Investors Are Walking on Eggshells These Days. Yet the S&P 500 Index Is on the Cusp of Doing Something Extraordinary for Only the 4th Time in 20 Years.
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By Bram Berkowitz – Apr 16, 2026 at 1:05PM ESTKey PointsInvestors are right to be concerned, in light of the Iran war, oil prices, inflation, and more.However, the broader market has proven very resilient.In fact, the S&P 500's earnings power has arguably never been better.While the market has held up fairly well given all the turbulence this year, it's hard not to go a day without hearing about concerns. These are certainly understandable, given everything that's happened since the COVID-19 pandemic. High interest rates and the longest inverted yield curve in history suggested that a recession was almost a certainty, yet there hasn't been one. Meanwhile, there have also been significant concerns about stagflation, another worrisome scenario that would be bad for the market. Yet while it feels like investors have been walking on eggshells for years, the S&P 500 (^GSPC +0.15%) is on the cusp of doing something extraordinary for only the fourth time in the past two decades. Let's dive in. Image source: Getty Images. Analysts continue to pencil in strong earnings growth One concern that bears have frequently pointed out is the S&P 500's elevated valuation since the pandemic. While it varies depending on the data source you use, the S&P 500 currently trades at 28.5 times trailing earnings, well above its five-year average, which has been elevated by historical standards. S&P 500 P/E Ratio data by YCharts The bulls could argue that the market deserves a premium because it has posted strong earnings growth over the past few years. Much of this has been led by large-cap growth and tech companies, which have seen 24% earnings growth in every quarter since the third quarter of 2023, according to a team of strategists at Deutsche Bank. But with earnings season having just kicked off, Wall Street analysts on average expect the S&P 500 to generate more than 16% year-over-year growth in the first quarter of 2026, the highest level in four years. Deutsche Bank's head strategist Binky Chadha thinks that number will actually be over 19%. "Equity investor positioning, meanwhile, is significantly underweight and in line with an imminent collapse in earnings growth," Chadha and his team said in a recent research note. "Positioning is notably low for sectors in the market crosshairs currently, like financials and tech, especially software." Even the 16% consensus growth is an extremely high level "rarely expected at the start of any earnings season" but which supports a healthy macro backdrop, weakness in the U.S. dollar, and cyclical growth tailwinds. Furthermore, according to Chadha and his team's analysis, consensus earnings growth has only been this strong three other times over the past 20 years. Most have actually come after significant sell-offs and financial crises, such as the Great Recession in 2008-2009, and following the brunt of the COVID-19 pandemic. It also happened after significant corporate tax cuts were implemented in 2018. The market's resilience makes sense Earnings growth helps explain some of the market's resilience in recent years. Despite everything that's happened, including the pandemic, an inverted yield curve, rapidly rising interest rates, the 2023 banking crisis, President Donald Trump's tariffs, and even the Iran war, the market is still experiencing a multi-year expansion and has generated phenomenal returns in recent years. Now, there have been significant sell-offs for short periods, but they have been followed by rapid rebounds. It's also possible that analysts have not yet incorporated the impact of surging oil prices from the Iran war into their forecasts. Even if tensions between the U.S. and Iran die down and a broader, long-term agreement is struck in the near term, oil prices will likely remain higher than they were at the start of this year for the foreseeable future. Investors should also remember that Wall Street analysts typically only have reliable estimates for a year or two out, and these can change each quarter, so it's certainly something to watch for. If analysts revise earnings lower, the market will feel it, and sometimes unforeseen events can come out of nowhere, leading to quick revisions. However, if earnings estimates stay where they are or rise, there's no reason the market won't follow them higher.Read NextApr 16, 2026 •By Anthony Di PizioThe S&P 500 Just Shrugged Off the Iran War and Hit a New Record High.
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Is Wall Street Underestimating the Iran Energy Shock?Apr 15, 2026 •By Emma NewberyStock Market Today, April 15: S&P 500 and Nasdaq Reach New HighsApr 15, 2026 •By Jeremy BowmanPresident Trump Says Iran War Is "Close To Over." Will Markets Boom?About the AuthorBram Berkowitz is a contributing Motley Fool stock market analyst covering financials, technology, consumer goods, and macroeconomic trends.
Before The Motley Fool, Bram worked in equity research covering bank stocks and as a reporter for local publications. He holds FINRA Series 7 and 66 licenses, as well as a bachelor’s degree in business with a minor in economics from Syracuse University.TMFBramX@BramBerkoStocks MentionedS&P 500 IndexSNPINDEX: ^GSPC$7,031.59(+0.12%)+$8.64*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.