Despite persistent inflation and ongoing conflict between the U.S. and Iran, broader equity markets demonstrate resiliency.
During the last quarter, 87% of S&P 500 companies reported positive earnings that exceeded Wall Street forecasts.[1] This is well above the 10-year average earnings-per-share (EPS) beat rate of 76%. Experts anticipate this trend will continue through the end of 2026, with EPS for the S&P 500 expected to jump 24% year over year.[2] AI profits and investments have spurred earnings, with benefits broadening into traditionally non-tech sectors such as energy, financials, and industrials.
Meanwhile, the outcome of upcoming midterm elections could stabilize federal actions, easing the path for markets moving forward.
Still, the U.S. braces for potential volatility, largely stemming from factors like a new, unfamiliar Federal Reserve Chair as well as economic softening. With positive upswings across the breadth of the market—and not just centralized in a few core sectors—investors have an opportunity to lean on a steady financial foundation to limit these downsides.
Convening Risks
The conflict in Iran has entered a stalemate, and experts suggest it could last at least another six months.[3] The war’s ripple effects (such as relatively steady inflation of 3.4%, which is markedly higher than the Fed’s goal of 2%) have led to a split in consumer habits.[4][5] Earnings reports from retail giants like Walmart and Home Depot show a divide, with middle-class Americans spending less while wealthier consumers support the sector.[6]
At the same time, the country’s immigrant population shrunk last year for the first time since 1965.[7] This has had a multifold effect. The labor supply has taken a major hit, which could increase housing costs (new construction often relies on foreign-born labor, potentially worsening the supply shortage of residential homes over time).[8][9] Granted, negative net immigration has proven to make renting more affordable by increasing the supply of rental properties not occupied by immigrant workers, highlighting a contrasting impact and the sheer complexity of current factors influencing the economy.[10]
Moreover, Fed Chair Kevin Warsh, who took office in May, remains largely unfamiliar to the American public. He also stepped into a uniquely uncertain time for the economy. While Walsh initially presented as dovish, or interested in lowering interest rates, he has since become more hawkish and open to raising interest rates as a means of mitigating stubborn inflation.
According to the latest meeting minutes from the Fed, financial markets have priced in a 25-basis-point rate hike by September, with another poised for the end of Q1 2027.[11] Warsh’s long-term decision making remains up in the air, as does the stickiness of price hikes in energy and beyond.
For investors, these risks are signals of potential volatility, but aspects like widening growth and positive impacts of AI across market sectors introduce an opportunity to reach financial goals, whatever way the wind blows.
Resilience In Numbers
Despite cooled consumer spending for certain demographics, unemployment remains steady at 4.1%.[12] This is just one positive signal that makes for a reasonably optimistic outlook. Another is a strong earnings season. Last quarter, 10 out of 11 S&P 500 sectors recorded year-over-year earnings growth, with eight of those sectors reaching double-digit expansion.[13]
While previous quarters have hinted at a potential AI bubble, it’s clear that the benefits of this emerging technology are seeping into other non-tech sectors.
Moreover, historical trends suggest that upcoming midterm elections could limit the Trump administration’s capacity for taking action, leading to fewer surprises and a stronger status quo that’s easier for markets to navigate.
Since 1946, the first midterm election after the end of World War II, the president’s party has lost seats in the U.S. House of Representatives 18 out of 20 times.[14] Across this entire post-WWII period, the president’s party has lost Senate seats 13 out of 20 times.
Ultimately, the chances are likely that Democrats will take the house. The Senate remains difficult, likely resulting in a split Congress that will promote gridlock and mute aggressive policy changes. This predictability could benefit markets in the coming quarters.
Filtering the Noise
Given the numerous opportunities and risks of the moment, the fact remains that investors who avoid biased distractions and stay focused on core economic realities are better suited for success.
A solid, strong financial plan is built for both ups and downs, and smart investors fall back on that to maximize growth, even when volatility rears its head. As influential as outside factors can be, thriving portfolios are proactive, not reactive.
For investors looking for new but reliable opportunities, look beyond core tech. AI benefits and strong earnings growth continue to spread across sectors, even the unassuming ones.
Stay mindful of persistent inflation above the Fed’s 2% target, as well as potential rate hikes in the near future. This is particularly important as time proves whether energy and consumer cost increases will prove sticky or transitory, and whether factors like negative net immigration will further soften lower-income consumer spending power.
Speak with your financial advisor to ensure you’re consistently well-positioned to take advantage of opportunities, but also to make sure that your portfolio is structured to give you staying power. Whether it’s rebalancing, locking in long-term yields, or ensuring adequate liquidity, your financial plan is built around financial goals, such as generating income. By plugging your ears to the noise, you’re more likely to actually achieve your goals with a complementary portfolio.
Long-Term Discipline
Markets have always climbed a wall of worry. While the current circumstances are certainly unique, factors like geopolitical friction, monetary policy shifts, and political transitions are staples in the fabric of the American economy.
The key to navigating headline noise is recognizing that successful investing relies more on disciplined preparation than accurate market timing. Underlying economic fundamentals (like broadening corporate earnings growth and transformative productivity gains) continue to compound value, making for an optimistic environment in an otherwise volatile world.
[1] FactSet, Earnings Insight Sept. 4, 2026
[2] Goldman Sachs, The S&P 500 Is Forecast to Climb as Earnings Growth Powers Stocks Higher
[3] The Guardian, Iran war likely to drag on for another six months, ex-US defense secretary warns
[4] U.S. Bureau of Labor Statistics, Consumer Price Index Aug. 12, 2026
[5] Federal Reserve, FAQs
[6] USA Today, Americans are spending more cautiously. Retail earnings show why
[7] Pew Research, What the data says about immigrants in the U.S.
[8] Harvard University Joint Center for Housing Studies, Homebuilding and Remodeling Depend on Immigrant Labor in Major Metros
[9] The University of Utah, What ‘mass deportation’ means for housing costs
[10] Federal Reserve Bank of Dallas, The Impacts of Unauthorized Immigration on U.S. Labor and Housing Markets: New Evidence from Administrative Microdata March 6, 2026
[11] Federal Reserve, Minutes of the Federal Open Market Committee Aug. 19, 2026
[12] U.S. Bureau of Labor Statistics, Employment Situation Summary Sept. 4, 2026
[13] FactSet, S&P 500 Earnings Season Update Aug. 7, 2026
[14] The American Presidency Project, Seats in Congress Gained/Lost by the President’s Party in Mid-Term Elections
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