Imagine I showed you these headlines on January 1st and asked you to guess what the stock market would do this year:

• Inflation hits a three-year high and keeps climbing.
• The Fed halts all rate cuts.
• Stagflation warnings intensify.
• Stress builds in the private credit market.
• AI starts to seriously disrupt the job market.
• The U.S. goes to war with Iran.
• Oil tops $100 per barrel.
• Gas jumps from under $3 to over $4.50.
• Tariffs are ruled unconstitutional, then reenacted under new legislation
• Consumer sentiment hits a 70-year low.

My guess?

Most people would assume we're headed for a recession, a bear market, or some kind of crisis.

But that's not what's happened. Not even close.

***

Before we dive in, did you catch this week's podcast? 👇

Why 2 Retirees With the Same $1M Plan Ended $3M Apart In this episode, you'll learn why two retirees with the same portfolio, withdrawal rate, and 30-year plan ended up more than $3M apart. 🎙️ Listen now on ​Apple​, ​Spotify​, or ​YouTube​.

The Market Didn't Get the Memo

Here's where the major asset classes stand five months into 2026:

• U.S. Large Cap: +9%
• U.S. Tech: +16%
• U.S. Small Cap: +15%
• International Developed: +8%
• Emerging Markets: +22%

Those would be impressive returns in any environment. Against that backdrop of headlines, they’re remarkable.

Two Reasons It's Worked

The first is corporate earnings.

S&P 500 companies just grew earnings more than 12% in Q1 — the sixth straight quarter of double-digit growth, coming off an already historically high base.

The second is the AI story.

Market returns continue to be driven by a relatively small group of large technology companies, as investors bet that AI will reshape productivity, profits, and business growth in the years ahead.

Whether that bet pays off, nobody knows.

But either way, it’s important to acknowledge both sides of the surprise.

The negative headlines have been surprising.

But so has the strength of corporate earnings.

So has the market’s continued enthusiasm around AI.

So has the resilience of the economy and businesses in the face of everything listed above.

And this is one of the many reasons forecasting the market is so difficult, if not impossible

As Daniel Kahneman once put it,

In other words, we often want the relationship between headlines and markets to be simple.

Bad news should lead to bad outcomes.

Good news should lead to good outcomes.

But that’s not how markets work, at least not reliably.

The economy, businesses, investor expectations, valuations, earnings, interest rates, policy decisions, and human behavior are all moving at the same time.

The result is usually far messier than the headlines suggest.

And that’s really the point.

The connection between headlines and market outcomes is much weaker than most people assume.

Not because headlines don’t matter, but because businesses are not static and often adapt.

They cut costs, raise prices, invest in new technologies, improve productivity, and find ways to grow through uncertainty.

Economies move forward because companies continue solving problems, creating products, and becoming more efficient over time.

Over long periods, those forces have generally been positive.

And over long periods, the market has generally moved higher as well.

Bottom Line

To be clear, I’m not saying the market will continue rising for the rest of the year.

I don’t know what happens next. Nobody does.

But 2026 has already offered a powerful reminder:

Markets have an incredible ability to surprise the greatest number of people.

And headlines alone are usually a terrible guide for making investment decisions.

📚 What I've Been Reading

• The U.S. Leads the World in Stock Ownership (Paul Kedrosky)​
• 3 Big Questions to Ask Your Aging Parents (Morningstar)​
• Existing Home Sales, Prices, and Inventory Remain Rangebound (The Bonddad Blog)​
• One World, One Kind of Work (Humble Dollar)​
• The Death of Sincerity (Darius Foroux)​​
• How We Walk Might Reveal Our Risk of Death (Nautilus)​​

Thank you for reading!

Please reply to this email with comments, questions, and/or feedback.

Stay wealthy,

Taylor Schulte, CFP®