2026 Earnings: Why the Bar is Higher Than Ever

 2026 Earnings: Why the Bar is Higher Than Ever

​Key Takeaways

• ​Current Context: Research and latest data suggest global economic growth is slowing in 2026, making it tougher for companies to boost earnings compared to the stellar performance of recent years. 
• With forecasts calling for nearly 15% earnings growth, the S&P 500 faces real-time pressure from trade tariffs and a restrictive 3.4% rate environment.
• ​Global Risks: Organizations like the IMF and World Bank are highlighting downside risks, such as policy uncertainty and potential financial market corrections, as the year progresses.
• ​Sector Focus: Our mini case study on John Deere shows how sector-specific issues, like weak farm demand, are hindering growth at the start of this fiscal year.
• ​Tech Leadership: Tech-driven sectors continue to lead, but the broader economy requires careful watching to meet the high expectations set by the previous two years.

Introduction

​As we navigate the opening weeks of 2026, the financial headlines are confirming what many analysts feared: the stock market is struggling to keep up the relentless pace it set in 2024 and 2025. We have seen the bulls running wild lately, with earnings shooting up double digits year after year. But as we stand here today, the path ahead has clearly become steeper. That is the crux of why 2026 will have a high bar to clear for earnings growth. It’s not that growth has stopped—far from it—but the hurdles we face today make it feel like climbing a mountain after a long, exhausting sprint.

Now, let’s examine where the S&P 500 currently stands. This index has been on a historic roll, driven largely by the AI boom. As of now, analysts are still forecasting a solid year for 2026, with earnings growth expected to be around 15%. On paper, that sounds great—it's significantly above the 8.6% average we've seen over the last decade. But here is the catch: to hit that number in the current climate, everything has to align perfectly. We are already seeing global growth dip, interest rates are staying higher than most investors are comfortable with, and new trade policies are starting to throw spanners in the works of international commerce.

​Why does this matter to you right now? Whether you are an investor checking your pension, a business owner planning your Q3 strategy, or just someone curious about the economy, understanding these dynamics in real-time helps you make smarter choices. Earnings growth isn’t just a metric; it is the engine that fuels jobs, innovation, and general prosperity. If 2026 is setting a high bar, it means companies have to work twice as hard to deliver, and that pressure is already rippling through everyday life.

The 2026 Global Economic Backdrop

​The foundation for earnings growth this year lies in a global economic outlook that appears stable yet increasingly vulnerable. According to the IMF’s latest World Economic Outlook reports from late 2025, global GDP is projected to grow at 3.1% in 2026. This is a noticeable deceleration from the 3.2% in 2025 and 3.3% in 2024. This moderation stems from ongoing adjustments to policy changes and persistent volatility in the energy sectors.

​Advanced economies—including the US and Europe—are currently forecast to expand at a modest 1.5%. This reflects mature markets grappling with aging populations and persistent skill shortages. In contrast, emerging markets are pushing ahead at over 4%, driven by regions like South Asia at 6.2%. However, these figures mask significant risks. The escalation of protectionist measures we are seeing today, particularly new tariffs, is disrupting supply chains and inflating costs for businesses worldwide.

​The World Bank echoes this caution in its recent reports, forecasting an average global growth of 2.5% for the 2026-2027 period. They describe this as the slowest decade of expansion since the 1960s. Regional variations highlight the uneven terrain: East Asia and the Pacific are slowing to 4.0% due to trade barriers, while Sub-Saharan Africa averages 4.2%, hampered by weak commodity demand.

​From the US perspective, the Federal Reserve’s latest Summary of Economic Projections provides a granular view of the current year. For 2026, median estimates include:

• ​Real GDP Growth: 2.3%
• ​Unemployment: 4.4%
• ​PCE Inflation: 2.4%
• ​Federal Funds Rate: 3.4% (Higher than the long-run norm of 3.0%)

​Higher rates mean borrowing costs more, which is actively squeezing company profits as we move through the first quarter of the year.

