If you’re wondering how markets are hitting all time highs (with an ever-increasing list of headwinds – ongoing conflict in the Middle East, high oil prices, inflationary pressures from said oil prices, and decreasing odds of rate cuts to name a few), you are not alone.

What’s driving this remarkable rise?

Always remember – equity markets are a collection of businesses and the values assigned to them. Those underlying businesses need to adapt and go about conducting their operations no matter what is happening in the world around them. Their ability to do just that leads to various metrics (such as cash flow, earnings, margins, productivity, capital expense levels, etc) that are used to derive an estimated fair value of their worth.

Throughout all the challenges of 2026, American businesses are doing exceptionally well and we can tell this by looking at just one of those key metrics – earnings.

For Q1 2026, 74% of the S&P 500 (so 369 American businesses) have reported thus far. Of those, 88% have beat the estimates for earnings by a median of 6%. In aggregate, the total earnings for the S&P 500 were estimated to be $70.64 for Q1 and that total is $79.24, a 12% beat. Of those reporting, average year over year revenue growth is 10% and year over year earnings growth is 27%. Sure, there can be some noise in these numbers and they may normalize a bit as the final earnings reports come in. But overall, this earnings season has been far stronger than any expected (in the face of the headwinds noted above) and directly drive higher valuations for the underlying businesses and the equity market they comprise.

Can something derail this rally? Of course. Just think back to February and March when geopolitical events monopolized the market narrative. Sentiment can certainly swing markets but with time, fundamentals – things you can measure and quantify like earnings – tend to come back into focus.

For now, let’s be thankful for strong earnings and the resulting stunning recovery in equity markets.

Onward we go,