Market Watch Special Edition: Markets Are Near All-Time Highs. Here’s Why That’s Not a Surprise.

Summary

Markets have recovered to near all-time highs despite real headwinds: geopolitical tensions, high oil prices, and historically low consumer sentiment. The explanation lies in corporate earnings, which are beating expectations by a wider margin than usual. If the trend holds, it would mark six consecutive quarters of double-digit earnings growth, the longest streak since the post-2008 recovery. International markets have also outperformed the U.S. year-to-date. While risks remain, the takeaway is that fundamentals, not headlines, are driving sustained market direction.

Headwinds Abound, So Why Are Stocks Near All-Time Highs?

If you’ve been watching the headlines, the market’s recent strength might feel like a disconnect. Geopolitical tensions remain elevated. Oil prices are still high. Consumer sentiment is hovering near all-time lows. And yet, equity markets have staged a significant recovery from their March lows and are sitting near record highs, here and abroad.

The explanation is less mysterious than it appears, and it comes back to something we talk about regularly: fundamentals.

Earnings are the story.

While not the loudest headlines, corporate earnings have been the ones that matter most to investors right now. Only about 25% of S&P 500 companies have reported for the quarter, but those that have are beating Wall Street’s expectations more consistently, and by a larger margin, than typical. If the rest of earnings season follows suit, it would mark six consecutive quarters of double-digit earnings growth, the longest streak since the recovery from the 2008 financial crisis.

This is also not just a U.S. story. International developed and emerging market indices have actually outperformed the U.S. year-to-date, up 5.9% and 14.4%, respectively, as of April 24.

Is some of this a relief rally? Yes, in part.

Ceasefires in the Middle East have contributed to upward momentum. But the earnings data reinforces that this move is grounded in something more durable than sentiment. Companies are delivering results that hold up under real pressure.

What we’re still watching.

Elevated oil prices, the potential for geopolitical shifts, and the possibility that weak consumer sentiment eventually softens spending are all risks we continue to monitor. These concerns haven’t gone away, and we’re not suggesting they should be dismissed.

What this environment does reinforce is the value of staying grounded in the data rather than reacting to headlines. Periods of uncertainty don’t preclude positive outcomes, particularly when the fundamental backdrop remains supportive.

We’ll continue to keep you informed as conditions evolve. In the meantime, please don’t hesitate to reach out if you’d like to talk through any of this.