After a stretch of record highs, the market finally caught its breath last week. The NASDAQ is down about 4% from its peak — a move that feels dramatic in the moment but is, in reality, entirely normal.
Pullbacks Happen — Often
If history is any guide, declines like these are not the exception but the rule. Over the past decade, markets have seen pullbacks of varying sizes fairly often — small dips happen several times a year, and even more meaningful drops tend to occur regularly. In other words, periods of volatility are a normal and expected part of investing.
Volatility isn’t a warning sign — it’s the rhythm of a normal market cycle. Short-term pullbacks are the market’s way of resetting expectations before resuming their long-term trend.
Earnings: The Foundation Remains Solid
While investors may be rattled by a few down days, corporate earnings — the engine of long-term equity returns — continue to impress.
The S&P 500’s bottom-up EPS has grown from about $118 in 2015 to over $243 in 2024, and is projected to hit $306 by 2026. That’s a 26% increase in just two years — a remarkable run of profitability.
Those fundamentals are why markets can absorb volatility: companies are earning their way higher.
2025: Stronger-Than-Expected Growth
Third-quarter 2025 earnings results came in at almost double expectations, led by Technology, Financials, and Industrials — clear evidence that corporate America is still thriving beneath the surface.
2026: Broad-Based Expansion Ahead
Looking further out, analysts expect broad-based earnings growth across nearly every sector in 2026.
- Technology and Materials are projected to lead with growth above 20%,
- The S&P 500 overall is expected to grow 13.7% year-over-year,
- And even more defensive sectors like Utilities and Consumer Staples are expected to show steady gains.
That’s not the sign of a fragile economy — it’s a signal of resilience spreading beyond the top-heavy tech trade.
Sentiment Shift: Less Fear, More Focus
Perhaps the most overlooked development: the “Worry Index” — tracking how often companies mention “job cuts” or “economic slowdown” on earnings calls — has fallen sharply. Companies aren’t talking about crisis; they’re talking about execution.
Context Matters
Even zooming out, U.S. companies are reporting the strongest earnings growth since 2021, according to Deutsche Bank. That tells us something simple but powerful: while markets occasionally wobble, profits are still climbing steadily.
Perspective Over Panic
Markets are rarely linear. They climb, they correct, they consolidate — and they do so against a backdrop of consistent corporate strength.
Short-term declines like last week’s are part of that rhythm, not a rupture.
If anything, they remind us that the market is a living system — occasionally volatile, but fundamentally driven by earnings, innovation, and human enterprise.
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Tim Phillips, CEO, Phillips & Company
Sources:
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