US stocks are trading at record levels with earnings season right around the corner, and improving expectations for Corporate America’s profit growth indicate that the rally can keep going.

Among the companies in the S&P 500 Index that provided guidance for their third-quarter results, more than 22% were expecting to beat analysts’ expectations — the highest reading in a year, according to data compiled by Bloomberg Intelligence. In addition, the share of firms issuing worse-than-expected profit forecasts was the lowest in four quarters as well.

The improving profit outlook flies in the face of what many Wall Street pros had been expecting as the initial wave of tariffs imposed by President Donald Trump started to hit.

“People have been crying wolf regarding tariffs, but the wolf has yet to appear,” said Sam Stovall, chief investment strategist at CFRA. “And the real question is, has the wolf been delayed or eliminated? It seems like corporations are absorbing most of the tariffs costs.”

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