If you’ve been paying attention to headlines lately, it might lead you to believe we’re in a bear market. Tensions around Iran and the Strait of Hormuz remain unresolved. Oil is still hovering near $100 a barrel. Inflation expectations are creeping back up. And to top it all off, consumer sentiment just hit its lowest reading on record, which would historically indicate investors are scrambling for the exits.
Yet, following a run-of-the-mill pullback the S&P 500 is sitting at an all-time high again. What’s holding things together? The answer is hiding in plain sight: earnings.
S&P 500 large-cap earnings per share have reached $290.54 over the trailing twelve months, accelerating in recent years. This is a figure that would have seemed extraordinary just a few years ago.
Even more importantly, the outlook ahead is equally compelling. Analysts are projecting a 17.6% earnings growth rate for the S&P 500 over the next year, with technology leading the way at 34.3%.
The relationship between earnings growth and stock returns isn’t new, it’s one of the most durable trends throughout market history. Going back to 2000 rolling stock market returns have closely tracked year-over-year forward earnings growth.
Despite everything going on this year, the S&P 500 has seen 9 new all-time highs so far in 2026. The market doesn’t wait for the all-clear. It prices in the future picture, not today’s headlines. While short-term swings can be driven by sentiment and noise, the long-term message is clear – earnings growth is the engine behind stock returns.
– The Aspire Wealth Team
