The Real Reason Stocks Go Up - Wyatt Investment Research

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It’s easy to get distracted…

And forget the single most important thing for stocks.

It’s earnings.

Yes, that sounds boring. But it’s 100% true.

It’s easy to get distracted by the Fed, interest rates, global conflicts, inflation, etc.

However, stock market gains over the long-term are powered by earnings growth.

Here you can see that earnings (black line) and the price of the S&P 500 (blue line) basically move together.

When earnings fall – stock prices fall.

And when earnings rise – stock prices rise.

It’s that simple.

Now, the U.S. stock market has experienced a huge rally since October.

There’s lots of reasons to justify the gains…

Falling inflation… a resilient economy… and the expectation of lower interest rates.

Yet I’d argue…

Earnings growth is the real reason stocks continue to rise.

4^th quarter earnings for the S&P 500 grew 3.2%.

The outlook is also bright…

If the S&P 500 continues to deliver double-digit earnings growth…

The index will continue rising.

I’m expecting that profit margins will continue expanding…

Thanks to productivity gains from Artificial Intelligence, robotics and automation.

Everyone’s talking about Nvidia’s blowout earnings. Yet they’re overlooking this huge billion-dollar breakthrough at Tesla.

Ian

P.S. When the S&P is positive in the months of January and February…

The average 12-month gains are nearly 15%.