S&P 500 Rebounds Nearly 9% From Its Lows, Driven by Q1 Earnings Expectations

The primary driver behind this rebound is earnings growth expectations. According to data from MarketWatch, S&P 500 companies are projected to deliver around 13–14% year-over-year earnings growth in Q1 2026, marking the sixth consecutive quarter of double-digit expansion. This highlights that corporate fundamentals remain solid, serving as a key pillar that allows the market to absorb macro uncertainties. In addition, the temporary easing of geopolitical tensions has helped reinforce investor confidence, reducing the “risk-off” pressure that previously weighed on markets.

Big Tech and the AI narrative continue to play a leading role in driving the trend. Notably, after the sharp correction in March, valuations of large-cap stocks have become more attractive, drawing back growth-oriented capital. However, the positive momentum is not limited to mega-caps. Improvements across other sectors, particularly financials, along with the outperformance of small-cap stocks, suggest that market breadth is gradually expanding.

That said, the broader picture still carries elements of caution. While geopolitical risks have eased, they have not disappeared, and although oil prices have pulled back, they remain elevated. The latest data shows U.S. CPI at 3.3%, still significantly above the 2% target of the Federal Reserve. This implies that the Fed is likely to maintain higher interest rates for longer, creating a structural headwind for equity valuations.

From a personal perspective, the current rally in the S&P 500 appears to be driven more by earnings expectations and improving sentiment rather than a meaningful shift in macro conditions. This suggests that while the uptrend may persist in the short term, it is becoming increasingly sensitive. Any shocks from oil prices, inflation data, or corporate guidance could quickly trigger a pullback, especially as valuations have already returned to elevated levels.