Despite the firehose of worrying headlines this year, stocks have remained remarkably buoyant.
There’s war in Iran, sticky inflation, rising Treasury yields, concerns about the Federal Reserve keeping rates higher for longer, and more.
And through it all, the markets have kept “climbing a wall of worry.”
To wit, as I write this, the S&P 500, Nasdaq, and Dow are all within about 1% of all-time highs.
The Headlines Feel Worse Than the Market Action
One of the most difficult realities for investors to accept is that markets rarely wait for “perfect” conditions before moving higher.
In fact, markets often rally during periods of uncertainty because stock prices are driven less by today’s headlines and more by expectations about the future. Investors are constantly discounting what the economy, earnings, inflation, and interest rates may look like six to twelve months from now.
And importantly, even with elevated bond yields and geopolitical conflict in the Middle East, corporate earnings have remained resilient, with FactSet showing that the average earnings growth rate so far in Q1 2026 (with 94% of companies having reported) is an astronomical 28.4%.
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Year-to-Date Market Performance
Here’s a snapshot of how several major asset classes and indexes have performed year to date:
| Asset Class | As Measured By | Year-to-Date Return |
| Large-cap stocks | S&P 500 | 8.6% |
| Small-cap stocks | Russell 2000 | 13.0% |
| International stocks | Vanguard Total International Stock Index (VXUS) | 10.6% |
| Value stocks | Vanguard Value Index (VTV) | 8.2% |
| Growth stocks | Vanguard Growth Index (VUG) | 8.2% |
As you can see in the table, small-cap stocks have led the way so far in 2026, but none of the asset classes cited have returned anything less than 8.2% as we approach the midpoint of the year.
Rising Yields Haven’t Stopped Stocks
One of the biggest surprises this year has been the market’s ability to absorb higher interest rates.
Normally, rising Treasury yields create pressure on stock valuations, particularly for growth companies. Yet investors have largely looked through higher yields because earnings growth has remained strong enough to offset valuation concerns.
In other words, the economy has remained resilient enough to support corporate profits, which in turn support higher share prices.
Just Another Brick in the Wall
That’s not to say that volatility is a thing of the past.
There is always something to fret about in the market. Investors today should know that as well as anyone.
If you’ve been investing for the last 20 years, you’ve been through the worst economic slowdown since the Great Depression, a global pandemic, the highest inflation in a generation, wars, natural disasters, and more.
And yet, the S&P 500 is up nearly fivefold in that span.
A Bromide for the Worry
I believe I’m (unofficially) Cabot’s resident bear. So let me offer a dash of perspective on how to deal with the wall of worry:
Patience, diversification, and an investing style that matches your needs and time horizon.
Have the patience to allow your investments to work in your favor instead of overreacting to negative headlines. Over the long haul, large-cap U.S. stocks return about 7% (inflation-adjusted) each year, enough to double your investment every decade.
Diversify your holdings so that you’re not overly reliant on the returns of a single asset class or, even worse, a single company. All it takes is one unexpected development to turn “the next big thing” into yesterday’s news.
And finally, your portfolio should match your needs and time horizon. If you are relying on your holdings for income, don’t invest entirely in high-flying growth stocks that don’t pay a dividend.
By that same token, if you’re 30 years from retirement, don’t pile into cash or bonds in favor of safety at the cost of growth.
When you know you need a big chunk of cash to pay for a college education in a year, keep that in cash. When you’re retired and don’t have time to practice patience for your higher-risk assets to recover from a market downturn, dial down your risk with some dividend payers.
And if you need help identifying new opportunities, consider a subscription to one of Cabot’s advisories.
This Memorial Day, we’ve got a special promotional offer available for both Cabot Prime Plus and Cabot Prime Core, memberships that give you access to a wide range of Cabot’s premium services.
If you’re light on value stocks, you can find them in Cabot Value Investor and Cabot Turnaround Letter; if you’re light on growth, we’ve got Cabot Growth Investor and Cabot Early Opportunities. You can find help with income investing in Cabot Income Advisor and Cabot Dividend Investor, and if you subscribe to Cabot Prime Plus, you’ll also find small-cap insights in Cabot Small-Cap Confidential, and the best international stocks in Cabot Explorer.
Why climb the wall of worry alone?
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