⚡️Market Strategy Flash
August 14, 2026
Is the US stock market overextended and heading for a crash this year? No, not in my opinion. While we won’t know the precise outcome until 4:00 PM on December 31, a comparison of currently favorable and previously challenging operating conditions should ease investor anxiety in the meantime.
In 2022, the massive negative shock from runaway inflation, a hostile Federal Reserve (Fed), alarmingly restrictive financial conditions, an “everything” bear market and an S&P 500 earnings recession still weren’t enough to take down the US economy.
By contrast, 2026 has provided a surprisingly friendly investment climate: Relatively cool “core” inflation, a neutral-to-supportive Fed, broadly accommodative financial conditions and booming corporate profit growth (see the table below).
6 Important Ways 2026 Differs From 2022
Sources: FRED, WCG, 08/12/26. Notes: Y/Y = Year over year. SD = Standard deviation. ZLB = Zero lower bound. EPS = Earnings per share.
This hospitable macro and microeconomic environment anchors my investment thesis for an ongoing economic expansion and bull market in stocks.
1. Bad Labor Market News = Good Stock Market News
- 2022:At that time, the average U-3 civilian unemployment rate (UR) sat at an overheated3.7%, reflecting acute labor shortages and wage-push inflation in the wake of the global pandemic and “Great Shutdown” of 2020.
- 2026:Since then, the labor market has softened to an average UR of4.3%through July of this year. A modestly higher UR reflects better balance between labor market supply and demand, as opposed to an overheating job market (i.e., too tight) or recessionary job losses (i.e., too loose) [see the chart below].
#1: The job market’s weaker now than it was then
Sources: FRED, BLS, WCG, 08/12/26. Notes: BLS = Bureau of Labor Statistics.
2. Good Inflation News = Good Fed News
- 2022:Inflation was rampant with the January-July average Consumer Price Index (CPI) for All Items soaring to a punishing rate of8.3%year-over-year (Y/Y) and the CPI for All Items Less Food & Energy surging6.1%Y/Y.
- 2026:Price stability has largely been restored. Year-to-date (YTD) average “headline” CPI has cooled to3.3%Y/Y while “core” CPI has retreated below the psychologically important 3.0% threshold to2.6%Y/Y, giving the Fed scope to maintain policy support or at least avoid causing harm (see the chart below).
#2: Inflation is much cooler in 2026 than it was in 2022
Sources: FRED, BLS, WCG, 08/12/26.
3. Good Supply Chain News = Good Inflation News
- 2022:The Federal Reserve Bank of New York’s Global Supply Chain Pressure Index (GSCPI) averaged+2.8standard deviations above its historical average, reflecting disruption, long delivery times / delays and related cost increases across the manufacturing, wholesale and retail sectors.
- 2026:Despite intermittent shocks, supply networks have generally normalized with the GSCPI easing to+1.1standard deviations. The unspooling of global logistical constraints continues to suppress input costs and protect profit margins, which is a stiff earnings tailwind (see the chart below).
#3: Supply chain disruptions are much less intense and are moving in the right direction
Sources: FRBNY, WCG, 08/12/26. Notes: FRBNY = Federal Reserve Bank of New York.
4. Good Fed News = Good Stock Market News
- 2022:The Fed embarked on one of the most intense / aggressive interest rate-hiking campaigns in modern history, lifting the federal funds rate (FFR) off the zero lower bound (ZLB) by2.3percentage points from December 31, 2021 to July 31, 2022.
- 2026:Monetary policy has shifted from restrictive to supportive. After a period of rate cuts, the FFR has remained unchanged so far this year (a0.0%change YTD), a markedly easier policy backdrop where rates rest well below the pace of nominal economic activity (see the chart below).
#4: The policy rate hasn’t moved this year
Sources: FRED, WCG, 08/12/26.
5. Good Financial Conditions = Good Economic Conditions
- 2022:The Goldman Sachs US Financial Conditions Index (FCI) tightened sharply by+2.2%in the first seven months of the year, choking off liquidity and crushing equities.
- 2026:Financial conditions have stayed steady and accommodative (a+0.1%change YTD). Ample liquidity and abundant credit continue to lubricate capital markets and business investment (see the chart below).
#5: Broader financial conditions are accommodative, not restrictive
Sources: GS, WCG, 08/12/26. Notes: GS = Goldman Sachs.
6. Booming Earnings = Booming Stocks
- 2022:S&P 500 earnings per share (EPS) growth witnessed a sharp deceleration, sliding from+9.4%Y/Y in 1Q22 to-5.0%in 4Q22 as margin compression took hold.
