In the simplest of terms, stock prices are driven by two forces:

• Earnings
• The price that investors are willing to pay for those earnings

And this year, estimates for the “E” in P/E ratio are trending up. As you can see in the chart, the 2026 and 2027 estimates for the Standard & Poor’s 500 are higher than they’ve ever been, following Q2 earnings revisions.

Why the change? Mostly it’s due to the rosy economic outlook. Gross Domestic Product increased by 1.5 percent in Q2, and the Atlanta Fed’s GDPNow estimate for Q3 was more than 5 percent on August 6.

So despite the mixed signals from the Fed on short-term interest rates and inflation, S&P 500 companies are having a banner year, and that trend is expected to continue into 2027.

But before you start popping the champagne, remember that September and October are just around the corner. Those two months can be volatile, so while optimism is in the air, it may come face-to-face with some short-term price swings.

So stay focused and committed to your strategy. And if the markets get bumpy, take a moment and ask yourself, "Is there any news associated with the short-term price swings that would change the long-term outlook that companies are talking about?” 

^{AtlantaFed.org, August 12, 2026}