In memory of those we lost on September 11th, and all that was lost with them. We will never forget.

For those of us afflicted with a compulsion to read the news, it might seem particularly strange that the U.S. stock market has continued to rise over the last few years.

In fact, “rise” is probably underselling it when the record shows that the S&P 500 has more than doubled investors’ wealth from the depths of the (very painful) 2022 pullback to now.

There is no need to relive the daily trauma (I meant, drama…), but the chart above highlights two events too meaningful not to bring up.

See Hey Boss, Have We Tried Boiling the Frog Instead? for my analysis of this new era of tariffs from the perspective of an economist (me) trained in the theory of rational tariff policy. Yes, there is such a thing. Not all tariffs are irrational. But all of them are consumption taxes.

This is when I wrote War Games about why you might be well served to play out portfolio volatility before it happens, so that you don’t end up cashing your chips at the worst of times—when markets are down big and your brain is screaming, “Get me out of here.” We call that a pre-mortem in the business. It beats a post-mortem, if you get a vote in the matter.

What have we learned so far?

Not much—other than that, somehow, the market has repeatedly “looked beyond” dramatic events that have been rewiring the global economy in real time.

And unlike the Covid era, “free money” is hardly the purported market stimulant that it was in 2020-2021. In fact, interest rates have been going up a pretty decent amount recently, as you can see below.

And to state what should be self-evident, the market ignoring bad news isn’t some kind of given.

Sure, people talk about stocks climbing a “Wall of Worry,” a clever way to capture the complex reaction function baked into markets between risk and prices—and the compensation investors expect to earn for bearing that risk. But the climbing isn’t mechanical.

Markets aren’t blind; they see plenty.

That’s how you get the drop of April 2025 or that of March 2026.

But maybe they’re hyper-focused—possibly to the point of myopia—on the ultimate end goal of investing, which is to fund profitable human enterprise.

And that takes us to corporate earnings.

Roughly 20 years ago, someone told me, “Accounting is the language of business; you need to be accounting literate.”

In a world that kicks you in the teeth for being accounting-illiterate, paying attention to earnings is akin to not losing the thread of the story as you flip pages.

And that’s what the market has been doing over the last three years.

Here is the long view before we zero in: earnings adjusted for inflation going as far back as practical (1871, thanks to Nobel laureate Robert Shiller over at Yale).

If you’re wondering why the U.S. stock market has been a rewarding bet over the last 100 years or so, look no further.

→ Earnings on U.S. stocks have climbed from some version of $5 after the post-WWI crash to $250+ today (again, using dollars made comparable after inflation).

Keeping it simple, that’s roughly a 50x rise in corporate America’s ability to generate gains for its shareholders.

This rise in real earnings since the late 19th century was not without its periods of angst and suffering.

How about deep psychic and recurring financial pain nearly every time the line would stop going up?

Of course, the Great Financial Crisis was unequivocally the sharpest decline in corporate earnings in the modern era, so you can see why many at the time feared that the U.S. “earnings-making machine” had suffered irreparable damage.

Lucky for us, that wasn’t the case. Not even a little. Easy for us to laugh about now; not so much then.

I am giving you market returns—the thing you see in your brokerage account—along with earnings.

Run your finger over the annual returns. Watch the clusters of positive years and feel the sharp reversals along the way: the glorious decades and those remembered as “lost.” If you take nothing else from this, let it be a slightly more visceral appreciation for the mechanics of market returns historically.

And that takes us to today.

Real earnings have been rising sharply since the 2022 pullback.

Some of that is the large-scale corporate spending to build the “AI economy.”

Whatever the causes may be in their totality, two things are worth remembering.

→ Sure, read the news, but watch the earnings. The news probably won’t matter to the market as much as you’d expect it to, as long as earnings keep ticking up.

→ And yes, the recent rise in earnings has been sharp. But if you look at the longer track record, it’s one with many peers. A squiggle up amid a long history of ups and downs. The long term has been “the compounding machine.” The near term is how bad things happened to good people.

Don’t get too comfortable in today’s sunshine. I don’t think they’ve suspended the weather just yet.

And do whatever is in your power to see to it that you do two things, (i) scale risk so you’re not one of the good people to whom irrecoverably bad things happen along the way and (ii) use your influence in this world to keep the “American earnings machine” honest and healthy. That’ll mean different things for different people.

But the thing that happened over the course of the 20th century was as close to economy magic as one can hope for. Don’t take it for granted.

Blind faith won’t do the trick.

Active engagement and the absence of dogma clouding our collective judgment are how we get another shot at this, for ourselves and for the generations who will inherit this whole thing from us.