how much higher earnings market is demanding right now? and how is the sectorwise split of earnings currently in s&p 500

Two questions — let me answer both clearly.

First: how much earnings growth is the market actually demanding?

Using the discount rate framework from before: with 10-year yields at 4.6%, an equity risk premium of ~3%, and long-run growth of 5%, the model implies a fair PE of roughly 14-15x. The market is trading at 29x trailing and 21x forward. To justify 21x forward at current rates, you need the "growth" input in the formula to be dramatically higher — roughly 5-6% higher than historical norms, sustained indefinitely. That's precisely what the AI productivity thesis is promising. In plain terms: the market is betting that earnings compound at 18-21% annually for the next several years, not the historical 5-7%. That's the implied demand baked into the price.

For the rest of 2026, analysts are calling for earnings growth of 21% in Q2, 23% in Q3, and 21% in Q4 — full-year 2026 earnings growth of about 21%. The market needs all of that to land, plus continued growth into 2027, for current multiples to make mathematical sense. FactSet

Now the sector picture: