Corporate profits showing strong growth

Another earnings season is upon investors and it looks to be the brightest in several years. But the question in the week ahead is, will it be enough to satisfy investor optimism?

Heading into the beginning of the third quarter reporting period, the S&P 500 stock index is hovering near new highs. Expectations are high for profits, and for strong profit forecasts.

According to FactSet Research, profits for S&P 500 companies are predicted to grow by more than 19 percent compared to a year ago. That would make the third quarter the strongest quarter for corporate profit growth since early 2011. The energy sector likely will produce the strongest earnings growth driven by oil prices, which were up 50 percent this summer compared to last year.

Just behind the pop in energy profits is the financial sector. Insurance company earnings improved thanks to a relatively calm third quarter. The destruction left behind last month by Hurricane Florence notwithstanding, last year’s Harvey, Irma and Maria devastated the communities they hit and cost the insurance industry billions of dollars. The financial reality is that those costs a year ago help insurance profit growth this year.

Big banking stocks have lagged the overall market this year. Worries about a trade war, higher interest rates and even a “blue wave” this election cycle have held down bank shares. Inves- tors will begin hearing from banks like JPMorgan Chase, Citigroup and Wells Fargo when that trio reports their latest quarterly results on Thursday.