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MULTIPLE MAGIC TO EARNINGS MUSCLE: THIS BULL MARKET IS EVOLVING

Heading into 2026, Brian Belski, CEO and chief investment officer at Humilis Investment Strategies, had a pretty clear view of what would drive the market: earnings, not valuation multiples. Over the prior three years of this bull run, he saw returns coming from a mix of both -- though multiple expansion did most of the heavy lifting. Now, he says that’s changed. Earnings growth is taking the lead.

In a note on Monday, Belski pointed out that markets driven primarily by earnings tend to behave differently. Historically, they come with more volatility than markets lifted by rising valuations. That was central to Humilis’ outlook for the year -- with volatility expected to be a defining feature of 2026. And so far, that’s played out. Just last week, for instance, there were several intraday swings of more than 3%, underscoring how choppy things have been.

At the same time, markets are still very headline-driven. Investors are reacting in real time to developments around the Iran conflict, ongoing excitement (and uncertainty) around artificial intelligence, and elevated capital spending. All of that is contributing to the day-to-day swings.

Even so, Belski’s overall message isn’t bearish. Quite the opposite. He believes the market can continue to trend higher -- but not smoothly. Instead, the path forward is likely to be uneven, with bouts of volatility along the way. In his view, that’s actually a healthy sign. It’s consistent with both a bull market and an earnings-led environment, and it can create opportunities for long-term investors to step in at more attractive levels.

(Terence Gabriel)

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