By Brent Gargano, CFP®

May 2026  |  Infinite Wealth Planning

Earlier this year, as geopolitical tensions rattled markets, the consensus view was that the rally had no foundation.

We’ve been saying the same thing through all of it — on the Money Alchemist Podcast, in this newsletter, and in client conversations: tune out the noise and watch the fundamentals. The fundamentals disagreed with the panic. And now the earnings data is proving it.

With 94% of S&P 500 companies now reporting, the blended earnings growth rate for Q1 2026 sits at 28.4% — more than double what analysts expected at the start of the quarter, and the highest growth rate since Q4 2021. It’s also the sixth consecutive quarter of double-digit earnings growth.

While investors were busy worrying, American companies were reporting some of the best earnings numbers in four years.

Revenue grew 11.6% — the highest since Q2 2022. Net profit margins hit 14.8%, the highest on record since FactSet began tracking the metric in 2009. And 84% of companies beat earnings estimates, the highest percentage since Q2 2021.

Source: FactSet Earnings Insight, May 21, 2026

S&P 500 earnings growth is now at its strongest level since 2021 — and the trend has been building for six consecutive quarters.

Why Does the Market Feel Disconnected from Real Life?

Consumer sentiment has been under serious pressure lately. People are feeling it at the grocery store, at the gas pump, and in the general sense that things are uncertain and expensive. So, when the S&P 500 pushes to new highs, it’s not just confusing but almost offensive — like the market is living in a different reality than the rest of us.

That frustration is understandable. It’s also, historically, one of the best buying signals the market produces. JP Morgan has tracked consumer sentiment cycles back to the 1970s, and the pattern is remarkably consistent. As of April 2026, the Consumer Sentiment Index sits at 49.8 — well below its long-term average of 77.4. That’s not a warning sign. That’s historically been the setup for strong recoveries.

When sentiment hits a trough, subsequent 12-month S&P 500 returns have averaged +24.1%. When sentiment peaks? +4.8%.

Source: J.P. Morgan Asset Management, Guide to the Markets – U.S., data as of April 30, 2026. Past performance is not a guarantee of future results.

The market feeling irrational isn’t a sign something is wrong. It’s the market doing what it always does — pricing in a future that hasn’t arrived yet for most people.

What’s Actually Behind the Numbers

A big part of the earnings story is the AI infrastructure buildout. The capital expenditure cycle at Microsoft, Amazon, Alphabet, and Meta isn’t just showing up in their own results — it’s flowing through to semiconductors, industrial suppliers, and data center infrastructure across the economy. NVIDIA grew earnings over 130% year-over-year. The semiconductor industry as a whole grew 107%.  These are real earnings driven by massive capex budgets from some of the biggest companies on the planet.

To be fair, a few Magnificent 7 headline numbers were boosted by one-time items — Alphabet had a $37.7 billion unrealized gain on stocks, Amazon recorded $16.8 billion in gains from its Anthropic investment, and Meta benefited from an $8 billion tax item. Even so, the other 493 companies grew earnings by 17.4%. Also the best since Q4 2021. Ten of eleven sectors grew year-over-year. Seven of those grew by double digits. The S&P 500 is cap-weighted by design, which means the biggest companies carry the most influence — and right now, the biggest companies are also the fastest-growing. This is how market cap weighted indexes are designed to work.

Looking ahead, analysts are projecting full-year 2026 earnings growth of 22.1%, with double-digit growth expected in each remaining quarter. And while the market may feel expensive, the chart below shows earnings have grown 219% over the past decade while prices have risen 260%. The market isn’t expensive because investors are being irrational. It’s priced where it is because the companies inside it have been compounding earnings at a remarkable rate. Earnings don’t lie — and these companies have been earning their valuations.

Over the past 10 years, S&P 500 earnings have grown 219% while the index price has grown 260%. Earnings have done the heavy lifting. Source: YCharts, May 28, 2026.

What This Means for You

If you moved to cash earlier this year, or you’re still waiting for “more certainty” before getting back in, this earnings season deserves your attention. The market doesn’t wait for certainty. It prices in probabilities — and the probability that U.S. corporate earnings were structurally impaired was always lower than the fear suggested.

The fundamentals were never as broken as the headlines implied. The earnings just proved it.

Your plan wasn’t built for the headlines. It was built for moments exactly like this — where the noise is loud, the signal is clear, and discipline is what separates good outcomes from bad ones