Earnings Surprise Tracker — A Sentiment Signal Based on Fundamentals

The Earnings Surprise Tracker on ETF-Rankings.com tracks how far S&P 500 companies are beating or missing earnings expectations over time — providing a clear, fundamentals-driven view of market sentiment that often shifts well before price trends do.

While price-based indicators tend to react after market leadership has already changed, earnings surprises capture what actually matters: whether corporate fundamentals are improving or deteriorating relative to expectations. When earnings surprises are strong and accelerating, risk appetite tends to follow. When they weaken or roll over, defensive strategies often outperform — even if headline index levels remain elevated.

What the Earnings Surprise Tracker Measures

  • Quarterly aggregate EPS surprise for the S&P 500
  • SPY-weighted averages to reflect true market impact
  • A long-term history spanning multiple market cycles
  • A rolling average to identify trend changes, not just one-off beats

Unlike beat-rate statistics or headline earnings growth figures, this tool focuses on the magnitude of surprises — not just whether companies beat estimates, but by how much. That distinction matters because small beats often signal slowing momentum, while large, persistent surprises tend to coincide with strong risk-on environments.

Real-world example: In the second half of 2021, earnings surprises began to decline meaningfully despite continued index strength. Based on this deterioration, The Sunday Investor advised readers to rotate toward high-dividend, lower-valuation ETFs — a shift that proved effective as growth-oriented strategies struggled in the following quarters.

How to Interpret the Signal

  1. Strong surprises (≈5%+): Fundamentals support risk-taking and growth exposure
  2. Moderate surprises: Caution is warranted as momentum begins to slow
  3. Weak or negative surprises: Defensive and income-oriented strategies tend to outperform
  4. Decelerating surprises: Earnings remain positive, but momentum is fading — often signaling increased market risk ahead

The goal of the Earnings Surprise Tracker is not to time short-term market moves, but to identify regime changes in corporate fundamentals that influence leadership, factor performance, and ETF selection over full market cycles.

Related tools: ETF Earnings Risk Tool, ETF Compare Tool, ETF Overlap Tool.

Analysis and methodology by Geoffrey Learmonth — ETF analyst and creator of ETF-Rankings.com.

The Sunday Investor Earnings Sentiment Take: Loading