This week’s chart compares S&P 500 reported earnings (orange line, top panel) with after-tax corporate profits from the National Income and Product Accounts, or NIPA (green line, top panel). NIPA profits track economy-wide corporate earnings, including private companies, and tend to move ahead of reported S&P 500 profits.
The top portion of the chart shows how these two measures have moved together over time. Both series typically rise and fall in tandem, but today we see a clear divergence—S&P 500 profits are still climbing while NIPA profits have started to roll over. Historically, when that happens, S&P 500 earnings often follow with a lag.
The lower portion of the chart highlights those year-over-year changes. Here we can see the contrast more clearly: S&P 500 earnings (blue line) are up 16.6% from a year ago, while NIPA profits (red line) are down 3.3%. That kind of split suggests that underlying profit momentum in the broader economy is weakening beneath the surface. Oh yeah, and the gray bars mark recessions, and you can see that back-to-back NIPA declines (like today) have often preceded slowdowns or profit pullbacks in the S&P.
So what this chart is basically showing is the difference between Wall Street and Main Street right now. Large, publicly traded companies can often sustain profit growth longer through cost controls, buybacks, or global operations. But NIPA data captures the broader business landscape, including smaller firms more sensitive to tariffs, rates, and domestic demand.
The takeaway? When economy-wide profits start to roll over while market earnings climb, it’s often a cautionary signal for investors. It’s something we’ll be watching closely as third-quarter earnings results begin to roll in.
This is intended for informational purposes only and should not be used as the primary basis for an investment decision. Consult an advisor for your personal situation.
Indices mentioned are unmanaged, do not incur fees, and cannot be invested into directly.
Past performance does not guarantee future results.
The S&P 500 Index, or Standard & Poor’s 500 Index, is a market-capitalization-weighted index of 500 leading publicly traded companies in the U.S.