On the Street Monthly – Stocks Climb as Earnings Stay Strong
On The Street NewsletterJune 2026
Stocks Climb as
Earnings Stay Strong
Inside: Q1 Earnings & Megacap Concentration, What History Says About a 19% Two-Month Rally, and The Reality Behind the IPO Hype.
Earnings Strength
Stocks Climb as Earnings Stay Strong
Q1 2026 earnings growth
+28.6%
6th straight quarter of double-digit growth
S&P 500 profit margins
14.8%
Highest in FactSet records back to 2009
The conflict in Iran, rising oil prices, and even a discussion of potential rate hikes would usually be the headline coupled with rationale for why stocks are selling off. While all of those are looming risks to the market, the S&P staged a two-month return of 19.5%. With 97% of the S&P 500 now reported, Q1 2026 earnings grew 28.6% from a year ago, the strongest quarter since late 2021 and the sixth straight quarter of double-digit growth.
The headline number is impressive, but the more telling story is where that growth actually came from. A handful of megacaps did much of the heavy lifting: Information Technology’s 54% growth falls to 30% without NVIDIA and Micron, Communication Services’ roughly 49% turns negative without Alphabet and Meta, and Consumer Discretionary’s 41% drops to 17% without Amazon.
“Profit margins hit 14.8%, the highest in FactSet’s records going back to 2009, and 85% of companies beat earnings estimates while 81% beat on sales.”
Just as telling, analysts kept raising forward estimates as the quarter played out rather than trimming them, with twelve-month forward earnings now near $355 per share and still climbing. The one caution is price: at roughly 21 times forward earnings, the market sits above both its five- and ten-year averages, which raises the bar for what still counts as a pleasant surprise.
Q1 2026 Earnings Growth, With & Without Megacaps
Year-over-year S&P 500 earnings growth by sector — reported vs. excluding the largest contributors.
Information
Technology
Communication
Services
Consumer
Discretionary
As Reported Excluding Megacaps
*Communication Services growth turns negative when excluding Alphabet and Meta; precise figure not disclosed. Source: FactSet Earnings Insight.
Rally Signal
Strong Rally a Sign of More Strength?
S&P 500 two-month return
+19.5%
Only 7 prior occurrences since 1950
Avg 12-month forward return
+41.1%
Higher 100% of the time
The S&P 500’s roughly 19.5% gain over the past two months is a rare event: it has happened only seven other times since 1950. These surges tend to show up after the market has been through something significant. The most recent examples came in 2025, as the tariff fears from earlier in the year unwound, in 2020 coming out of the COVID crash, and in April of 2009, which marked the end of the Great Financial Crisis and the start of a major bull market.
In other words, this kind of move has historically signaled a turn for the better rather than a warning sign. Seven occurrences are a small sample, and no single signal should drive an investment decision. What caught our attention, though, is the consistency: in all seven prior instances, the S&P 500 was higher one, three, six, and twelve months later, with the average gain building to roughly 41% a year out.
Rapid, broad advances like this one tend to reflect improving fundamentals and renewed risk appetite rather than the kind of blow-off top that bears often warn about. History is never a guarantee, and we would not be surprised to see the market pause and digest these gains in the near term. But when you pair a track record like that with the earnings growth above, the weight of the evidence leans constructive heading into the back half of the year.
S&P 500 Returns After >19% in Two Months (1950 – Current)
Every prior occurrence and its 1, 3, 6, and 12-month forward returns
| Date | 2-Month | 1 Month | 3 Month | 6 Month | 12 Month |
|---|---|---|---|---|---|
| 2/5/1975 | 19.4% | +6.8% | +12.8% | +9.2% | +29.1% |
| 10/6/1982 | 21.5% | +12.6% | +12.7% | +19.9% | +32.0% |
| 3/7/1991 | 19.0% | +0.8% | +2.1% | +3.9% | +8.4% |
| 12/1/1998 | 19.1% | +4.6% | +6.1% | +10.6% | +18.9% |
| 4/30/2009 | 24.5% | +8.0% | +13.1% | +19.5% | +36.0% |
| 5/14/2020 | 19.5% | +7.5% | +18.3% | +25.2% | +46.3% |
| 6/9/2025 | 20.5% | +4.6% | +8.4% | +14.0% | ? |
| 5/29/2026* | 19.5% | ? | ? | ? | ? |
| Average | — | +6.7% | +13.3% | +19.6% | +41.1% |
| % Higher | — | 100.0% | 100.0% | 100.0% | 100.0% |
Source: Ryan Detrick on X. *Current period — forward returns to be determined.
