Can the Stock Market Continue Its Upward Trend This Year? This Is the Key Reason an Expert Believes So

Main Insights

• Lori Calvasina, who leads U.S. equity strategy at RBC Capital Markets, believes that ongoing earnings growth could propel stocks even higher into 2026.

• According to FactSet’s John Butters, analysts actually increased their earnings forecasts for the final quarter of 2025 during the fourth quarter—a move he describes as unusual.

Is it possible for the S&P 500 to achieve another year of impressive double-digit gains? If so, one market strategist suggests it will be well-earned.

There are voices cautioning that U.S. equities cannot continue to deliver extraordinary returns indefinitely. After years of strong performance, fueled by a robust dollar and rising valuations, the S&P 500’s impressive run may be nearing its end or at least facing new challenges—especially if significant interest rate cuts do not materialize. Still, some experts remain optimistic about the index’s prospects for at least another strong year.

What’s driving this optimism? Robust corporate earnings growth. Lori Calvasina projects the S&P 500 could reach 7,750 within the next year, representing a potential increase of just over 11% from current levels. At the close of 2025, this projection stood at 13%, which was in line with the consensus for earnings growth at that time.

“We’re not expecting valuation multiples to expand or contract significantly,” Calvasina told CNBC on Thursday. “We believe the market’s performance will be justified by earnings growth.”

Why This Is Relevant

Last year, concerns about the high valuations of mega-cap technology stocks dominated market discussions. This year, however, many analysts expect that solid fundamentals—rather than market sentiment—will be the primary force behind further gains in the S&P 500.

RBC’s monthly-updated price target is based on several factors: investor sentiment, valuations and earnings per share, the relative attractiveness of stocks versus bonds, broader economic conditions, and monetary policy.

Recent earnings reports seem to support this positive outlook. Instead of lowering their forecasts, analysts have become more optimistic about fourth-quarter 2025 earnings, raising their estimates throughout the quarter. John Butters of FactSet called this trend “rare” during a recent interview on MRKT Call.

He noted that the projected earnings growth rate for the fourth quarter has climbed to 8.1%, up from 7.2% at the end of September.

Butters also highlighted that the technology sector experienced the largest upward revisions in earnings per share, with companies like Nvidia (NVDA), Microsoft (MSFT), and Apple (AAPL) leading these positive changes.

Additional Context

Nicholas Colas and Jessica Rabe of DataTrek observed that analysts have only raised their quarterly earnings estimates during a reporting period a few times in recent years: the first three quarters of 2021 and the last two quarters of the previous year. Since it’s more common for analysts to lower their projections, these recent increases are notable and, in their view, help justify the current high valuations of the S&P 500.