We are getting the calls again. Markets are near all-time highs, yet the headlines full of warning signs (i) a war with Iran, (ii) rising inflation, (iii) a consumer everyone insists is tapped out, and if that wasn’t enough, (iv) midterm elections that will determine the balance of power for the next two years. The natural behavioral reflex is always the same, “let’s lock in our gains and wait for the market to fall and we will buy back cheaper.” It is a deeply human reaction, and it is almost always wrong.
This pattern is the signature of an earnings cycle that the market believes is broadening, not fading. Consensus now sees S&P 500 earnings of roughly $341 in 2026, $391 in 2027 and $438 in 2028, building on about $311 in 2025. That is a path of high-single to mid-teens annual growth, and the trajectory is firming rather than rolling over.
What is underneath it? Productivity. The transmission of artificial intelligence (“AI”) into the real economy: how companies write code, serve customers, run logistics, and underwrite risk. Productivity is showing up in margins and earnings power. You do not have to take a view on any single AI stock to recognize the macro signal. When the economy gets more productive, corporate profits grow, and equity prices follow profits. The new highs are the market doing its job, rewarding earnings growth and profits.
Here is the classic behavioral trap. We picture an all-time high like a cannonball launched into the sky; destined, at some point, to come crashing back down to Earth. So, the natural question is the one I asked myself almost two years ago on our Q3 2024 webinar, and it is worth asking again, “how rare is an all-time new high?”
It turns out an all-time new high in the stock market is one of the most ordinary things a rising market does. Since 1990, the S&P 500 has set a new closing high on more than 20 trading days a year, on average. Healthy years routinely produce dozens. There were 39 all-time new highs in 2025, almost half of the 77 observed in 1995, the most ever on record. New highs come in clusters because that is simply what an asset whose underlying value compounds over time looks like on a chart. If stocks tend to grow 10% a year on average (we’ll visit this later) then it shouldn’t become a surprise when that brings fresh all-time highs year-in and year-out.
If all-time new highs shouldn’t cause fear, then what is a fair objection? Valuation. At about 21 times forward earnings, the market is plainly above its long-run average of roughly 17 times. Without debate the market is expensive. But a multiple in isolation is a number without context. When you buy a house, you do not stop at the sticker price; you look at price per square foot. The forward P/E is the sticker. The PEG ratio (price-to-earnings divided by the growth rate) is the price per square foot.
Run that calculation and the picture flips. The market’s PEG sits near 1.7 versus a historical average above 2.1, roughly 20% below average. In other words, for all the talk of an expensive market, you are paying less per unit of expected growth than investors have paid, on average, for the last thirty years. Expensive on price; cheap on growth. And for context, the forward P/E peaked above 25 times during the 1999 dot-com mania. Given the scale of this AI-led industrial revolution, it would be negligent to look at valuation in isolation without accounting for the growth potential of the technological shift.
This is the part many investors get backward, and it is the analytical heart of the piece. Decompose the S&P 500’s total return since 1991 (there is nothing special about this date other than the fact it’s the longest dataset I could find from Bloomberg) into its two engines (1) the fundamental return of earnings growth plus dividends, and (2) the change in the multiple investors are willing to pay and the result is striking.
That has a clean implication for today. If a stretched multiple is the smaller piece of the return, then a rich multiple does not set up a crash; rather, it sets up lower future returns from that one component. The multiple can give back a few points. The earnings engine keeps running. That is the difference between “future returns may be more modest” and “the market has to collapse.” Those are not the same statement, and conflating them has cost investors dearly as a steep opportunity cost.
I will close with my favorite chart, one a lot of our clients have seen before. It plots two things on the same axis: daily trailing realized one year returns of the S&P 500 vs daily 30-year annualized returns.
The thin grey line is one year of returns. It is the definition of volatility, swinging from nearly minus 47% to plus 79% in any given year. That volatility that shows up in your statements, dominates the headlines, and causes the belief that all-time highs must be followed by steep draw-downs. The bold blue line is the 30-year annualized return for an investor who simply stayed invested. It is remarkably flat around 10% annualized. Think about all we have experienced over the last 30 years that is contributing to the far right dot on that thick blue line: (i) the Russian Ruble crisis and collapse of LTCM in 1998, (ii) the dot-com boom and bust, (iii) 9/11 and the double-dip recession, (iv) the subprime meltdown and Great Financial Crisis, (v) Euro debt crisis, (vi) COVID, (vii) oil selling for a negative $38 per barrel, (viii) hyperinflation coming out of COVID and Russia invading Ukraine, (ix) “Liberation Day” and the (x) the Iran War. Despite all of these negative developments, the S&P 500 has compounded at 10.4% from June 1996 through June 2026.
None of this means the road ahead is smooth. There will be drawdowns, there always are, and we plan for them. But “there will be bumps” and “sell because we are at a high” are very different conclusions. If you are fully invested and on plan, a market making new highs is not the thing to fear. It is, quite literally, what you signed up for.
This material is provided by 1900 Wealth Management, LLC for informational and educational purposes only and represents the views and opinions of the author as of the date of publication. It does not constitute investment, legal, or tax advice, nor an offer or solicitation to buy or sell any security or to adopt any investment strategy. Forward-looking statements, including consensus earnings estimates and forecasts, are inherently uncertain and subject to change; actual results may differ materially. References to “the S&P 500” reflect index-level data. Index returns are shown gross of fees and do not reflect the deduction of advisory fees, transaction costs, or other expenses, which would reduce returns; indices are unmanaged and cannot be invested in directly. Past performance is not indicative of, and does not guarantee, future results. All investing involves risk, including the possible loss of principal. Data sourced from Bloomberg and 1900 Wealth analysis as of June 2026 unless otherwise noted. Please consult your 1900 Wealth advisor before making any investment decision.
Bobby serves as Chief Investment Officer at 1900 Wealth Management, where he manages a team of investment officers and oversees portfolio strategies for clients. He also develops new business relationships and contributes to firm growth.
A Chartered Financial Analyst (CFA), Bobby previously analyzed fixed-income investments for USAA and its related funds. His career spans capital management, private equity, and financial operations in multiple industries.
Bobby holds a Bachelor of Business Administration in Accounting and Finance from Texas Christian University.
