What Rising Rates, Strong Profits, and AI Mean for Investors Today

Interest rates, company profits, and AI are shaping today's market. Here's what investors should know about these trends and what they could mean for long-term investment opportunities.

Last Edited by: LPL Research

Last Updated: September 17, 2026

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IN THIS ARTICLE:

Recent insights from LPL Research point to three themes shaping the market right now: the Federal Reserve's interest rate path, the strength of corporate profits, and the growing impact of artificial intelligence (AI). Together, they help explain why the economy has remained stronger than many expected and why investors continue to look for opportunities despite ongoing uncertainty.

Higher Interest Rates Haven't Stopped the Market

Many investors assume that when the Federal Reserve (Fed) raises interest rates, stocks must struggle. History tells a more nuanced story.

Higher rates can slow economic activity because borrowing becomes more expensive. Businesses may think twice before taking out loans, and consumers may cut back on large purchases. But higher rates alone do not guarantee weaker markets.

What often matters more is the reason rates are rising. In many cases, the Fed raises rates because the economy is growing and inflation remains elevated. When businesses continue to hire, consumers continue spending, and corporate earnings keep expanding, stocks have often been able to move higher even during periods of higher rates.

Today's environment reflects some of that resilience. Economic growth has remained steady, consumers continue to support the economy, and many households are less sensitive to rising rates than in the past because they locked in lower mortgage payments years ago. While market swings may continue, history shows that investors should look beyond interest rate headlines and focus on the bigger economic picture.

Why Corporate Profit Margins Matter

Another reason investors have remained optimistic is that many companies continue to generate strong profits.

A simple way to think about profitability is how much money a company keeps after paying its expenses. The more efficiently a company operates, the more earnings it can produce from each dollar of revenue.

Over the past several decades, many businesses have become more efficient through technology, automation, and improved operations. Companies that rely on software, digital services, and intellectual property often require fewer physical resources than traditional businesses, helping them maintain healthy profit levels.

For investors, this matters because earnings remain one of the biggest drivers of stock prices over time. Companies that can grow revenue while controlling costs may be better positioned to reward shareholders in the years ahead.

Rather than focusing solely on daily market moves, investors may benefit from watching whether companies continue delivering consistent earnings growth.

AI Works Best Alongside People

AI has become one of the most talked-about investment themes in the market. New AI tools help businesses work faster, analyze information more efficiently, and improve productivity.

At the same time, AI is not replacing the need for people.

Businesses still rely on employees to make decisions, solve problems, build relationships, and apply judgment in situations where technology alone falls short. The most successful organizations are likely to be those that combine AI's capabilities with human expertise.

For investors, this is an important distinction. The opportunity may not be limited to companies creating AI technology. Businesses that successfully use AI to become more productive could also benefit over time.

As AI adoption grows, investors will continue looking for signs that companies can turn technological advances into real business results.

What This Means for You

Investors do not need to react to every interest rate decision, earnings announcement, or AI headline. Instead, focusing on long-term goals and maintaining a disciplined investment approach can help reduce the impact of short-term market noise.

Markets will always face periods of uncertainty, whether related to interest rates, economic growth, or new technologies. The investors who tend to have the greatest success are often those who stay focused on fundamentals, maintain a diversified portfolio, and avoid making emotional decisions based on daily headlines.

Keeping an eye on the economy, company earnings, and major technological developments can provide useful context, but a long-term perspective remains one of the most important investing tools available.

 

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RISING RATES, STRONG PROFITS, AND AI FAQs

While rising rates can create challenges by making borrowing more expensive for consumers and businesses, history shows that stocks have often performed well during periods when rates were increasing. What matters most is the broader economic backdrop.

 

For example, if interest rates are rising because the economy is growing and inflation remains elevated, businesses may still be generating strong sales and profits. In those situations, investors often focus more on economic growth and company earnings than on higher borrowing costs.

 

Higher rates can lead to periods of market volatility, but they do not automatically signal that stocks will fall. Investors are generally better served by looking at the overall health of the economy rather than reacting to rate changes alone.

Company profits matter because they show how much money a business is generating after covering its costs.

 

When profits grow, businesses have more resources to invest in expansion, develop new products, hire employees, return money to shareholders, or strengthen their balance sheets. Over time, companies that consistently grow their earnings tend to create more value for investors.

 

Profits also provide insight into how effectively a company is being managed. Businesses that can increase sales while controlling expenses are often better positioned to navigate changing market conditions.

 

This is why investors pay close attention to earnings reports. While market headlines may drive short-term attention, long-term investment performance is often tied to a company's ability to consistently grow profits.

Many believe believe AI will change how people work more than it will completely replace workers.

 

AI excels at processing large amounts of information, identifying patterns, and handling repetitive tasks. These capabilities can help employees work more efficiently and free up time for higher-value activities.

 

However, businesses still depend on people to make decisions, solve complex problems, communicate with clients, provide expertise, and exercise judgment. Human skills such as creativity, critical thinking, leadership, and relationship building remain difficult to automate.

 

For investors, the bigger story may be how companies use AI to improve productivity and drive growth. Organizations that successfully combine technology with human expertise could have an advantage as AI adoption continues to expand.

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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