Three Reasons the Market Is Up

Despite the conflict in the Middle East, US stocks and bonds are up for the year.  In the chart above, the stock market decline during the month of March is clearly visible.  The recovery started at the prospect of peace talks and as companies began to report their earnings for the prior quarter.

#1 Reduction of hostilities in the Middle East

The first reason for the market turn is the most obvious: the discussion of ceasefire talks between the US and Iran.  We covered the importance of the Straits of Hormuz and its impact on global oil markets in our March 13^th blog.

#2 First Quarter Earnings Results are Strong

The second reason for the market increase is the strong financial results being reported.  Incredibly, revenue growth for the S&P 500 companies in aggregate is expected to be 9.7% year-over-year and growth in earnings is expected to be 16%.

Not all sectors are growing so rapidly, but the strength in Technology is carrying the load.  The breakdown by economic sector is below.

#3 Full Year Profit Forecasts Have Been Increasing

It isn’t just the first quarter that has strong earnings.  The full calendar year earnings forecasts are also being pushed up, which is our third reason for a strong market.

The above table shows the eleven economic sectors of the S&P 500 listed by size in the index.  The last column shows the difference in earnings forecasts for the different sectors from the start of the year to now.

Not all sectors are up, but the strength in some areas, like Technology and Energy (no surprise, given the spike in oil prices), has been big enough to bring the overall S&P 500 earnings forecast up nearly 5%, to 20.4% year-over-year growth rate.

Stock prices and corporate earnings have a strong relationship and if the forecasts for 2026 are correct, it is supportive of a strong stock market.  If companies’ earnings fall short, we do expect the market will follow.