By Teresa Rivas
With stocks hovering around new highs, it appears the market has put the Iran War in the rearview mirror and refocused on corporate earnings. And that future looks bright.
Consensus estimates are a moving target, but analysts expect the S&P 500 earnings per share to grow some 13% this quarter, its sixth-straight quarter of double-digit gains, with guidance coming in strong as well.
It isn't just the second quarter, however. While many investors worried the Middle East conflict would derail the bull market, now in its fourth year, earnings strength makes that unlikely.
At present, EPS is expected to expand just under 18% this year and nearly 17% next year, which should support the rally. In fact, as Trivariate's Adam Parker puts it, "the precedent for this year being a bad year for stocks is relatively thin."
That is his conclusion after looking at both S&P 500 performance and earnings since 1928. In an analysis from this weekend, Parker looked at instances with double-digit EPS growth for two years, and then checked the index's total returns for the first of those years. There were only five times when that first year -- here a potential proxy for 2026 -- wound up being a down year for the S&P 500.
Those five times were more often than not outliers, Parker highlights, occurring in 1929, 1940, 1948, 1973, and 1994 and thus reflecting worries such as the Great Depression, World War II, and the oil shock of the 70s.
That is good news, in more ways than one. It means -- absent any new existential crisis -- there isn't much history of the market failing to make more gains with earnings this robust.
It also means there is a built-in cushion for the pattern to hold: Even if EPS this year and next is more modest than current forecasts, it would have to fall far indeed for it to dip into the high single-digit range.
It is even less likely to do that because tech is out in the lead, but not the only pillar of support. The materials and communications sectors are also in the double-digit club for 2026 and 2027, with utilities and financials close behind.
Nonetheless, tech itself remains the star of the show. Parker upgraded tech to Outperform from Market Perform, making it one of only two sectors, along with healthcare, that he is bullish on.
Consensus sees tech's EPS up more than 43% this year and growing another 25% in 2027, and even if the real numbers fall somewhat short of that, "growth is going to be too high for Technology to underperform," Parker says.
Technicals look strong, too. Vermillion Global Technical Strategist Ross LaDuke writes that tech "is the sector we want to be buying now on any pullbacks...value outperformed for five months, but now the tide has turned in favor of growth."
Investors will get a near-term test of that theory next week, when Google parent Alphabet, Facebook parent Meta Platforms, Apple, and Microsoft all report results. Yet for now it seems that as long as the broader market's overall earnings picture remains bright, it can't miss.
Write to Teresa Rivas at teresa.rivas@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
April 21, 2026 14:19 ET (18:19 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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