May 2026 Newsletter:

Recent headlines may suggest we are in a bear market. Tensions in Iran and the Strait of Hormuz remain unresolved. Oil prices are near $100 per barrel, and inflation expectations are rising. Additionally, consumer sentiment has reached a record low, which historically signals investor caution.

Despite a recent pullback, the S&P 500 has returned to an all-time high. The primary factor supporting this strength is clear: earnings.

S&P 500 large-cap earnings per share have reached $290.54 over the past twelve months, reflecting significant acceleration in recent years. This level would have been considered exceptional only a few years ago.

Looking ahead, the outlook remains strong. Analysts project a 17.6% earnings growth rate for the S&P 500 over the next year, with technology expected to lead at 34.3%.

The link between earnings growth and stock returns is well established and remains one of the most consistent trends in market history. Since 2000, rolling stock market returns have closely followed year-over-year forward earnings growth.

Despite this year's challenges, the S&P 500 has reached nine new all-time highs in 2026. The market anticipates future developments rather than reacting to current headlines. While short-term movements may reflect sentiment and volatility, the long-term driver of stock returns remains earnings growth.

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The information presented is not investment advice - it is for educational purposes only and is not an offer or solicitation for the sale or purchase of any securities or investment advisory services. Investments involve risk and are not guaranteed. Be sure to consult with a qualified financial adviser when making investment decisions.