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| By Sean Brodrick |
I keep seeing headlines along the lines of “10 Reasons the S&P 500 Will Crash.”
Today, I’ll tell you how you can bet against that conventional wisdom and potentially make a pile of money.
And it’s thanks to three cycles hard at work powering up stocks.
Sure, there are worrisome signs in the economy. But here's something investors sometimes forget: The stock market isn't the economy.
It's closer to a wealth index. And America's wealthy consumers and corporations are doing pretty darn well.
More importantly, three powerful cycles point toward a strong finish for stocks in 2026.
Cycle No. 1: The Midterm Slingshot
We're currently in Year 2 of the four-year presidential election cycle.
Historically, that's the weakest year for stocks, with relatively modest average returns and the biggest average drawdowns — around 19%.
Sounds bearish, right?
Here's the interesting part: Most of that weakness tends to come during the first half of Year 2. Then the cycle changes.
Historically, the market tends to bottom in late Q2 or early Q3 as the midterm elections approach and political uncertainty begins to fade.
And what comes next can be powerful.
Since 1938, the S&P 500 has posted a positive return during the 12 months following a midterm election 95% of the time, with an average gain of more than 14%.
Why?
One reason is that investors start looking ahead to Year 3 of the presidential cycle — historically the strongest of the four years, with average gains in the 10% to 15% range.
Wall Street doesn't wait until January to start pricing that in.
That means we're entering what has historically been the sweet spot of the presidential cycle.
Cycle No. 2: America's Inventory Machine Is Turning
The second cycle is less well known. It's called the Kitchin cycle.
Named after economist Joseph Kitchin, it tracks the roughly 36- to 42-month cycle in corporate inventories.
Companies build too much inventory. Then they cut orders and work it down.
Eventually inventories get too lean, forcing companies to start ordering, producing and hiring again.
And the evidence suggests we're entering that rebuilding phase now.
The ISM Manufacturing PMI bottomed at 47.9 in December 2025 after a 10-month contraction.
It moved back into expansion in January and hit 55.6 in July — its strongest reading since May 2022.
Customer inventories fell to 40.7 — deep into "too low" territory.
New orders climbed to 56.7.
Backlogs jumped from 50.5 to 55.0.
And production surged to 58.5, its highest level since November 2021.
Put those pieces together: Inventories are lean, orders are accelerating, backlogs are rising and factories are ramping production.
That's almost a textbook recipe for an inventory rebuilding cycle … and more profits.
Which brings me to the third cycle.
Cycle No. 3: Earnings Are Surging
Stock prices ultimately follow earnings. And right now, earnings are going the right way — fast.
Via FactSet, here is a chart of how the S&P 500’s price action is following earnings estimates higher.
With 88% of S&P 500 companies reporting second-quarter results, blended year-over-year earnings growth has reached a whopping 50.4%.
That's more than twice the 23.1% analysts expected at the end of June.
Even better, 86% of S&P 500 companies have beaten earnings estimates. That's well above the five-year average of 78%.
And second-quarter S&P 500 revenue growth is running at 15% — the strongest since the fourth quarter of 2021 — while 76% of companies have beaten revenue estimates.
Wall Street expects the good times to continue.
Analysts currently forecast S&P 500 earnings growth of 27.3% in Q3 and 24.9% in Q4.
That chart tells an important story.
Stock prices and forward earnings estimates tend to move together. And right now, forward earnings are pulling stocks higher.
And It's Not Just the Mag 7
Here's another reason I'm bullish.
The bears love to say this rally is being driven entirely by a handful of mega-cap technology stocks. The numbers say otherwise.
Strip out extraordinary gains from giants such as Alphabet and Amazon, and the rest of the S&P 500 is still delivering 32% earnings growth.
Ten of the S&P's 11 sectors are reporting positive year-over-year earnings growth. Eight are posting double-digit growth.
That's what we want to see. This rally isn't just getting stronger. It's getting broader.
Here's How to Play It
We have the presidential cycle turning bullish.
We have the Kitchin inventory cycle shifting into expansion.
And we have a powerful earnings cycle pushing forward estimates higher.
Any one of those could help stocks.
All three hitting at roughly the same time could provide serious rocket fuel into year-end and beyond.
And since technology continues to lead this bull market, one simple way to ride it is the Vanguard Information Technology ETF (VGT).
Here’s a weekly chart …
You can see how VGT consolidated starting in April but broke out more recently.
It may retest that breakout, but the obvious path is higher.
VGT owns more than 300 U.S. technology stocks across software, hardware and semiconductors.
It's heavily weighted toward the mega-cap tech leaders but also gives you exposure to mid- and small-cap technology companies.
And its expense ratio is a dirt-cheap 0.09%.
The bears will always have reasons why stocks should go down.
Will stocks zig and zag? Sure! But you should use pullbacks to get long.
Three major cycles are telling us stocks are going higher. And I recommend you listen to the cycles.
All the best,
Sean Brodrick
P.S. The four-year presidential election cycle isn’t the only political pattern pointing to something big right now.
Yesterday afternoon, our Director of Research and Ratings, Gavin Magor, unveiled his team’s greatest discovery to date: a 75-day profit window that starts on Friday leading up to the midterm election.
But it’s not the S&P 500 or even the tech sector as a whole that will benefit most.
Instead, he and his team developed a weapon to pinpoint the biggest potential gainers. See how it works here.
