For Stock Bulls, It's Earnings Perfection or Bust

U.S. business optimism has hit rarefied air. That, in turn, has led to expectations for record earnings. But is all this enthusiasm masking signs of strain? Perhaps. With just a few weeks to go until first-quarter reports start flowing in, the bar is as high now as it is during normal economic periods. If companies fail to keep up with analysts’ lofty expectations, the markets are likely to experience another bout of rising volatility.

The charts below detail sentiment among large-company chief executive officers, small businesses and consumers. Collectively, they show optimism is extremely high, presumably on the heels of cuts in regulations, tax reform and a White House promoting a pro-business environment. The first chart is of the Business Roundtable’s first-quarter survey of large-company CEOs. It shows record-high business optimism in data going back 15 years.