Another Year of Double-Digit Earnings Growth

The stock and bond markets performed well in 2025, helping to keep personal financial plans on track.  Those plans take each investor’s life situation, goals, risk tolerance, and time horizon into consideration to meet their investment and financial goals. 

As is typical in most years, the stock market underwent a significant correction during the year, dropping 19% from mid-February to mid-April.  While it may be tempting to make sudden portfolio changes based on recent performance or headlines, investors who maintain balance and stay on track with their financial plans are likely to be rewarded. 

It again paid to keep your appropriate asset allocation as the market subsequently rose to new all-time highs.  The stock market gains were driven primarily by another year of double-digit earnings growth.  Current consensus earnings estimates for the S&P 500 in 2026 are for a further 15% gain in earnings as corporate margins remain at elevated levels.   

This month not only marks the start of yearend earnings reports but also some key events: the Supreme Court is likely to announce its decision on tariffs, and there may be an announcement from President Donald Trump about the next Fed chairman. The Fed will have a difficult job in 2026 as they balance their dual mandate of strong employment and lower inflation. The second year of a presidential cycle, which we are entering, also tends to be the weakest historically. 

While earnings, interest rates, and inflation remain the primary drivers of stock prices, global geopolitical instability continues to pose a persistent risk. Ongoing conflicts in Ukraine, the Middle East, Venezuela, and regional tensions in Southeast Asia heighten the potential for sudden shocks, supply-chain disruptions, and pressure on defense and critical infrastructure. 

As we navigate investments and financial plans in 2026, we are always mindful of each client’s unique goals and objectives. We are very thankful for your trust and confidence in our team. 

-The LVM Team