Actual earnings results have been improving and should outpace forecasts by the end of the earnings season, providing a nice treat after the busiest earnings week. The Fed meeting and the jobs report will determine if Halloween week provides a trick or treat to investors.

This is the second busiest week of earnings season and should provide evidence that actual results will outpace forecasts even with the headwinds. Despite this week’s better-expected GDP growth, the somber economic outlook will keep markets particularly sensitive to forward guidance from companies.

Bank earnings were uniformly better than expected and sent the stocks higher, but inflation pressures sent the stock indexes lower. This week a more diverse group reports earnings. Markets are likely to be particularly sensitive to forward guidance while the economic backdrop remains challenging.

S&P 500 earnings are expected to grow at less than 3% year-over-year, which would be an after-inflation decline. Earnings guidance will be crucial with this week’s CPI reading, combined with the resilient labor market making a 75 basis point hike from the Fed in November a virtual certainty.

Stocks have had their typical midterm election year swoon, but they usually improve regardless of the outcome. The S&P 500 has been up in the year after every midterm election since 1942! Stocks have performed best under a divided government, the most likely outcome according to betting odds.