Earnings historically drive stock prices
What this chart shows:
This chart shows the relationship between stock prices and earnings by plotting the growth of the S&P 500 price index together with its NTM earnings per share (EPS), both indexed to 100.
The shaded area extends the EPS trend through 2027 using consensus bottom-up growth estimates.
Why it matters:
Over 20+ years and multiple market cycles, earnings and stock prices have moved together with a 98% correlation, making earnings growth a reliable driver of long-term returns.
Despite the market uncertainty and geopolitical noise of 2026, earnings expectations have remained strong, with consensus projections calling for 18.6% EPS growth this year and 16.1% in 2027. For long-term investors, that is the signal worth focusing on.
Related: Do Wars and Geopolitical Crises Really Matter to Stocks?
Source: FactSet (S&P 500 price and NTM EPS, indexed to 100 at May 2006). Price and EPS data as of April 30, 2026. (1) FactSet Earnings Insight, April 23, 2026; consensus bottom-up estimates, subject to change. NTM = next twelve months. Forecasted EPS trend extends the index using consensus growth rates and isillustrative only. Past performance does not guarantee or predict future returns.