Wall Street strategists have a message for investors concerned about the recent drama over Greenland and flight from US assets: Look for earnings growth to power the stock market higher this year.
“We’ve got an excellent backdrop for earnings growth,” Richard Saperstein, Treasury Partners chief investment officer, told Yahoo Finance on Thursday. He pointed to easing inflation and an economy that is still adding jobs.
With earnings season underway, analysts expect the S&P 500 (^GSPC) to post year-over-year profit growth of about 8.3% for the fourth quarter, according to Bloomberg data. Meanwhile, FactSet analysts project that growth could rise above 14%, marking the fifth consecutive quarter of double-digit earnings expansion.
Of the 33 S&P 500 companies that have reported fourth quarter results through Jan. 16, 79% beat the average earnings-per-share estimate, according to FactSet.
BNY Wealth strategists also expect earnings growth of about 14% this year, in part driven by tax incentives and capital expenditure benefits from President Trump’s “Big Beautiful Bill,” which essentially lowered the corporate tax rate by about 3%.
The bank’s strategists expect earnings contributions to come from other sectors besides tech and the “Magnificent Seven” cohort.
“It’s not as concentrated a market,” Alicia Levine, head of investment strategy and equities at BNY Wealth, said last week during a 2026 outlook roundtable.
“You’re finally getting earnings growth from the rest of the market, and that’s partly what’s driving the cyclical tilt to the market,” she added, pointing to the recent outperformance in sectors such as Materials (XLB), Industrials (XLI), and Energy (XLE).
Treasury Partners’ Saperstein said his firm’s core position is still with large-cap tech stocks.
“The AI universe, that trend is really one of the main ones driving the economy,” he said.
He also said that he would avoid parts of the market affected by proposed policy changes by President Trump, such as credit card rate caps or restrictions on institutional homeownership.
Wall Street also anticipates some easing from the Federal Reserve, with a consensus expectation of two rate cuts this year. Strategists expect the central bank to have a more dovish stance once a new Fed chair is appointed to replace Jerome Powell after his term ends in May.
Read more: How much control does the president have over the Fed and interest rates?
That could be positive for medium-term bonds.
“If rates do come down … that five-year, 10-year duration space in the US Treasury market feels like it’s going to give you a nice return,” F/m Investments CEO and chief investment officer Alex Morris told Yahoo Finance.
Short-term market volatility is still expected when geopolitical issues arise.
“Geopolitics is the wild card this year,” said Saperstein.
But last week’s market rebound following President Trump’s announcement of a “framework” for a future deal for Greenland and his abandonment of tariff threats against Europe showed those events may not have lasting damage for the market.
“Headlines come and go, but underlying fundamentals consistently drive market performance,” UBS strategists said in a note on Thursday.
“At the same time, the powerful structural trends of AI, electrification, and aging demographics should continue to underpin stock performance over the long term,“ the note said.
The firm forecasts S&P 500 earnings per share will grow about 10% year over year, pushing the index to 7,700 by the end of 2026.
Meanwhile, Oppenheimer set the most bullish year-end target on the broad-based index, expecting it to reach 8,100.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre.
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