Headlines vs. Bottom Lines
The second quarter of 2026 brought a dramatic reversal for financial markets as the March declines gave way to an April rally. The positive momentum continued throughout May before dipping slightly during month of June. All the major market indexes are now comfortably in positive territory for the year.
Media headlines often attribute the recent market growth to “AI hype”, but it is the exceptionally robust corporate earnings that are driving much of the increase. The recent earnings season ranks among the best in two decades, with first quarter profits growing by an astonishing 28.6% – more than double what analysts initially expected. Though hype (or fear) can drive short-term market movements, stock prices are ultimately driven by business earnings. As those continue to rise, so too do stocks.
The combination of economic growth and energy shocks arising from the geopolitical conflict with Iran have fueled an increase in inflation. It remains well below post-Covid-19 levels, but above the Federal Reserves target. As a result, the Fed has been forced to keep interest rates steady and there is now talk of an interest rate increase late this year, rather than the decreases that many had hoped for. Markets are now pricing in at least one hike before year-end.
The surprisingly strong stock market run has brought about fears of a crash, or for some, concerns about investing at all-time highs. It’s important to remember that markets reaching all-time highs is not a rare occurrence. In fact, roughly 6.7% of trading days since 1950 have set new highs, which equates to an average of about 17 new records per year. From there, about 44% of trading days occur within 5% of a high point.
Historic evidence also shows that investing at an all-time high has produced better results than delaying and investing only after a correction. 91% of the time, an investor would have been better off investing at the newly reached high point, since waiting typically resulted in missing growth between that time and the later market drop.
There’s no way of knowing how the market will move in the short term, but history has shown that stocks tend to move higher over long periods. New market highs are a normal occurrence and don’t necessarily warn of an impending correction. They may, in fact, signal that further growth lies ahead.
PWM Updates
There are two questions we’ve received with relative frequency lately:
- Are we accepting new clients? Yes! We are accepting new clients, primarily on a referral basis. We would be honored to help your friends, family, or colleagues.
- How is Brad doing these days? Great! Brad still pops into the office regularly but is about “95% retired”. He loves staying connected with our team and our clients and always enjoys catching up!
As always, please let us know if we can be of service. Happy Fourth of July!
