Dr. Craig Callahan ICON Advisers – Founder & Executive Committee Chair
Equities
From the market low during the financial crisis on March 9, 2009, the S&P 1500 Index has gained 1,255.84% through October 31, 2025, meaning $1.00 invested in that index at the low would have grown to $13.55 in roughly 16.5 years. In my book, “Unloved Bull Markets,” which went to print late 2021, I described the stock market as unloved and gave evidence that many, if not most, investors did not fully participate in the first 12 years of that run-up. There were some popular intuitive, gut-level feelings that the market should be going down. In the book’s conclusion, I guessed that those investors with the incorrect view would finally give up, admit they had been wrong for 12 years, and embrace the stock market.
My guess was wrong. The negative sentiment has gotten worse. From the pandemic low of March 23, 2020, through October 31, 2025, the S&P 1500 has gained 228.36%, or more than tripled, yet it appears this recent advance is even more unloved than the previous phase. Various measures offered in the book, like investor sentiment, equity mutual fund flows, and public funds pension plans’ use of equities, have all signaled an increase in the dislike of the stock market during this impressive five-year bull market.
As the saying goes, “Fool me once, shame on you. Fool me twice, shame on me.” I know better now than to guess that this incorrect group of skeptics will give up, admit they have been wrong, and embrace the stock market. Our research suggests the stock market will continue moving higher over the long run, climbing the so-called “wall of worry” while the skeptics sit back and worry.
Perhaps the worries come from the top-down, 30,000-foot view. We prefer the bottom-up, value perspective. There is a survey of analysts whose only job is to forecast corporate earnings. Their salaries, bonuses, and reputations are based on the accuracy of their forecasts. The table included shows year-over-year rates of growth for earnings per share for three indexes: the large cap S&P 500, the S&P Mid-cap 400 and the S&P Small-cap 600.
These analysts are predicting healthy earnings growth for 2026 and 2027, with the biggest potential spurts in small and middle capitalization stocks. They show no sign of an earnings recession over the next two years. These analysts can be wrong and they can revise, but for the time being, they are the best we have and they are seeing earnings growth.
As for current earnings, 813 of the companies in the S&P 1500 Index have reported quarterly earnings. On average, they are beating forecasts by 5.09%, with Consumer Discretionary stocks providing the biggest positive surprise, 14.46% above estimates. As for year-over-year growth, the average for the 813 companies is a healthy 11.07%. Two sectors leading the growth surge are Technology, 23.46%, and Financials, 23.11%
Summary
In addition to the positive earnings situation, we just don’t see the behaviors that often accompany market peaks. Therefore, we expect the market to grind its way higher, perhaps two steps forward, one step back.
The data quoted represents past performance, which is no guarantee of future results. Opinions and forecasts regarding sectors, industries, companies, countries and/or themes, and portfolio composition and holdings, are all subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security, industry, or sector.
Investing in securities involves inherent risks, including the risk that you can lose the value of your investment. An investment concentrated in sectors and industries may involve greater risk and volatility than a more diversified investment. Investments in international securities may entail unique risks, including political, market, regulatory, and currency risks. In general, there is less governmental supervision of foreign stock exchanges and securities brokers and issuers. Investing in fixed-income securities such as bonds involves interest rate risk. When interest rates rise, the value of fixed-income securities generally decreases.
Individual account holdings and composition may vary. Opinions and forecasts regarding sectors, industries, companies, countries and/or themes, and portfolio composition and holdings, are all subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security, industry, or sector.
ICON’s value-based investing model is an analytical, quantitative approach to investing that employs various factors, including projected earnings growth estimates and bond yields, in an effort to determine whether securities are over- or underpriced relative to ICON’s estimates of their intrinsic value. ICON’s value approach involves forward-looking statements and assumptions based on judgments and projections that are neither predictive nor guarantees of future results. Value readings are contingent on several variables including, without limitation, earnings, growth estimates, interest rates, and overall market conditions. Although valuation readings serve as guidelines for our investment decisions, we retain the discretion to buy and sell securities that fall beyond these guidelines as needed. Value investing involves risks and uncertainties and does not guarantee better performance or lower costs than other investment methodologies.
ICON’s value-to-price ratio is a ratio of the intrinsic value, as calculated using ICON’s proprietary valuation methodology, of a broad range of domestic and international securities within ICON’s system as compared to the current market price of those securities. According to our methodology, a V/P reading of 1.00 indicates stocks are priced at intrinsic value. We believe stocks with a V/P reading below 1.00 are overvalued while stocks with a V/P reading above 1.00 are undervalued. For example, we interpret a V/P reading of 1.15 to mean that for every $1.00 of market value, there is $1.15 of intrinsic value which has not yet been realized in the market price.
The unmanaged Standard & Poor’s Composite 1500 (S&P 1500) Index is a broad-based capitalization-weighted index comprising 1,500 stocks of Large-cap, Mid-cap, and Small-cap U.S. companies. The unmanaged Standard & Poor’s (S&P) 500 Index is a market value-weighted index of large-cap common stocks considered representative of the broad market. The unmanaged Standard & Poor’s (S&P) SmallCap 600 Index is an unmanaged index of 600 domestic stocks chosen for their market capitalization, liquidity, financial viability, and sector representation.
Sources: Bloomberg
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