Can Stocks Keep Rising This Year? Here's the One Reason This Expert Says Yes

• Analysts increased Q4 2025 earnings estimates during the quarter itself, marking only the fifth time this has happened since 2021 and signaling stronger-than-expected corporate performance
• RBC's 7,750 price target relies on earnings growth, not multiple expansion, with Calvasina stating the market will 'get what it deserves from an earnings perspective'
• Tech sector companies including Nvidia, Microsoft, and Apple drove the upward earnings revisions, with the sector seeing the biggest jump in earnings per share expectations

Market Summary: S&P 500 Outlook Driven by Earnings Growth

Key Forecast:

Lori Calvasina, RBC Capital Markets' head of U.S. equity strategy, projects the S&P 500 will reach 7,750 within 12 months—representing approximately 11% upside from current levels. This outlook centers on sustained corporate earnings growth rather than valuation expansion.

Critical Data Points:

• Q4 2025 earnings growth estimates rose to 8.1% from 7.2% at end-September
• Analysts unusually raised earnings expectations during the quarter instead of lowering them—a "rare thing" according to FactSet's John Butters
• Similar upward revisions occurred only in Q1-Q3 2021 and the final two quarters of 2025

Sector Performance:

The technology sector led earnings estimate increases, with major contributors including Nvidia, Microsoft, and Apple driving positive revisions.

Market Implications:

After a decade of exceptional performance supported by a strong dollar and valuation expansion, market experts now emphasize fundamentals over sentiment as the primary driver for 2026. RBC's forecast explicitly does not rely on multiple expansion, instead expecting the market to "get what it deserves" from an earnings perspective.

DataTrek analysts Nicholas Colas and Jessica Rabe noted the rarity of upward quarterly estimate revisions, stating this trend supports current high S&P 500 valuations.

Investment Context:

While concerns about mega-cap tech valuations dominated 2025, the shift toward earnings-driven growth represents a fundamental change in market dynamics. Analysts suggest stocks must "earn" their gains through corporate performance rather than continued valuation expansion, particularly as expectations for significant rate cuts diminish.

The consensus view indicates another solid year ahead, though dependent on companies delivering on elevated earnings expectations.