The 2026 earnings bonanza is at risk of being curtailed, according to JPMorgan. “Earnings upgrades are plentiful, but the trend in revisions suggests the fuel may be running low,” wrote analysts led by Khuram Chaudry in a note on Thursday. Earnings expectations typically align with stock prices; however, a divergence has occurred in recent weeks, with earnings forecasts rising even as the S&P 500 experienced a decline. The divergence may serve as an indication that the robust profit growth recorded in the first half of this year is beginning to wane. Two macroeconomic data points may indicate a potential slowdown in earnings ahead. The spread between the Producer Price Index and Consumer Price Index—that is, the difference between the prices businesses pay and the prices consumers pay—is positively correlated with both sales and earnings revisions.

However, this spread has narrowed in recent months. If that trend continues, “the risk is that further rises in both EPS and Sales forecasts may be limited,” the analysts wrote. Analysts express concern regarding the U.S. ISM order-to-inventories ratio, as it typically serves as a leading indicator of profit expectations. The explanation is straightforward: when demand exceeds supply, orders surpass inventories, and conversely, when supply exceeds demand, inventories outstrip orders. The ratio has declined for the past three months, reflecting the narrowing inflation spread and indicating that “the upward march in Sales/EPS revisions could soon slow.”

A deceleration in earnings growth would signal adverse implications for equity markets. Wall Street analysts anticipate that double-digit earnings growth will serve as the principal catalyst for stock gains as the year concludes. As the second half approaches, there are expectations that increasing bond yields will constrain multiples; however, it is anticipated that stocks may still appreciate in tandem with profit growth. If earnings estimates decline in the coming weeks, stock prices may face a significant adjustment given the elevated expectations. Oil prices represent a significant threat to earnings growth in the latter part of this year. Brent crude oil futures, the global benchmark, traded above $100 a barrel for the first time since late May on Thursday as tensions in the Middle East escalated.

Earlier this week, Iran-backed Houthis in Yemen launched attacks on two Saudi Arabian oil tankers in the Red Sea, posing a threat to the flow of traffic through the Bab al-Mandeb. This strait represents one of the limited alternatives to the Strait of Hormuz for the export of seaborne oil from the Middle East. “Investors need to be at least somewhat worried that oil/gasoline prices will both weaken consumers and the economy while also complicating life for central banks,” said Sameer Samana.