- 2026:Corporate earnings have powerfully accelerated. S&P 500 EPS surged+28.8%Y/Y in 1Q26 and+50.4%Y/Y in 2Q26, with bottom-up analysts expecting+27.4%Y/Y in 3Q26 and+25.2%Y/Y in 4Q26. It never ceases to amaze me how the strength of earnings recoveries always seems to catch investors off guard (see the chart below)!
#6: Earnings are booming, not collapsing
Sources: FactSet, WCG, 08/12/26.
Bottom Line
2022= Spiraling inflation + a tightening Fed + restrictive financial conditions + supply chain disruption + earnings deterioration
2026= Cooler inflation + a neutral / supportive Fed + accommodative financial conditions + supply chain normalization + earnings acceleration
If the US economy was resilient enough to absorb the historic negative shocks of 2022 without falling into a deep recession, it stands to reason that the “Goldilocks” environment of 2026 – characterized by cool “core” inflation, a supportive Fed, accommodative financial conditions and persistent double-digit earnings growth – should continue providing strong tailwinds for stocks through the rest of the year.
In other words, it isn’t too late for fearful or doubtful investors to harness the raw earnings power and macro-to-micro forces behind share prices.
Definitions
Federal Reserve:The central banking system of the United States that manages monetary policy to promote maximum employment and stable prices. It regulates financial institutions and maintains stability in the overall financial system.
Consumer Price Index:An economic metric that measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. It serves as the primary tool for measuring inflation and deflation.
Global Supply Chain Pressure Index:An index created by the Federal Reserve Bank of New York that tracks global supply chain disruptions using shipping rates and manufacturing data. It helps gauge inflationary pressures stemming from logistical bottlenecks.
Standard Deviation:A statistical measurement that quantifies the amount of variation or dispersion in a set of data values. In finance, it is commonly used to measure investment volatility and risk.
Effective Federal Funds Rate:The volume-weighted median of overnight interest rates backed by transactions between depository institutions. It represents the actual rate at which banks lend to each other overnight.
Goldman Sachs US Financial Conditions Index:A weighted index that tracks stock prices, interest rates, credit spreads, and currency values to gauge the overall availability of credit in the U.S. economy. A lower index level signifies looser financial conditions that support economic growth.
S&P 500:A stock market index that tracks the performance of 500 of the largest companies listed on United States stock exchanges. It is widely regarded as the best single gauge of large-cap U.S. equities.
Earnings Per Share:A financial metric calculated by dividing a company's net profit by the number of its outstanding shares of common stock. It indicates how much money a company makes for each share of its stock.
Disclosures
The views expressed are for informational and educational purposes only and are subject to change without notice.
This material is not intended as, and should not be interpreted as, individualized investment advice or a recommendation to buy, sell, or hold any security, sector, industry, or investment strategy.
References to specific companies, securities, sectors, or industries are for illustrative purposes only and should not be construed as investment recommendations.
Investing involves risk, including the possible loss of principal. Investments in a specific industry or sector may involve greater risk and volatility than more diversified investments.
Past performance is not indicative of future results. No investment strategy can guarantee a profit or protect against loss.
Forward-looking statements, including views about future demand, pricing, supply, or industry cycles, are based on current expectations and assumptions and are subject to risks and uncertainties. Actual results may differ materially.
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Securities offered through LPL Financial, Member FINRA/SIPC. Investment Advice offered through WCG Wealth Advisors, LLC, an SEC Registered Investment Advisor. WCG Wealth Advisors, LLC and The Wealth Consulting Group are separate entities from LPL Financial. Index performance is shown for illustrative purposes only and does not predict or depict the performance of any investment. Past performance does not guarantee future results.
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This is for educational / general purposes only, does not constitute investment, tax or legal advice and should not be relied on as such. This is not to be construed as an offer to buy or sell any financial instruments. Any strategies discussed are not intended to be relied upon as the sole factor in making an investment decision for any individual. As with all investments there are associated inherent risks. Please obtain and review all financial material carefully before investing. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested in directly. These comments should not be construed as recommendations but as an illustration of broader themes.
Forward-looking statements are not guarantees of future results. They involve risks, uncertainties and assumptions; there can be no assurance that actual results will not differ materially from expectations. In addition, forward-looking statements, including index targets or market scenarios, are hypothetical in nature, reflect current views and assumptions and are subject to change based on market and economic conditions and are not guarantees of future performance. This is a hypothetical example and is not representative of any specific investment. Your results may vary. (88-LPL) Scenario outcomes are illustrative and not predictive. This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional before making any investment decisions.
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Publication Date: August 14, 2026
For Public Use in the US
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