The start of third quarter earnings season has been overshadowed by macro events thus far (trade and Brexit negotiations), but earnings the numbers have been good.

Remember, never underestimate the appetite of Wall Street and corporate America to dial down expectations when given the opportunity.  
As we discussed when the third quarter ended, estimates had already been ratcheted down, to fit the recession narrative that had been going around.  That view has since been lowered even more.  The street is looking for a 4.6% year-over-year decline in S&P 500 earnings in Q3.

So, we came into earnings season with the table set for positive surprises.  

And we're getting it.  About eight out of ten companies have beat earnings estimates so far, showing year-over-year growth, not contraction.  But it's still early. 

With Bank of America earnings today, we've now heard from all of the big four banks (JPM, BAC, WFC and C).  We've seen big positive surprises in the banks from Q4 of 2018 through Q2 (all against dailed down expectations).

But the banks have generally not just shown good performance against the low bar of expectations, the year-over-year growth has been strong too.  The key contributor has been a strong consumer.

So, how did the banks look in Q3?  We've had positive earnings surprises Citi, JPM and Bank of America for an average year-over-year earnings growth of 14%. That is strong. Though Wells Fargo was the outlier, missing on expectations, as they took some pain preparing for a new CEO to start next Monday.

The earnings strength from the major banks (three of the major banks, in the case of Q3) follows 21% average year-over-year EPS growth from the big four in Q2.  Again, the consumer has not faded, despite a nine month public debate over recession cues.  

And remember, we looked at this chart from Citigroup’s Economic Surprise Index as we ended Q3 …