Why Stocks Keep Rallying

Corporate earnings have emerged as the primary driver of U.S. equity markets, overshadowing geopolitical headlines and Federal Reserve policy. Current reporting data reveals significant strength and breadth, with the typical S&P 500 company achieving 16% earnings growth and a median earnings surprise of 6%—the highest in four years. While sectors like semiconductors lead, revisions are rising across financials, industrials, and consumer cyclicals. Although geopolitical tensions in the Middle East have pressured supply chains and increased input costs for chemicals and machinery, companies are successfully adapting through pricing power and revenue surprises. Despite a sharp 18% correction in price-earnings multiples driven by hawkish Fed expectations, accelerating earnings are offsetting valuation resets and liquidity concerns. This resilience suggests a classic bull market environment where robust bottom-line growth allows equities to grind higher despite intermittent volatility and shifting interest rate forecasts.