But so far, 87% of the firms in the blue-chip index have reported earnings, and they’ve managed to beat Wall Street’s (admittedly low) EPS targets by 2% on average, according to Bank of America. That leaves them on pace for a more muted EPS decline of 4% to 5%. 

There are still a number of big-name firms that have yet to report their results, including Disney, Walmart, and Nvidia, but in total, 70% of the 423 companies that reported earnings through last Friday managed to beat Wall Street’s EPS forecasts and 60% managed to top sales estimates. 

Savita Subramanian, head of U.S. equity and quantitative strategy at BofA, said in a Sunday research note that it was a “solid beat and raise quarter,” but added that investors have offered “muted reactions” to the resilient earnings. 

“Reactions skewed negative, especially in growth [stocks],” she said, explaining that even companies that guided for rising earnings saw their stocks fall .05% on average the day after reporting, compared to the historical 1.93% average rise.

Dylan Kremer, Certuity’s co-chief investment officer, said he wasn’t surprised by the S&P 500’s earnings momentum in relation to analyst’s forecasts, noting that corporate America guided for a steep drop in their earnings this quarter, which left them room to outperform. He also emphasized that despite beating Wall Street’s consensus forecasts, the expected aggregate earnings decline for the second quarter, which includes actual and estimated results, still sits -5%.

Still, overall, the second quarter earnings season has been “strong” and shows large U.S. companies have “been able to navigate the challenging economic environment thus far,” according to Kremer.

“Despite slowing growth and economic uncertainty, earnings have remained resilient and probabilities of a near-term severe profit contraction occurring have abated,” he said.

Fading inflation and steady job growth have also led U.S. executives to feel more optimistic recently. BofA’s Subramanian explained that her three-month guidance ratio, which measures the ratio of companies that offer above- vs. below-consensus earnings guidance and is supposed to give a sense of corporate sentiment, jumped to 1.3x last week. That’s the highest level since 2021, and significantly ahead of the 0.8x historical average. 

BofA’s analysis of earnings transcripts also showed that sentiment improved in the second quarter, rising five percentage points year over year, the biggest jump since the third quarter of 2021.

A word of caution

Despite stronger than anticipated second-quarter earnings, a hot labor market, and increasingly bullish execs, wealth managers remain worried about the stock market.

The S&P 500 is now up nearly 18% to date, and with aggregate earnings on pace to decline 5%, Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management, was left asking: “How much more can go right?”

“Anything is possible, but economic strength suggests [interest] rates will be higher for longer, likely rendering rich multiples unsustainable,” she warned in a Monday note. “Furthermore, 2023’s tailwinds may reverse, as excess [consumer] savings are exhausted, demand cools, fiscal spending decelerates and liquidity shifts.”

Shalett recommended her clients trim their exposure to “the most richly valued U.S. stocks” after this year’s run up in share prices, and she wasn’t the only one.

Ryan Belanger, founder and managing principal at Claro Advisors, a Boston-based wealth management firm that manages $700 million in assets, told Fortune that although earnings have been better than expected, “it’s important for investors to remain vigilant and not become complacent, as the market’s inflation and Federal Reserve fears remain intact.” 

“We encourage investors to avoid chasing this recent market rally,” he added. “Many investors have ‘fear of missing out’ and are prone to buying the dips, however small they may be, but we believe it’s too early to even think about adding new money to work at current valuations.”