What's going on?

US companies are preparing to deliver updates on their second-quarter earnings, and investors might be pleased to see companies� lives going back to the way they were.

What does this mean?

Earnings season doesn�t start in earnest till the big US banks begin reporting on July 13th. But pulses are already racing: according to data provider FactSet, analysts are currently predicting that average profits at companies in the S&P 500 index will come in 63% higher than this time last year. That�d make for the biggest annual increase since 2009, and well up on just three months ago when investors were predicting a second-quarter earnings increase of 52%. As for why analysts have lifted those forecasts, it�s all down to the US economy�s faster-than-expected recovery from the effects of coronavirus � and they�re not the only ones feeling more optimistic�

Why should I care?

The bigger picture: No more excuses.

The pandemic provided the ultimate cop-out for company CEOs reluctant to give guidance on future profitability. But now that the worst of the pandemic looks like it�s behind us, the number of US firms issuing forecasts for the upcoming quarter � which halved this time last year � has returned to normal. And perhaps significantly, a bigger proportion of those companies have a positive outlook than at any time in at least the last five years.

Zooming out: The music�s still playing � for now.

Enthusiastic analysts are probably being won over by the rip-roaring stock markets too: average year-end targets for the S&P 500 have risen to 4,300 from 4,000 at the start of 2021. That rally can�t last forever, mind you: the pace of US economic expansion is expected to slow from 6.6% this year to just 2.3% in 2023, and that�ll eventually rein in company profit growth.