IPO Reality
The Reality Behind the IPO Hype
% positive after 1 year
43%
Across 30 major IPOs analyzed
Avg Year 1 max drawdown
-55%
Peak-to-trough during first year public
SpaceX, Elon Musk’s rocket launch company, is set to go public later this week, and it is not the only headline name eyeing the public markets. Anthropic recently completed a Series H at a reported $965 billion valuation and has filed an S-1 of its own, setting the stage for an eventual IPO. With this much excitement in the air, we thought it was worth stepping back to ask a simple question: how have recent high-profile IPOs actually treated investors?
To answer it, we looked at how 30 major IPOs have performed from their first day of trading through their first year as public companies. The results are a useful reality check. One year after going public, these stocks were positive only 43% of the time, and the average peak-to-trough drawdown over that first year was a steep 55%. The average return did finish in positive territory at roughly 14%, but that figure is propped up by a handful of big winners.
The point is not that IPOs should be avoided, but that they are rarely the sure thing the headlines suggest. Buying a newly public company often means signing up for a year of significant volatility, and even strong businesses can take time to find their footing once they are trading.
Performance of 30 Major IPOs
Returns from IPO date through Year 1, plus peak-to-trough Year 1 drawdown
| Company | 1 Wk | 1 Mo | 3 Mo | 6 Mo | 12 Mo | Y1 Max DD |
|---|---|---|---|---|---|---|
| -17% | -18% | -45% | -42% | -31% | -54% | |
| 0% | 0% | 11% | -32% | -10% | -58% | |
| Alibaba | -4% | -6% | 18% | -9% | -30% | -49% |
| Shopify | 7% | 38% | 14% | 9% | 2% | -52% |
| Block | -9% | -6% | -24% | -28% | -7% | -44% |
| Twilio | 27% | 42% | 125% | 20% | 3% | -66% |
| Snap | -7% | -8% | -13% | -39% | -26% | -56% |
| Okta | 4% | 1% | 0% | 18% | 64% | -20% |
| MongoDB | -3% | -7% | -9% | 20% | 103% | -26% |
| Dropbox | 10% | 2% | 18% | -7% | -24% | -54% |
| Spotify | 4% | 14% | 13% | 21% | -3% | -46% |
| Lyft | -5% | -23% | -16% | -46% | -65% | -79% |
| Zoom | 5% | 45% | 54% | 9% | 142% | -40% |
| 18% | 9% | 6% | 5% | -28% | -70% | |
| Uber | 1% | 3% | -4% | -34% | -21% | -68% |
| CrowdStrike | 33% | 22% | 19% | -18% | 64% | -67% |
| Cloudflare | 10% | -13% | 0% | 6% | 90% | -32% |
| Datadog | -14% | -16% | 1% | -15% | 128% | -42% |
| Snowflake | -14% | -5% | 30% | -9% | 27% | -52% |
| Palantir | 5% | 13% | 164% | 132% | 153% | -53% |
| DoorDash | -17% | -19% | -28% | -28% | -13% | -47% |
| Airbnb | 2% | 3% | 37% | 0% | 25% | -39% |
| Affirm | 9% | 44% | -29% | -40% | -26% | -65% |
| Roblox | 10% | 2% | 31% | 22% | -40% | -69% |
| Coupang | -11% | -7% | -23% | -36% | -65% | -64% |
| Coinbase | -5% | -19% | -30% | -24% | -55% | -57% |
| Robinhood | 46% | 35% | 2% | -64% | -74% | -90% |
| Rivian | 45% | 15% | -36% | -77% | -67% | -88% |
| Arm Holdings | -18% | -20% | 11% | 106% | 132% | -43% |
| CoreWeave | 20% | 5% | 300% | 217% | 87% | -65% |
| Median | 3% | 1% | 4% | -9% | -9% | -54% |
| Average | 4% | 4% | 20% | 1% | 14% | -55% |
| % Positive | 57% | 57% | 57% | 43% | 43% | n/a |
Source: Truist. Returns measured from first day of trading.
