3 Key Metrics That Will Determine Whether The Stock Marke…
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1. Oil prices and supply
Oil prices have a significant impact on the economy. Not only do they influence gas prices at the pump, but they also make everything feel more expensive because so many goods and services require transportation to get from one place to another.
High oil prices have also increased inflation expectations and ly contributed to the Federal Reserve’s recent decision to raise interest rates.
The Iran war, which essentially closed the Strait of Hormuz, a key oil chokepoint bordering Iran and Oman, sent oil prices soaring. As of this writing, West Texas Intermediate (WTI) Crude oil traded slightly below $91 per barrel, while Brent Crude traded around $99.40. WTI directly influences U.S. gas prices.
I think many investors have been surprised that oil prices haven’t gone even higher and that the market has remained resilient, despite elevated oil prices.
Perhaps the economy will remain resilient if oil prices rise more, but I don’t think investors will hold the line forever. The U.S. Strategic Petroleum Reserve (SPR) ended the week of Sept. 11 with less than 285 million barrels, the lowest level since 1982.
Not only are the reserves nearing “critical levels” of below 250 million barrels, but getting down this low also risks damaging the caverns where the oil is stored, according to experts.
2. Long-term bond yields
Higher inflation expectations and concerns over mounting U.S. debt, which is not exactly a new problem, have led to a sharp increase in bond yields, particularly those on longer-dated U.S. Treasury bonds.
10 Year Treasury Rate data by YCharts
Higher bond yields are typically bearish for stocks because they make safer assets, such as bonds guaranteed by the U.S. government, more appealing, essentially increasing the bar for riskier assets, stocks.
Higher bond yields also make borrowing much more expensive for consumers and businesses. High mortgage rates, coupled with high home values, have made buying a house difficult for many Americans. Also, new debt the U.S. issues comes with much higher interest costs, forcing increased spending by the federal government.
Similar to oil prices, I think we are nearing bond yield levels we won’t want to exceed. Since the Great Recession in 2008, the economy has been in an ultra-low-interest rate environment until the Fed began hiking rates in 2022.
Although those low rates after the Great Recession didn’t coincide with a healthy economic environment, the economy adapted, so a rapid reversal to much higher rates could lead to a tough adjustment period.
3. S&P 500 earnings estimates
If there’s one thing that’s kept the S&P 500 moving higher despite all the challenges, it’s that the S&P’s collective earnings and forward earnings estimates continue to surge.
At the end of the day, most investors value the S&P 500 based on earnings multiples. If earnings keep growing, that’s often enough to push the market higher, regardless of other challenges. And if earnings continue to grow, investors will often award that index or stock a higher multiple.
In 2025, the S&P 500 generated roughly $271 per of earnings. This year, strategists, on average, expect nearly $363 in earnings per , or 34% growth, according to research from LSEG published on Sept. 11. In 2027, analysts expect that number to rise another 15%.
Sure, that may not be as strong as 2025 or 2026, but it’s still very solid. Now, some investors may see this and believe the market has hit peak earnings growth and decide it’s time to lower the multiple and therefore their price targets.
It’s hard to say how investors will react, but investors should ultimately keep an eye on forward S&P 500 earnings estimates. Although 15% growth in 2027 may not drive the market much higher, it’s still growth and probably can support current levels.
Investors should be watching whether those estimates move lower or higher. That’s ultimately going to determine if the market can keep pushing higher.
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About the Author
Bram Berkowitz is a contributing Motley Fool stock market analyst covering financials, technology, consumer goods, and macroeconomic trends. Before The Motley Fool, Bram worked in equity research covering bank stocks and as a reporter for local publications. He holds FINRA Series 7 and 66 licenses, as well as a bachelor’s degree in business with a minor in economics from Syracuse University.
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