2026 is off to a rocky start for the U.S. stock market, IF you measure performance by the S&P 500 Index, which almost everyone does — including us — because it’s the simplest gauge we have. The Index is up less than 1% Year-to-Date at the time of this recording. And remember, the index is weighted. The biggest companies impact performance more than the smaller companies.
Earnings Growth 2025–2026: What FactSet Data Says About Corporate Profits
First, you are likely constantly bombarded by negative news and social media posts that are built to alarm us. They tell us the economy is in the tank. The stock market is about go off a cliff. Let’s just create some balance here.
According to Chris Fasciano, the chief market strategist at Commonwealth, U.S. companies as a whole, are still growing. He writes that through the end of last week, roughly 75% of the companies that make up the S&P 500 have reported fourth quarter earnings. According to FactSet data, 74% of those companies exceeded analyst’s views. Because of that strength, earnings growth is on track to rise 13.2% in the last quarter of 2025. Hardly a reason to believe a stock market collapse is imminent.
Sector Rotation 2026: Technology Falls, Energy and Consumer Staples Rise
But, at the same time, there is a shift occurring. Take a look at this LPL chart.
This shows all 11 sectors that make up the S&P 500 Index, comparing their performance in 2025 with the first few weeks of 2026. You can see communication services and technology were the big winners last year, up 32.4% and 23.3% respectively. But this year, they’ve been two of the biggest losers. Instead, energy, materials, and consumer stables have led the way.
S&P 493 Earnings Growth: Beyond the Magnificent Seven Stocks
According to LPL, the S&P 493, which excludes the so-called Magnificent Seven companies, is projected to grow full-year 2026 earnings per share by nearly 14%, up from an estimated 10% in 2025.
We have also seen improving earnings outlooks in other areas of the market like small caps and international markets. This makes the case for diversification, and for active management.
Active ETFs vs Passive Index Funds: Shifting Investor Demand
LPL tells us that while passive funds still represent 64% of all equity assets under management, demand for active equity exchange-traded funds has surged. According to J.P. Morgan Asset Management data, active U.S. equity ETFs now account for 32% of all ETF flows, up from only 6% in 2021.
Why Financial Advisors and Diversified Portfolios Matter in 2026
It’s reminder that the S&P 500 Index is NOT the entire stock market, and simply investing in index funds may not capture the same performance as more nimbly pursuing the companies that make up the index that are growing faster. Working with a financial advisor can help you build an opportunistic portfolio, and not just a set it and forget it strategy.
*There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
Securities are offered through LPL Financial, Member FINRA/SIPC. GenWealth Financial Advisors is an other business name of Independent Advisor Alliance, LLC. All investment advice is offered through Independent Advisor Alliance, LLC, a registered investment adviser. Independent Advisor Alliance, LLC is a separate entity from LPL Financial.
