Markets Balance Strong Profits, Higher Rates, and Global Opportunities

Markets are balancing strong corporate earnings, higher interest rates, and shifting global trends. Learn how AI, company profits, and international developments may shape opportunities for investors.

Last Edited by: LPL Research

Last Updated: September 24, 2026

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IN THIS ARTICLE:

The market has been surprisingly resilient this year, even with higher interest rates, ongoing inflation concerns, and plenty of headlines about global uncertainty. So, what’s helping keep stocks moving forward?

Strong Earnings Explain Market Resilience

A big part of the answer comes down to corporate earnings. Many of the largest companies in the market continue to generate strong profits, particularly technology and artificial intelligence (AI)-related businesses. Companies are generally earning more money on each dollar of sales than they did a decade ago, helping support stock prices even as economic challenges remain. 

At the same time, investors should remember that some of today’s profit growth may not last forever. Certain industries are benefiting from unusually strong demand, limited competition, or the current AI investment boom. Those conditions can change over time as more companies enter the market and spending patterns normalize.

Why Interest Rates Still Matter

Interest rates have become one of the most closely watched topics for investors. When rates rise, borrowing money becomes more expensive for households and businesses. That can affect everything from mortgages and auto loans to business expansion plans.

While higher rates can create challenges, they do not automatically mean trouble for markets. History shows that stocks and bonds can continue to perform well when the economy remains healthy and companies keep growing earnings. Investors often react strongly to rate announcements, but longer-term market performance tends to depend more on business growth and corporate profits than on any single decision by the Federal Reserve (Fed).

For investors, the takeaway is simple: pay attention to interest rates, but do not view them in isolation. They are just one piece of a much bigger economic picture.

What’s Happening Outside the U.S.?

International markets are being shaped by several important trends.

One of the biggest trends is the global race to develop and adopt AI technology. Companies and countries that are investing heavily in AI continue to attract attention from investors around the world. AI is influencing where money flows, which industries are growing, and which regions may have an advantage in the years ahead.

China remains another key story. While some investors hope for major government stimulus measures to boost economic growth, expectations may be running ahead of reality. Economic policy decisions, trade relationships, and competition in emerging technologies will remain important factors to watch.

Investors should also keep an eye on the U.S. dollar. Changes in the dollar’s value can affect overseas investments, global trade, and returns from international markets.

What This Means for You

While today's market faces several challenges, the overall picture remains more balanced than many headlines suggest.

A few key themes stand out:

  • Strong margins in corporate America continue to support stocks.
  • Higher interest rates may create volatility, but they do not necessarily derail markets.
  • AI remains a powerful force influencing businesses and global investment trends.
  • International markets may present opportunities, but investors should pay attention to economic and policy developments abroad.

Rather than focusing on short-term headlines, investors may benefit from keeping their attention on the bigger drivers of market performance: earnings growth, economic conditions, and long-term investment trends.

 

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STRONG PROFITS, HIGHER RATES, AND GLOBAL OPPORTUNITIES FAQs

Why are S&P 500 margins still strong?

The index has changed structurally over time. The S&P 500 has migrated away from capital heavy cyclical businesses and toward companies with more predictable recurring revenue and higher margins. Strong demand for AI-related products and services, namely semiconductors, has also provided a boost to many of the market’s largest companies.

 

However, investors should keep in mind that some of these profit drivers may be temporary. Certain industries are benefiting from unusually strong demand or limited supply, conditions that tend to attract more competition over time. While the floor for margins may be higher now, as those conditions normalize, profit growth may still slow from its current pace. 

Higher interest rates can create challenges because they increase borrowing costs for consumers and businesses. As loans become more expensive, spending and investment activity can slow, which may put pressure on economic growth.

 

That said, higher rates do not automatically lead to poor market performance. History shows that stocks and bonds have often faced temporary turbulence following a rate hike, before recovering when the economy remains healthy. While rate increases can create short-term market swings, investors are often better served by focusing on the broader economic picture rather than any single interest rate decision. 

The global economy is more connected than ever, which means developments overseas can affect investors in the United States. Economic growth, government policy decisions, trade relationships, and currency movements all play a role in shaping investment returns around the world.

 

International markets may offer opportunities that are different from those available in the U.S., particularly when certain regions, industries, or countries are growing at different rates — underscoring the importance of a diversified portfolio. At the same time, factors such as developments in China, global AI competition, and changes in the value of the U.S. dollar can influence market performance and deserve investors' attention. 

Disclosures

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change. ​

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results. ​

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. ​

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy. ​

All investing involves risk, including possible loss of principal. ​

US Treasuries may be considered “safe haven” investments but do carry some degree of risk including interest rate, credit, and market risk. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price. ​

The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The PE ratio (price-to-earnings ratio) is a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share. It is a financial ratio used for valuation: a higher PE ratio means that investors are paying more for each unit of net income, so the stock is more expensive compared to one with lower PE ratio. ​

Earnings per share (EPS) is the portion of a company’s profit allocated to each outstanding share of common stock. EPS serves as an indicator of a company’s profitability. Earnings per share is generally considered to be the single most important variable in determining a share’s price. It is also a major component used to calculate the price-to-earnings valuation ratio. ​

Precious metal investing involves greater fluctuation and potential for losses.

The fast price swings in commodities will result in significant volatility in an investor’s holdings. Commodities include increased risks, such as political, economic, and currency instability, and may not be suitable for all investors.​

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. Indexes are unmanaged and cannot be invested in directly.

The MSCI US Broad Market Index captures broad U.S. equity coverage. The index includes 3,204 constituents across large, mid, small and micro capitalizations, about 99% of the U.S. equity universe. Indexes are unmanaged and cannot be invested in directly.

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price. Private credit carries certain risks — illiquidity, opacity, borrower concentration, and bespoke structures — that distinguish it from corporate bonds and bank loans and complicate its evaluation and oversight.

All index data from FactSet or Bloomberg.

This research material has been prepared by LPL Financial LLC.

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