3 Things 7-6-26

 Thing One

The Market Doesn't Send Invitations

One of the strongest arguments for long-term investing isn't based on optimism. It's based on mathematics.

Every year, countless investors convince themselves they can avoid the market's inevitable downturns by moving to cash and then jumping back in once conditions "feel safer." It sounds sensible. Why ride the declines if you can simply step aside and return when the storm has passed?

The problem is that the market doesn't send invitations before it rallies.

History shows that a surprisingly large portion of the stock market's annual return is often generated during just a handful of trading days. Miss those days, and the difference in your investment results can be dramatic.

Consider the S&P 500 during 2025:

Investment Scenario Annual Return

Fully invested all year. +17.88%

Miss the single best trading day +7.64%

Miss the two best trading days +4.23%

Think about those numbers for a moment. Missing just one exceptional day cut the year's return by more than half. Missing only two of the year's strongest trading days reduced the return by roughly three-quarters. Those aren't hypothetical calculations. They're a reminder that some of the market's biggest gains arrive suddenly and without warning. That's what makes market timing so difficult. Many investors assume they'll simply wait until things "look better" before investing. Unfortunately, by the time the news feels comfortable again, the market has often already made a substantial move higher. In fact, some of the strongest up days in market history have occurred during periods of intense pessimism, sometimes immediately following some of the worst down days. The emotional instinct to wait for clarity is understandable, but clarity often comes after prices have already recovered.

This doesn't mean investors should be 100% invested at all times or that cash has no place in a financial plan. Quite the opposite. Cash serves several valuable purposes. An emergency fund provides peace of mind. Cash earmarked for a home purchase, college tuition, or another major expense shouldn't be exposed to stock market volatility. Maintaining some cash can also provide the flexibility to invest when attractive opportunities present themselves. The important distinction is understanding why you're holding cash. There's a meaningful difference between maintaining a deliberate cash allocation because it fits your financial plan and moving long-term investments in and out of the market because you believe you can predict the next correction or rally. One is prudent portfolio management. The other is an attempt to outguess millions of other investors, institutions, economists, and businesses around the world—all of whom are processing new information every second the market is open.

Could someone successfully time the market once? Certainly.

Could they do it consistently over decades, through recessions, bull markets, wars, elections, inflation scares, interest-rate cycles, and countless unexpected events? History suggests that's a much more difficult challenge.

Successful investing has never required predicting tomorrow's headlines. It has required patience, discipline, and the willingness to remain committed to a sound plan even when emotions are pulling in the opposite direction. The next great day in the market almost certainly won't announce itself in advance.

Thing Two  

Wall Street Thinks Stocks Have More Room to Run

As we enter the second half of the year, the broad consensus among many of Wall Street's largest research departments on where the market is headed remains cautiously optimistic.

Goldman Sachs recently raised its year-end S&P 500 target to 8,000, while J.P. Morgan increased its target to 7,800. Bank of America remains the most conservative of the three, with a target near 7,100. That's a fairly wide range, but notice the common thread: all three firms expect the market to finish above where they believe corporate earnings justify today's valuations.

The reason is straightforward—earnings. Goldman Sachs expects S&P 500 companies to earn approximately $340 per share in 2026, followed by $385 in 2027, representing another year of double-digit earnings growth (+13%). J.P. Morgan is even slightly more optimistic, projecting roughly $350 per share in 2026 and $390 in 2027 (+11%). And while Bank of America has not published a formal 2027 earnings estimate, it too expects corporate profits to continue expanding rather than contracting.

Beyond a one-year horizon, forecasting exact index levels becomes increasingly difficult so very few firms have published official year-end 2027 targets for the S&P 500. Even so, Morgan Stanley has projected the S&P 500 could reach approximately 8,300 by mid-2027, while J.P. Morgan has discussed a bull-case scenario approaching 9,000 by mid-2027 if earnings continue to accelerate and the artificial intelligence investment cycle unfolds as expected.

Wall Street isn't simply predicting higher stock prices because investors will become more enthusiastic. The prevailing view is that higher stock prices will be supported by higher corporate earnings. Over the long run, that's exactly what has driven the market. Companies that earn more money generally become more valuable.

Of course, none of these firms expect the journey to be smooth. They continue to caution that valuations remain above historical averages, the market remains heavily concentrated in a handful of technology companies, and investor expectations are elevated. Any disappointment in earnings, inflation, interest rates, or geopolitical events could produce meaningful pullbacks along the way.

That's why we don't believe investors should build their financial future around anyone's year-end target—not even those issued by the biggest names on Wall Street. Instead, they should use these forecasts for what they are: informed opinions based on today's information.  Then they should remember that patient investors who’ve owned productive businesses, maintained appropriate diversification, and stayed committed to a long-term investment plan have generally fared much better than those who’ve repeatedly tried to guess what the market would do over the next few months.

In summary, Wall Street's outlook is encouraging. The firms that follow corporate America most closely generally expect earnings to continue growing through 2027, and that has translated into constructive market forecasts.  Could they be wrong?  Absolutely.  Their forecasts are informed estimates—not guarantees.  But when several of the world's largest investment banks independently expect earnings to grow from roughly $340–$350 per share in 2026 to $385–$390 per share in 2027, they're telling us that they believe the long-term engine of the stock market—growing corporate profits—remains healthy.  And that’s a good thing.

Thing Three

Just A Thought  

"Forecasting is very difficult, especially if it's about the future." — Yogi Berra