Fidelity's Timmer Flags Potential 35% Q3 Earnings Surge Amid Falling Valuations

Fidelity’s Jurrien Timmer has indicated that earnings growth in the third quarter could reach 30% to 35% if the typical post-quarter bounce seen in recent periods repeats. Despite this, the index’s trailing price-to-earnings multiple has declined by 10% compared with a year earlier.

As Director of Global Macro at Fidelity, Timmer noted that trailing earnings have risen by 28%, while forward earnings are projected to climb another 20%. Even so, investors are not assigning higher multiples to capture that expansion.

Can Q3 Earnings Growth Really Reach 35%?

Timmer observed that double-digit growth is embedded in each upcoming quarter, and those projections keep being revised upward.

Bloomberg information featured in his chart indicates that Q2 2026 growth is on course to finish at 34%, while Q1 2026 stands at 29%. Those figures are significantly above the 11% to 15% range recorded from Q4 2024 through Q3 2025.

Moving on from the glass half-empty to one that is overflowing, earnings season will be upon us in a week or two, and it looks like the bonanza is set to continue. All the incoming growth “waves” are still rising, and all are at double-digits. If we get the typical earnings… pic.twitter.com/eT8gvaNgQn

— Jurrien Timmer (@TimmerFidelity) October 8, 2026

In recent quarters, estimates have typically risen sharply in the weeks after a quarter ends, once companies start disclosing results.

Timmer suggested that if that pattern repeats, Q3 growth could land in the 30% to 35% range. At the same time, equities have already reached an S&P 500 record above 7,800.

A robust quarter alone may not be sufficient. Growth of 30% to 35% would prolong the streak of upward revisions, but the S&P 500 is already at a record level, meaning investors may need evidence that the trajectory is sustainable.

Why Is Wall Street Paying Less for Faster Profits?

Timmer’s reasoning is grounded in historical patterns.

“History shows that investors don’t tend to pay top multiples for peak earnings growth.”

Jurrien Timmer, Director of Global Macro at Fidelity, wrote on X.

The earnings and valuation chart from Fidelity, based on data through Oct. 4, illustrates this tendency. When earnings growth was near 23% around 2018, the P/E multiple subsequently fell by approximately 24%.

A similar sequence occurred after the 2021 reopening, when growth near 50% preceded a roughly 33% decline in the multiple.

Meanwhile, forward earnings are anticipated to expand by 20%, which is slower than the 28% trailing rate.

Kevin Gordon, head of macro research and strategy at Schwab, has pointed to a potential threat to that growth. A single shortfall in capital spending by a mega-cap firm, especially in AI, could disrupt the earnings picture.

Gordon noted that the average S&P 500 stock has dropped 14% from its peak to its trough since early August.

AI-related stocks currently account for a large portion of the index, so one weak report could demonstrate whether the lower multiple was justified.