Earnings, Not Headlines, Drove the Market This Year

If you ask someone why the stock market went up this year, you’re likely to hear a lot of theories: the President, the Fed, bubbles, or the Illuminati.

But the truth is much simpler—the market went up because earnings went up.

Of the S&P 500’s year-to-date total return, 1.38% came from dividends, 11.82% from earnings, and 4.64% from investors paying a higher premium for those earnings than they did last year.

As random as the stock market can feel day-to-day, long-term results are driven almost entirely by the profits of the businesses we own and how much investors are willing to pay for those profits.

We can debate why companies made more money and where earnings will go from here, but when we stay focused on the fact that we own companies and their future earnings, not just ticker symbols with prices that seem to bounce up and down in response to every new headline, it becomes a lot easier to tune out the noise.

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Fun fact:

Over Thanksgiving, my mom told me she likes my newsletters, but she doesn’t care for my charts.

So, if you are like my mom, here is a random fun fact that doesn’t require a chart:

• 51% of the animals in farms across the world are shrimp. - Andrés Jiménez Zorrilla]

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Personal note:

My wife is also not a chart person. She said she only opens my emails to see what I put in the personal note.

So, for my wife and everyone else who scrolls to the bottom, here is the family photo we used for this year’s Christmas card.