The Good News Is There. It Just Doesn't Make Headlines

When you watch the news, it is easy to believe that the stock market is out of touch with all the terrible things happening in the world. But the good news is always there; it just doesn’t make for exciting television.

Below are just a few examples.

Earnings Are the Story

The primary reason the stock market has been going up is that earnings have been going up. Companies are making more money. As the chart below shows, earnings and dividends have collectively contributed nearly 7% to the S&P 500’s total return this year. The only reason the stock market isn’t up further is that people are willing to pay less for those earnings now than they were at the start of the year.

And that is healthy.

A Return to Normal Valuations

Remember last year when everyone wanted to talk about how tech companies had gotten too expensive, and we were in something that looked like another dot-com bubble (See my note from October, Not Every Boom is a Bubble)?

Source: Apollo

Well, since then, tech valuations have compressed from 40x to 20x, and we are back at valuation levels last seen before the AI boom began.

Similar trends have occurred in other sectors as well. As the chart above shows, today’s valuations are very much in line with their ten-year averages.

Diversification Did Its Job

A few years ago, the S&P 500 was the best-performing asset class in the world, and it was tempting to wonder why you owned anything else. (See my January 2025 note, Predicting Stock Returns). But that has since changed, and diversification has continued making a difference.

Investors who stuck with their plans have continued to benefit. Those who went chasing returns have not.

The Impact of Higher Oil Prices

This chart isn’t necessarily good news, but it provides some important context for the bad news. Specifically, higher oil prices do not necessarily lead to lower stock prices.

Historically, when oil prices have risen by 20% over two days, as they have recently, the stock market has averaged 24% returns over the next 12 months.

That is not intended as a prediction, but rather a reminder that scary inputs do not always produce the outcomes we fear.

The Optimist’s Advantage

Finally, good news tends to be boring. It arrives gradually in the form of declining mortality rates, rising corporate profits, or technological progress that compounds quietly over decades. Bad news is a much better storyteller. It creates vivid narratives that make the worst feel permanent.

But nothing is ever quite as bad as it seems. The world rarely ends, and when it comes to your retirement plan, the pessimists may sound smart, but it is the patient optimists who make money.

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*If doomscrolling has you thoroughly depressed, I highly recommend reading some of the articles on the Human Progress website.

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Personal Note:

Tomorrow is the day! If you are in the Sugar Land area and looking for something fun to do, come on out, eat crawfish, play with puppies, and bid on auction items.

Last year, my wife made me walk around greeting people in a dog costume. We’ll see what happens this time around.