Key Projections for 2026:

Metric	2026 Projection	Primary Source
Global GDP Growth	3.1%	IMF (Latest)
US Real GDP Growth	2.3%	Federal Reserve
S&P 500 Earnings Growth	15.0%	FactSet
Fed Funds Rate	3.4%	Federal Reserve
US Unemployment Rate	4.4%	Federal Reserve
Mag. 7 Earnings Growth	22.7%	Sector

Sectoral Insights and Earnings Forecasts

Focusing on individual earnings, the S&P 500 remains the market’s main bellwether. FactSet’s latest data for 2026 shows an expected 15.0% year-over-year earnings growth. This would mark the third consecutive year of double-digit advances. All eleven sectors are projected to grow, with five leading the pack: Information Technology, Materials, Industrials, Communication Services, and Consumer Discretionary.

However, this optimism comes with a heavy concentration risk. The so-called 'Magnificent 7' tech stocks are anticipated to drive 22.7% growth this year, while the remaining 493 firms are managing a much more modest 12.5%. This means if the tech sector stumbles—perhaps due to AI fatigue or regulatory crackdowns—the bar for the rest of the market becomes almost impossible to clear.

Mini Case Study: John Deere’s 2026 Outlook

To bring these abstract numbers into reality, let's examine John Deere (DE). This case study perfectly illustrates how macroeconomic factors are creating a high bar for earnings growth in 2026.

John Deere, a leader in agriculture and construction, entered the 2026 fiscal year facing a significant slump in the farm economy. In late 2025, they reported a net income of $5.03 billion, but their guidance for the current 2026 fiscal year is much softer: they are forecasting net income between $4.00 billion and $4.75 billion. This is a potential decline of up to 20%, missing the original analyst expectations of over $5 billion.

Why is Deere struggling to clear the bar?

Commodity Prices: Grain prices, like corn, have fallen significantly, leaving farmers with less cash to spend on new equipment.

Sales Slump: Deere expects sales in its Production & Precision Agriculture segment to drop 5-10% this year.

Financing Costs: With the Fed funds rate at 3.4%, the cost for a farmer to finance a new combine harvester has become prohibitively expensive.

Global Trade: Since Deere derives 40% of its revenue internationally, the current protectionist trade climate is hitting their export potential.

Management views 2026 as the "bottom" of the cycle, but for investors, it highlights that even "great" companies are struggling to beat the high earnings marks set in previous years.

Overcoming the Bar: Practical Tips and Strategies

As we move further into 2026, businesses must focus on extreme efficiency to clear these growth hurdles. Here are some practical steps:

Invest in AI for Productivity: Move beyond the hype and use AI to actually cut operational costs.

Hedge Against Tariffs: With trade tensions high, diversifying suppliers is no longer optional; it is a survival tactic.

Monitor Fed Signals: Keep a close eye on whether the 3.4% rate holds or if inflation forces another hike.

Suggested Internal Links: How AI is Transforming 2026 Earnings Growth, The Impact of 2026 Tariffs on Global Trade.

Authoritative External Sources: IMF World Economic Outlook (Latest), World Bank Global Economic Prospects.

Conclusion

In summary, 2026 has a very high bar to clear. Between the slowing global momentum, persistent policy risks, and the "high base effect" from two years of record growth, companies have no room for error. To succeed this year, staying informed is not just an advantage—it is a necessity. Stay proactive, diversify your portfolio, and keep a close eye on the leading indicators.

Call to Action: Subscribe to our blog for weekly economic insights and real-time tips to thrive in the 2026 market.

FAQs

What is the expected S&P 500 earnings growth in 2026? 

Analysts currently project 15%, but with active risks in trade and interest rates, many expect this number to be revised downward by mid-year.

What are the main risks to global growth right now? 

The primary risks are trade tariffs, fiscal vulnerabilities in large economies, and potential asset repricing if the market corrects.

Will interest rates fall in 2026? 

The Fed’s current projection is 3.4%. While this is a slight ease from the peak, it remains "higher for longer" compared to the last decade.