPI–CPI spread and the ISM orders-to-inventory ratio — stabilize or rebound in upcoming data is the key checkpoint for JPMorgan's thesis.
If both keep weakening, the earnings-upgrade cycle may be formally over, and the market will need a new driver beyond corporate results.
In plain terms = this is not a "good earnings, easy gains" environment anymore. The question has shifted from "are companies making money?" to "can they keep beating an already high bar?"
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