Market Snapshot
Month Ending May 31, 2026
| United States Markets | ||||
| 1-Month | 3-Month | YTD | 1-Year | |
| Dow Jones Industrial Average | 2.78% | 4.19% | 6.18% | 20.73% |
| S&P 500 | 5.15% | 10.19% | 10.73% | 28.22% |
| NASDAQ Composite | 8.36% | 18.99% | 16.05% | 41.12% |
| U.S. Mid Cap | 3.24% | 5.85% | 13.26% | 22.92% |
| U.S. Small Cap | 1.75% | 2.72% | 9.12% | 25.70% |
| Global Markets | ||||
| 1-Month | 3-Month | YTD | 1-Year | |
| Nikkei 225 | 11.88% | 12.71% | 31.76% | 74.71% |
| Hang Seng | -2.30% | -5.44% | -1.75% | 8.13% |
| Shanghai Comp | -1.06% | -2.27% | 2.51% | 21.54% |
| FTSE 100 | 0.29% | -4.59% | 4.81% | 18.66% |
| DAX | 3.34% | -0.71% | 2.51% | 4.61% |
| Fixed Income | ||||
| 1-Month | 3-Month | YTD | 1-Year | |
| Corporate Bonds | 0.86% | -0.95% | 0.76% | 6.15% |
| Municipal Bonds | 0.31% | -0.81% | 1.13% | 6.55% |
| High Yield Bonds | 0.44% | 0.99% | 1.60% | 6.99% |
| Market Indicators | Rate |
| 10 Year Treasury | 4.45% |
| Fed Funds (Effective) | 4.21% |
| Inflation Rate | 3.80% |
| Unemployment Rate | 4.30% |
| Market Indicators | Value |
| WTI Crude Oil | 87.36 |
| Gold ($/oz) | 4,593.00 |
| U.S. Dollar Index | 98.91 |
| CBOE Volatility Index | 15.32 |
Source: Morningstar, Inc. Corporate Bonds: iShares iBoxx $ Investment Grade Corporate Bond ETF. Municipal Bonds: iShares National Municipal Bond ETF. High Yield Bonds: iShares iBoxx $ High Yield Corporate Bond ETF. Inflation Rate & Unemployment Rate: U.S. Bureau of Labor Statistics. WTI Crude Oil: NYMEX. Gold: NYSE Arca Exchange. U.S. Dollar: DXY Index. All returns denominated in USD.
In the News
Articles We’re Reading
■ Did You Know?
This summer’s FIFA World Cup will be the biggest in tournament history.
For the first time, the World Cup is being co-hosted by three countries — the United States, Canada, and Mexico — and the field has been expanded from 32 teams to 48. That means 104 matches in all, up from 64, spread across 16 host cities, with the United States staging the bulk of them. There is a bit of history baked in as well: Mexico City’s Estadio Azteca will become the first stadium ever to host matches in three different World Cups, having previously done so in 1970 and 1986. The tournament kicks off there on June 11th and runs through the final at MetLife Stadium in New Jersey on July 19th.
Presented by the Investment Committee of Lake Street, an SEC Registered Investment Adviser
The information contained herein constitutes general information and is not directed to, designed for, or individually tailored to, any particular investor or potential investor. This report is not intended to be a client-specific suitability analysis or recommendation, an offer to participate in any investment, or a recommendation to buy, hold or sell securities. Do not use this report as the sole basis for investment decisions. Do not select an asset class or investment product based on performance alone. Consider all relevant information, including your existing portfolio, investment objectives, risk tolerance, liquidity needs and investment time horizon. Diversification does not ensure a profit or guarantee against a loss. There is no assurance that any investment strategy will be successful. Investing involves risk and you may incur a profit or a loss.
