A Stock Market Priced for Perfection Can Still Have a Very Good Year

Christmas week sparked a Santa Claus rally, but a stock market that’s posted three straight years of above-average gains will have to wrestle with a simple fact of life—it’s incredibly hard to stay perfect. The S&P 500 is expected to grow earnings by 15% in 2026, per FactSet, while net profit margins are forecast to hit 13.9%, the highest since FactSet began tracking the metric in 2008. Meanwhile, economic growth forecasts are moving higher after a stellar third-quarter gross-domestic-product reading, inflation isn’t expected to be a problem, and the labor market should be able to hold on.