The market that’s priced too perfect

Priced too perfect?

It’s one of the strangest earnings seasons in years — maybe ever. AI has already conquered the stock market, but traders are starting to wonder if the next battlefield might be the bond market. The numbers are spectacular, the headlines are euphoric, and yet… the market just shrugs. We’re not grinding higher, and frankly, it has little to do with Powell or the supposed “hawkish” Fed. This is what it looks like when perfection becomes a burden.

Roughly two-thirds of the S&P 500 have reported so far, and the results are blistering: 64% of companies have beaten EPS forecasts by more than one standard deviation — a feat matched only by the pandemic-era stimulus sugar high. On paper, it’s a blockbuster quarter. But here’s the twist — the market doesn’t seem to care. The median stock that beats its earnings is only outperforming the index by 0.32%. That’s a third of the usual reward. In market terms, it’s like hitting a home run and getting booed rounding the bases.

That tells you everything about where we are in this cycle: we’ve priced in perfection, gift-wrapped it, and laminated it for good measure. There’s no upside left to celebrate. The tape’s reaction function has become allergic to good news — when everything’s already perfect, even “better” feels redundant.

Yes, earnings are growing — 8% year-on-year in Q3, compared to 11% last quarter — but the market’s focus has shifted. The story isn’t the earnings beats anymore; it’s the quality of the growth and the sustainability of the margins. Traders know the difference between a cyclical bump and a structural one, and what they’re seeing looks like a plateau dressed as a peak.

Meanwhile, AI remains both the hero and the hostage of this market. The hyperscalers are spending like governments at war — capex expectations for 2026 have jumped from $314 billion at the start of the year to over $518 billion today. It’s a moonshot in progress, and yet the equity market feels almost numb to it. The spending binge is so massive it’s begun to feel like the new normal — and that’s the problem. Once something becomes consensus, it stops being a catalyst.

Flows tell the same story. Tech was the most net bought sector last week, driven mainly by short-covering rather than conviction buying. It’s less about belief and more about forced participation — no one wants to be the fund manager who missed the next AI leg higher. The positioning data shows the market’s emotional state better than any survey: stretched, cynical, and exhausted, but still unwilling to step aside.

Now that we’re past tax-loss season and buybacks are humming again — roughly $5 billion of daily corporate demand — there’s another tailwind in the mix. And yet, even with that liquidity backstop, the tape still can’t find new altitude. It’s as if the market has climbed so high that the air is thin — traders can breathe, but they can’t sprint.

So here we are: a market that’s never been more profitable, more liquid, or more data-rich — and yet, paradoxically, more fragile. Everything’s working, but nothing’s rewarding. AI keeps the lights on, the Fed keeps the ceiling low, and the bond market keeps the oxygen thin.

The bulls will tell you we’re due for another breakout. Maybe. But this doesn’t feel like euphoria; it feels like fatigue in designer packaging. The market isn’t failing — it’s just full. Like a feast where the plates keep coming, but no one’s hungry anymore.

And that, more than anything else, is why the tape looks so eerily calm: it’s not a lack of faith — it’s indigestion from too much perfection.