Why Markets Are Hitting New All-Time Highs: Key Drivers Behind the 2026 Rally

"Why are markets at an all-time high?" In answer to this question, on the drivers behind the market reaching new all-time highs, we dive in deeper. The S&P 500 is once again positive on the year after recovering from a dip into negative territory in March. While this is good news for investors, it underscores the importance of maintaining a long-term perspective as the conflict in the Middle East evolves.

Key Considerations:

• Improving sentiment around the conflict in Iran has been a major catalyst for the S&P 500 reaching a new all-time high, passing its previous peak in January. Investors are hopeful that stability in the region could eventually reopen oil transportation through the Strait of Hormuz, easing energy market pressures. The latest declaration by Iran suggests that shipping could begin soon, although this remains uncertain.

  
  

• Markets have swung in both directions over the past six weeks based on these events. Oil prices, which have been volatile, fell back toward the $80-90 per-barrel range after briefly jumping above $100 again. The ceasefire, which failed to lead to a lasting peace deal, fueled further uncertainty, but there are now expectations that the U.S. and Iran could return to the negotiating table in the coming weeks. There are still many issues that are challenging to resolve, including the future of Iran's nuclear program.

  
  

• One reason the market has rebounded quickly is that fundamentals remain healthy. Strong corporate earnings have supported the rally, with S&P 500 earnings-per-share growth at over 15%, well above the historical average of 7.7%, reflecting healthy underlying business performance. While broad market valuations have increased as the market has rebounded, with the S&P 500 P/E ratio above 20x again, they are still lower than in recent years.• There are early signs of inflationary pressures from oil in the latest Consumer Price Index report, but these higher prices have not yet spread to other parts of the economy. While this could begin to happen if gasoline prices stay high, history also shows that the situation can improve once the geopolitical situation stabilizes.

  
  

• Many different asset classes have contributed to portfolios this year, highlighting the importance of maintaining balance. Within the stock market, different sectors have supported investor outcomes, including Energy, Materials, Industrials, and more. In fact, eight of the eleven sectors are positive year-to-date, despite market swings.

The included chart shows asset class performance year-to-date, illustrating how diversification across different investments has contributed to returns in 2026, with leadership coming from areas outside of U.S. large cap stocks.

While the Middle East situation continues to evolve, keeping a long-term perspective and staying diversified remains the most reliable path to building wealth over time. These swings can’t be predicted, which is why we always recommend a diversified portfolio. Connect with one of our financial advisors to review your current portfolio allocations so that you can align your goals with your portfolio allocations.