Why did the stock market soar in the first half of 2026? Experts explain
The Dow is on pace for its best first half of a year since 2021.
The stock market surged over the first half of 2026, shrugging off a war in the Middle East, a historic oil shortage and fear of a bubble in artificial intelligence.
The Dow Jones Industrial Average is on pace for its best first half of any year since 2021. That index has climbed 8.9% since the outset of this year, topping 52,000. Over that same period, the S&P 500 has jumped 9.4% and the tech-heavy Nasdaq has soared 12.5%.
The run-up in stock prices owes primarily to a banner year for corporate earnings, which has been fueled by a resilient economy and many shoppers willing to spend in spite of elevated prices, some analysts told ABC News.
Stellar performance for AI chipmakers has also driven up markets, they added, allowing the major indexes to overcome a lackluster stretch for many of the tech giants that previously lifted markets.
“Earnings have been very, very strong,” said Ed Yardeni, the president of market advisory firm Yardeni Research and former chief investment strategist at Deutsche Bank's U.S. equities division.
He added, “In markets, often the story is more exciting than the fundamentals. This year it has been the fundamentals. The economy has surprised just about everybody with its resilience.”
The economy grew at a solid pace over the first three months of 2026, rebounding from a sluggish performance at the end of last year. Better-than-expected job gains helped to dispel fears of a recession. The labor market added a robust average of about 114,000 jobs each month from January to May, Bureau of Labor Statistics Data showed.
A combined measure of business and consumer spending expanded at the start of this year, Commerce Department data showed. Consumer spending accounts for about two-thirds of U.S. economic activity.
“At the end of last year, the job market was in question and consumer spending was pretty lukewarm. The economy has really impressed in the last six months,” Callie Cox, chief market strategist at Ritholtz Wealth Management, told ABC News.
Those economic gains have helped undergird stock market growth, propelling corporate earnings and pushing up shares, some analysts said.
Despite a temporary dip earlier this month, shares of fast-rising artificial intelligence chipmakers have boosted major indexes.
Micron has soared 306% in value this year. Sandisk has climbed a staggering 830% over that period.
The stratospheric performance of semiconductor firms has helped markets overcome a weak year for the "Magnificent Seven," a group of large tech companies that helped drive stock market gains in recent years.
Meta, the parent company of Facebook, has declined 15% so far this year. Tesla has dropped 7%. Even Nvidia, the world’s largest company by market capitalization, has seen its shares trail the growth of the S&P 500.
“The Magnificent Seven was all the craze in 2024 and 2025. Now it’s sluggish,” Tyler Richey, an analyst at Sevens Report Research, told ABC News. “You’ve got leadership in other corners of tech, especially chipmakers.”
Analysts who spoke to ABC News differed about the outlook for markets over the remainder of 2026.
The combination of elevated inflation and a resilient labor market has raised the chances of an interest rate hike, futures markets show, posing a risk for corporations eager to keep borrowing costs relatively low.
Federal Reserve Chair Kevin Warsh briefly sent stocks tumbling earlier this month in his first press conference atop the central bank. Warsh voiced a commitment to bring inflation down to the Fed's desired level of 2%. The annual pace of price increases stands at more than twice that rate.
Futures markets peg the odds of an interest rate hike in September at about 66%, according to the CME Group's FedWatch Tool, a measure of investor sentiment.
Yardeni said he expects the stock market to continue its rise over the second half of this year, forecasting a further 9% gain in the S&P 500. Richey disagreed, predicting a decline in major indexes through the end of 2026.
“Dovish expectations of a rate cut this year were a narrative in the first half of 2026. Now an interest rate hike is being priced in. There’s more risk and less fundamental support from the Fed,” Richey said.
Still, Richey acknowledged a large degree of uncertainty.
“It has been extremely challenging to time this market,” Richey added.