Clearwater Capital Group RIA Stock Market Update 8/24/2026

WHY ARE STOCKS PERFORMING SO WELL?

There are seemingly endless reasons for concern about the US economy right now. The national debt just reached $40T. The war in Iran rages on. The Straight Of Hormuz remains closed. American consumers credit card debt just surpassed $1.26T, the highest in history. Widespread AI bubble concerns persist in the equity markets. The housing market remains unaffordable for many Americans. The list goes on and on, but the stock market seems completely unfazed, with most major indexes cruising to all time highs over the last couple of weeks. The S&P 500 is currently up 11.85% year to date. The NASDAQ up 15.19%. The Dow Jones up 10.48%. The small cap Russell 2000 soaring 21.27% this year. Even the Schwab US Dividend ETF (which many of our investors hold) is up a breathtaking 27.96% this year. How does this make any sense? The disconnect can be explained by the fact that the stock market is not a measure of the entire economy. In our view, the stock market is better described as a measure of corporate profits + investor outlook of future corporate profits... and corporate profits are sky high right now. Today we are going to take a look into some of the metrics which are making investors optimistic, and Clearwater Capital Group’s strategy moving forward during market highs.

Earnings, Earnings, Earnings!

Beneath all of the economic uncertainty, American corporations have quietly delivered some pretty breathtaking numbers on their quarterly reports. For those who are not so familiar, every quarter, public companies (companies which trade on the stock market exchanges) must give investors an inside view of their revenue, profits, capital expenditure, and a multitude of other figures. Over 90% of companies in the S&P 500 have reported their Q2 earnings, and the year over year earnings growth rate is up 50.4% from Q2 of 2025. This marks the highest growth rate for the S&P 500 since the second quarter of 2021. Additionally, all 11 sectors of the S&P 500 showed year over year revenue growth, indicating a robust positive performance throughout the market... rather than a concentration of outperformance in just a few sectors. In short, one of the main priorities of stock market investors is corporate profits, and corporations just delivered massive profits for the shareholders.

Interest Rate Optimism

Interest rates are one of the most important factors for determining investor optimism and ultimately stock market performance. The Federal Reserve, controls the federal funds interest rate, which has a trickle down effect that reverberates throughout the entire economy by means of impacting mortgage rates, auto loans, credit card rates, and importantly corporate lending and spending. Up until recently, traders were pricing in a 60% chance that the Fed would increase interest rates in their September meeting. Luckily for stock market enthusiasts, we received a Consumer Price Index report in August, showing a surprise reading on inflation that came in lower than expected... and the expected chance of a September rate hike immediately plummeted to 25%.

What Should Investors Do Now?

To summarize, a wave of excellent earnings reports, plus, investor optimism surrounding favorable interest rate are a strong reason for the terrific performance within the stock market. As far as what we should do from here, we will give you the same guidance as always... we should be doing essentially nothing. At Clearwater Capital Group, we believe in a proactive approach for investing, rather than a reactive one. We are not able to predict the future, but we are able to align our stocks, bonds, cash, and other asset classes, in a way that best align with our long term risk tolerance, time horizon, and investor profile. All of our clients are invested in a way which we believe will best suit them for the long term, and the highs and lows along the way, do not change this view.

Notes & Disclosures

This newsletter is provided for informational and educational purposes only and is not intended to constitute investment, tax, legal, or accounting advice. The views and opinions expressed are those of the author as of the date of publication and are subject to change without notice. References to specific companies, securities, or market sectors are for illustrative and informational purposes only and should not be interpreted as a recommendation to buy, sell, or hold any security. Past performance is not indicative of future results. Investing involves risk, including the possible loss of principal. Readers should consider their individual financial circumstances, investment objectives, risk tolerance, and time horizon before making investment decisions. This material is intended for a general audience and does not take into account the specific investment needs or circumstances of any particular individual.

Clearwater Newsletter August 24th.pdf

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