Why does the stock market keep going up?
One of the most common questions we have received in 2026 is why does the stock market keep going up? Is it completely disconnected from reality?
It may feel surprising given today’s noisy headlines. Investors continue to face geopolitical uncertainty, inflation that remains above the Federal Reserve’s 2% target, questions about interest rates, and concerns that enthusiasm around artificial intelligence (AI) may have gone too far. Even so, stocks have continued to move higher in 2026.
The short answer is this: corporate earnings have been strong, and investors are paying attention. In fact, the S&P 500 is on track for its best earnings growth since the pandemic rebound.
Markets can move for many reasons over short periods of time, but over the long run, stock prices tend to follow earnings. When companies are growing sales, expanding profit margins, and generating more earnings per share, stock prices often have a stronger foundation. That has been one of the key themes so far in 2026.
As you can see in the market review chart below, the S&P 500 delivered a 10.2% total return in the first half of the year. Many analysts have raised their full-year return and earnings targets as a result of continued economic momentum, record earnings, expanded margins, and robust AI-related capital spending.
The earnings backdrop matters because it helps explain why markets can rise even when the news cycle feels unsettling. Investors are not simply betting on vibes – they are responding to the fact that many companies are still growing profits.
A major driver has been capital investment, particularly related to AI infrastructure. JP Morgan estimates that capital expenditures for the major hyperscalers (Alphabet, Amazon, Meta, Microsoft, and Oracle) could reach $789 billion, or about 2.3% of U.S. Gross Domestic Product (GDP), more than four times the level seen in 2023. This is one of the key pillars of growth for the second half of 2026.
Of course, none of this means markets move in a straight line. In fact, strong markets often experience pullbacks along the way – that is not only normal, but healthy. As we approach the mid-term elections in November, we expect the market to experience choppier conditions. There are still hurdles that the market needs to clear including stretched valuations, geopolitical uncertainty, and the possibility of interest rates increasing.
For long-term investors, it is a helpful reminder that markets are forward-looking. They often “climb the wall of worry,” as we like to say, rather than waiting until every concern has been resolved. This is why we continue to believe the most important discipline is staying aligned with your long-term plan, maintaining appropriate diversification, and avoiding the temptation to make major changes based solely on the headlines.
As always, please feel free to reach out with any questions or feedback. Thank you for allowing us to be of service. It is a true honor and privilege to walk alongside you on your life journey, and we are grateful for the trust you place in us.
Warmest regards,
Anne & Atricia