Why equity markets are rising despite the macro gloom​​

Earnings are doing the heavy lifting

​It's become a popular sport to call this rally fragile. The backdrop is hardly inspiring: geopolitical tensions, oil prices grinding higher, consumer confidence in the doldrums. Yet equity markets have continued to push higher, and the reason isn't complicated — companies are making serious money.

​Profits remain the foundation of equity valuations, and right now they're growing. Markets can absorb a lot of bad macro news when earnings are heading in the right direction. At the moment, the trajectory is firmly upward, and that matters more than the headlines.

​Around 80–85% of S&P 500 companies have beaten expectations this season, with profit margins near multi-year highs. That's not a fluke — it suggests many businesses have successfully navigated the post-pandemic cost environment that threatened to erode their bottom lines.

​Analysts are taking note too, with earnings forecasts being revised higher across the board. When the people paid to crunch the numbers are getting more optimistic, it's usually worth paying attention.

​The Magnificent Seven are carrying a lot of weight

​There's no getting around the concentration story here. A handful of mega-cap technology companies are generating earnings growth that dwarfs the rest of the index. Their scale and operational efficiency mean even modest revenue growth translates into substantial profit expansion, and that's driving a significant portion of the overall market move.

​The AI investment cycle is central to this. These firms are committing enormous sums to infrastructure, data centres and computing capacity. That spending is showing up in earnings across the technology supply chain, creating a broader ripple effect than the headline numbers might suggest.

​But let's be clear-eyed about what this means. A rally driven by a small number of companies is inherently more vulnerable than a broad-based one. If any of the Magnificent Seven stumbles — or if AI spending fails to deliver the returns being priced in — the implications for the wider market could be substantial.

​Concentration risk is real, and anyone holding index funds should be aware that their exposure to these names is growing whether they've actively chosen it or not.

​The market is still being selective

​One of the more encouraging signs in this environment is that investors aren't simply buying everything indiscriminately. Companies that miss earnings or flag a weaker outlook are being punished — and punished fairly hard. That selectivity matters.

​It suggests the rally has analytical discipline behind it rather than being pure momentum-chasing. Strong results get rewarded; disappointments get sold. For a market trading at elevated valuations, that kind of price discovery is reassuring.

​Price-to-earnings ratios across the S&P 500 are undeniably stretched. The bull case rests on the argument that sustained profit growth justifies those multiples — and for now, the data is cooperating with that thesis. It won't always, but right now the earnings support is there.

​For anyone thinking about how to invest in stocks, this is a market that rewards doing the homework. Owning the index is the easy option; owning the right parts of it requires more thought.

​AI's impact is broader than just tech

​It's tempting to frame the AI story purely in terms of the companies building the technology. But the investment cycle is having wider effects. Heavy spending on data centres, power infrastructure and computing hardware creates demand across construction, energy, semiconductors and logistics — sectors that don't always feature in the AI conversation but are clearly benefiting.

​This is one reason why the earnings picture looks more solid than many expected. The AI build-out is functioning almost like a private-sector fiscal stimulus, generating revenues and profits well beyond Silicon Valley. The breadth of the effect is easy to underestimate.

​That said, the returns on this spending remain largely unproven at scale. Investors are effectively betting that productivity gains from AI will eventually justify the capital being deployed. It's a reasonable bet — but it is still a bet, and that uncertainty is embedded in current valuations.

​The history of major technology investment cycles — and how the stock market has processed them — suggests the path from infrastructure boom to genuine economic payoff is rarely linear or smooth.

​What could derail the rally

​None of this makes the rally bulletproof. Elevated energy costs represent a genuine headwind for corporate margins, particularly in industries that can't easily pass costs on to customers. If oil prices stay high or move higher still, the margin story starts to look less comfortable.

​Consumer spending is another area worth monitoring. Much of the earnings beat this season has come from corporate and technology businesses rather than consumer-facing ones. If household finances come under more pressure, that weakness will eventually feed into revenues — and it won't be pretty when it does.

​The long-term return on AI investment remains the biggest unknown hanging over the market. A de-rating, if it comes, could be swift. And the concentration issue isn't going away: a market where a handful of companies account for a disproportionate share of earnings growth is one where individual company risk carries unusual weight.

​These aren't reasons to avoid the market — but they're good reasons not to be complacent.

​How to invest in or trade US equities

1. ​Do your research — understand which sectors are driving earnings growth and where risks are concentrated.
2. ​Decide whether you want to invest for the long term or trade shorter-term moves. For long-term investors, buy shares or ETFs through IG Invest or a share dealing account.
3. ​For traders looking for leveraged exposure to US indices or individual stocks, open a spread betting or CFD trading account.
4. ​Search for the market you want — the S&P 500, Nasdaq 100 or individual companies — in our platform.
5. ​Choose your position size and place your trade.