A Record Number of S&P 500 Companies Issued Upbeat Guidance Before Earnings Season. Should You Buy an Index Fund Now?

Going into third-quarter earnings season, 72 S&P 500 (SNPINDEX:^GSPC) companies issued positive guidance for their quarterly earnings per share, according to FactSet. That's the most for any quarter since FactSet started tracking the count in 2006. The last record was 65, set in the second quarter of 2021.

Positive, in FactSet's terms, means a company's own forecast was above Wall Street's average estimate from the day before. Simply put, 72 companies told analysts their numbers were too low.

This seems like good news for anybody who holds a fund tracking the index, like the Vanguard S&P 500 ETF (NYSEMKT:VOO). But the timing makes the choice trickier. As of this writing, the S&P 500 is about 1% below its Oct. 6 closing high, and the Vanguard fund trades near $709 a share.

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Companies are more upbeat than analysts

Showing how unusual this quarter's forecasts were, 62% of the 116 S&P 500 companies that gave third-quarter guidance pointed higher. In the last five years, that share has averaged 40%.

Just 44 companies guided lower, the fewest in any quarter since the third quarter of 2021.

I'd say who's forecasting matters here. Analysts can get carried away. But a company putting its own figure above the Street's is arguably sending a stronger signal, because it's the one that has to hit it.

And it's already turned up in the estimates. FactSet credits that guidance, plus analysts' upward revisions, for raising its estimate for the index's third-quarter earnings growth to 29.6% year over year as of its Oct. 9 report. That'd be the third straight quarter of growth above 25%.

Mostly a tech story

Of course, the record isn't spread evenly across the market. Of the 72 companies with positive guidance, 44 are in the information technology sector, led by software makers (12) and chipmakers and their equipment suppliers (11). That matches the sector's own record from the second quarter of 2026, and it's well above its five-year average of around 24 a quarter. In fact, tech companies alone gave more positive guidance this quarter than the entire index has averaged per quarter in the last five years (42). FactSet expects the sector's third-quarter earnings to rise 65% year over year, the second-fastest pace among the index's 11 sectors.

For an index fund owner, this mostly helps. After all, the S&P 500 weights its members by size, so the biggest companies move it the most. Around 39% of the Vanguard fund is in technology stocks, and its three largest holdings, all tech companies, are about a fifth of the fund.

But that also means much of the record comes from one part of the market. If spending on artificial intelligence cools, the companies behind most of the upbeat guidance may be the first to cut their forecasts.

Is the good news already in the price?

Partly. Based on the last 12 months of profits, the S&P 500's price-to-earnings ratio is around 26, according to FactSet, above its 10-year average of about 24.

Using the earnings analysts expect for the next 12 months, the ratio drops to about 19 -- right at its 10-year average. That second figure only looks reasonable if these estimates come true.

Here's where the guidance record helps. The quarter it covers is already over, but a record number of companies telling analysts to aim higher is arguably a good sign for the estimates further out, too.

Still, a record count of upbeat outlooks says little about where stocks move next.

The S&P 500 finished June 2021, the end of the last record quarter, at around 4,298. It kept rising to a high about six months later, then slid about 25% by October 2022.

Even so, the index is around 80% above that June 2021 close as I write this. Those who bought then and stayed in did fine, but they had to ride out a steep drop first.

Is a fund like Vanguard's worth buying this close to a record? I think so. Companies across the index are guiding above Wall Street's estimates in record numbers, and at around 19 times expected earnings, the price doesn't ask for much more than analysts' current forecasts coming true.

Yes, the record leans heavily on tech, and the last one was about six months before the index began a 25% drop. But I'd still consider buying the fund here, knowing that the next year might be bumpy.

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.