Profit surprises are normalizing — and that may signal a healthier stock market, say Citi strategists

Recent earnings reports from S&P 500 companies have shown a trend of profit surprises returning to more typical levels after a period of exceptionally high beats. Citi strategists argue this normalization could be a positive sign for the stock market, suggesting more stable and sustainable growth. While earnings are still above expectations, the reduction in the magnitude of these surprises indicates a return to a more balanced economic environment, potentially leading to more predictable market performance. This shift might alleviate some investor concerns about overly optimistic projections.