In this post I wanted to bring up a couple topics that I think are noteworthy investors and those watching the US economy.

1 – S&P 500 earnings for Q3 – Analysts are now predicting that Q3 earnings for S&P 500 companies will be positive! To kick off earnings season analysts were expecting a 0.7% drop in earnings. This number has been revised to an increase of 0.2% (click here to read the recent story over at Reuters). I know 0.2% is pathetic but it would end 3 consecutive quarters of declining earnings. This would be a positive change and very well could give some ammo to the bulls for stocks in the fourth quarter.

Also analysts are expecting earnings and revenue to increase in Q3 which would be the first time since 2014.

We talk a lot about how estimates have been consistently lowered before earnings are released and how this can trick the market into thinking things are better than they really are. Earnings per share data can be skewed because of share buybacks and “creative accounting” practices but overall if companies can start posting consistent earnings and revenue growth quarter after quarter I think we need to take note.

So far only 52 S&P 500 companies have released earnings so there is still a lot to prove. I am only saying that we need to remove any biases in regards to the market and watch the rest of the earnings roll in. If we close out earnings season in the positive (growth) then this could push the US equity markets higher into the end of the year.

2 – GDPNow significant decline – All you need to do is look at the GDPNow chart below…

What a pullback! Throughout the whole projection time frame, that started on August 1st, the GDP estimate has been lowered. Currently projecting 1.9% growth it is reasonable to assume the trend lower will continue before the actual GDP is released. This will further drive home the fact that we are in a slow growth economy at best! The only thing I can say on the flip side, is anyone surprised…

All I wanted to do in this post is bring up 2 factors that investor will be considering when investing. I understand that my conclusions to the 2 points above totally contradict each other for future market direction. The only thing I can say is that investors have been largely ignoring GDP forecasts when driving markets higher. Plus GDP growth has been constantly at low levels. The earnings growth this quarter (potentially) is a change in direction that I think investors can reference for justifying placing more money in the markets – which would make them run higher. Remember the earnings number especially is a short term driver and investors will quickly look forward to Q4 estimates.

I am curious to know what you think about the 2 points brought up above. Please share your thoughts on what these mean (if anything) for future market direction.