Price vs Pressure: Why Markets Keep Climbing

Gas prices are up. No question, but that’s not what drives markets.

What matters is pressure—how much those prices are actually squeezing consumers. When you adjust for wage growth and better fuel efficiency, gas today is still slightly below the 30-year average as a share of income. That’s the key. People may notice higher prices, but they’re not being financially squeezed by them.

See the chart below—we’re far below the peak of 2022 or where things were for an extended period of time, 2010-2014. (Chart from Duality Research)

And if the consumer isn’t under real pressure:

• Spending holds up

• Businesses keep generating revenue

• Earnings stay intact

Speaking of earnings.

This chart shows how Wall Street consistently revises earnings expectations—and usually gets them wrong.

The “Snake Charmer Effect,” as Duality Research calls it, refers to the “cobra heads” you see in the chart above. Estimates tend to start higher, get marked down over time, and then companies come in and beat those lowered expectations.

You can see that last year, and in Q1 of this year, analysts estimated earnings trended lower and lower, then jumped right as these companies started reporting their results. The gap between lowered forecasts and actual results creates “earnings surprises.” When companies deliver better-than-expected results—even if expectations were just set too low—stocks tend to move higher.

It’s a pattern that plays out over and over again.

At the end of the day, markets don’t move on headlines—they move on reality. And right now, the reality is that consumers are still holding up and companies are still delivering. As long as that stays intact, the backdrop for stocks remains constructive. It’s easy to get caught up in what feels expensive or concerning, but the data continues to tell a different story—one that’s quietly supporting higher markets.

Process over predictions.

Shean