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Founder, Chaikin Analytics

5 Reasons the S&P 500 Could Keep Rallying Through Year-End

Authored by Thomas Hughes. Posted: 8/20/2026.

The S&P 500 is set up for a strong year, and additional gains may still be ahead. Seasonally, Q4 is the strongest quarter of the year, with the market typically rising 80% of the time. Other factors suggest this year could follow that pattern. To begin, the onset of Q4 marks the end of the typically volatile summer trading season. Smart-money investors who “sold in May and went away” are returning and ready to reenter the market. While September is usually weak, rising only about 50% of the time, October typically marks a bottom and rises about 60% of the time, with November and December doing the heavy lifting. In the best years, the Santa Claus Rally caps the seasonal advance and keeps the market rising into the New Year.

Wicked-Hot Earnings Growth Underpins This Rally

Earnings drive every market, and they are growing at a robust pace in 2026, with strength expected to continue through year-end. Coincidentally, JPMorgan Chase (NYSE: JPM) kicks off the Q3 reporting season in mid-October, coinciding with the seasonal bottom indicated by the data. As it stands, the Q2 results reveal a significant disconnect between the market and reality: Fears are valid, but the facts are clear—the S&P 500 faces hurdles, but profitability is on the rise.

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S&P 500 earnings growth topped 50% in Q2, outperforming the consensus estimate by nearly 3,000 basis points, and there is no reason to think growth will slow in the current quarter. The more likely scenario is that the S&P 500 significantly outperforms the mid-August consensus estimate of about 27.5% and provides solid Q4 guidance.

Energy is driving the outperformance. High oil prices are boosting earnings, with some companies reporting roughly 150% year-over-year growth, including Exxon Mobil (NYSE: XOM). The caveat is that this is not an isolated event. Energy prices remain high, benefiting energy stocks, but the core driver is the AI boom, which continues to accelerate. NVIDIA (NASDAQ: NVDA), as the leader, posted 140% year-over-year growth in non-GAAP earnings per share in its latest reported quarter, while revenue rose 85%; the earnings tailwind remains strong.

The FOMC Is Unlikely to Hike Rates

As concerning as high energy prices and inflation are, the FOMC is unlikely to hike interest rates this year. Oil prices are a key driver of inflation, and the FOMC has little control over them. The best it can do is impair business activity with higher interest rates in hopes of curbing oil demand, but it is unlikely to take that approach given the economic data. The economy is not in danger, but the latest readings should give the committee pause.

Labor markets, the Fed's other mandate, are still expanding, but only tepidly, and could easily tip into contraction. Retail sales figures are more alarming, having contracted unexpectedly during the June-to-July period. The more likely scenario is that the FOMC stands pat and adopts a wait-and-see posture. That may be enough—stability is as good as a rate cut if it allows businesses and enterprises to advance their strategies as planned.

The AI Boom: It’s About to Boom Again

The AI boom is the core driver of this market, led by NVIDIA and supported by an expanding ecosystem of technology companies. Within this trend, two fall catalysts stand out, starting with NVIDIA’s summer activity. The company not only cemented its pipeline but also derisked its outlook by securitizing its GPUs. NVIDIA removed risk from its balance sheet while providing liquidity for its customers—a brilliant move if ever there was one. More importantly, the earnings boost for many AI companies is back-ended. Last year’s spending, which was a hurdle, translates into next year’s revenue and earnings gains, creating an additional catalyst.

The second catalyst is Advanced Micro Devices (NASDAQ: AMD). The company is launching initial deliveries of its MI450 line and Helios rack systems this quarter, ushering in the inference age by providing inference-focused GPU capacity at a lower cost. This is critical because the inference infrastructure market is expected to grow rapidly and eventually surpass demand for model training. AMD’s forward outlook does not reflect this opportunity. Expect the company to outperform, amplify the NVIDIA effect on the S&P 500, and drive a bullish sentiment cycle for its stock and the broader ecosystem.

Market Breadth Is OK; Catalysts for Improvement Are in Play

Market breadth is the final piece of this puzzle. As indicated by the Advance/Decline Line and the New Highs/New Lows index, market breadth is OK. It weakened somewhat over the summer but did not deteriorate enough to indicate market distribution. As it stands, the indicators are trending higher, showing relative strength with a bullish bias and several catalysts in play. The likely outcome is that breadth improves as summer gives way to early fall, adding lift to the major indices. As of late August, the S&P 500, Dow Jones Industrial Average, NASDAQ Composite and Russell 2000 all reflected uptrends and generally bullish conditions despite the summer swoon.