Look, I know earnings season can feel like watching paint dry, but Morgan Stanley’s Michael Wilson just spotted something that should make stock bulls do a little happy dance. While everyone’s been obsessing over whether Big Tech can justify their sky-high valuations, Wilson’s been quietly crunching numbers on the broader market – and what he found is pretty encouraging.
Here’s the deal: Two specific metrics from this earnings season are basically screaming “the party’s not over yet” for stocks heading into 2026. And no, it’s not just because AI companies are printing money (though they are).
Clue #1: Companies Are Actually Selling More Stuff
Revenue surprises this quarter came in at more than double the typical rate. Translation? Companies aren’t just squeezing more profit out of the same old business – they’re actually growing their top line. Sales growth hit 2.3%, which might sound underwhelming until you realize the average is usually around 1.1%. In Wall Street math, that’s basically crushing it.
This matters because it means businesses aren’t just playing accounting games or cutting costs to boost profits. They’re legitimately selling more products and services than anyone expected. That’s the kind of organic growth that makes investors sleep better at night.
Clue #2: The Profit Party Is Spreading Beyond Tech
Here’s where it gets interesting. The median company in the Russell 3000 (that’s basically “most of the stock market”) posted 11% earnings per share growth. That’s nearly double what they managed in Q2, and it’s the best showing in four years.
Wilson calls this a “rolling recovery” – fancy speak for “profits are getting better across the board, not just for the usual suspects.” While everyone’s been laser-focused on whether Meta and Google can justify their trillion-dollar valuations, regular companies have been quietly having their own profit renaissance.
Why This Actually Matters
Wilson thinks this trend is “underappreciated” (Wall Street speak for “nobody’s paying attention, but they should be”). His theory? We’re in the early stages of a new bull market cycle that started back in April, and these earnings are proof that it’s got legs.
The beauty of broad-based earnings growth is that it supports higher stock prices across more sectors, not just the mega-cap tech darlings. When profits are expanding everywhere, portfolio diversification actually works again – imagine that.
The Plot Twist
Of course, it’s not all sunshine and rainbows. Wilson notes that while trade tensions with China have cooled off (thanks to last week’s truce), there’s still uncertainty around Fed policy. Jerome Powell’s recent comments left some question marks about the pace of future rate cuts.
But here’s Wilson’s take: over the next 6-12 months, he expects the Fed to stay accommodative as the new administration wants to “run it hot” economically. That’s generally good news for risk assets like stocks.
The bottom line? While everyone’s been arguing about AI bubbles and tech valuations, the broader market has been quietly building a foundation for continued gains. Sometimes the most important stories are the ones nobody’s talking about.