Morgan Stanley’s Andrew Slimmon, who runs the firm’s Global Strategies group, delivered a contrarian message on Barron’s Streetwise podcast that cuts against the prevailing wisdom on Wall Street. The most common question he hears from individual investors right now: “I don’t get why the stock market is at an all-time high.” His answer reframes the entire valuation debate.
“I have never seen the magnitude of these earnings increases that I have seen year to date,” Slimmon said. The implication is striking. “If this continues, we’re going to look back and say, wow, the stock market wasn’t expensive, it was actually cheap.”
The Earnings Data Backing the Thesis
Looking directly at the latest Bureau of Economic Analysis figures provides incredible fundamental support for Slimmon’s broader framing. Total domestic corporate profits accelerated to reach $4.35 trillion in the final quarter of 2025, locking in a powerful 10% year-over-year growth rate. The prior quarter posted a similarly strong 9% annual expansion, proving that the corporate sector has managed to sustain an elevated pace of earnings growth. For comparison, quarterly expansion throughout 2024 hovered in a much tighter band between 3% and 7%. This clear fundamental acceleration shows up across multiple sectors.
The domestic manufacturing sector tells a strikingly similar story of bottom-line health when you dig into the data. This core industrial space generated $759.6 billion in fourth-quarter profits compared to $727.8 billion during the exact same window a year earlier. Sequential operational momentum is also building rapidly across corporate America, with quarter-over-quarter profitability growth picking up steam to hit 6% following a solid 5% expansion in the third quarter. Investors can review the full, unedited dataset tracking these industrial corporate profit trends directly through the open portal at the Bureau of Economic Analysis.
Why the Disconnect Persists
Market analysts tracking the macroeconomic landscape point out that the bearish case has plenty of fuel right now. The University of Michigan Consumer Sentiment Index sits at 49.8 as of April 2026, below the recessionary threshold of 60 and down from a July 2025 peak of 61.7. The 10-year Treasury yield closed at 4.57% on May 21, 2026, sitting at the upper end of its 12-month range. CPI is running at a seasonally adjusted 332.4, up 0.6% month-over-month, with the index at the high end of its trailing 12-month range.
However, veteran portfolio managers like Slimmon argue that none of this changes the math on stocks. “What ultimately drives stocks is earnings and earnings revisions, and that’s going very powerfully the right way,” he said. The S&P 500 reflects that flow. The SPDR S&P 500 ETF Trust (NYSEARCA:SPY | SPY Price Prediction) is up 9% year-to-date and 28% over the trailing year through May 22, 2026. Slimmon expects the market to refocus on macro worries once earnings season fades, creating what he called “a great, you know, fat pitch the way it was kind of in the February, March timeframe.”
The Setup for a “Fat Pitch”
Financial market timelines show that this specific window aligns perfectly with the sudden VIX spike to $31.05 on March 27, 2026, which has since completely normalized to $16.76 as of May 21. Institutional fear has quietly reset while corporate earnings continue compounding aggressively in the background. The official first-quarter GDP print further reinforces this corporate resilience case. Real economic growth expanded at an annualized two percent rate, with localized business investment jumping nearly nine percent to mark its best sequential reading in recent quarters, while core industrial exports rebounded by double digits.
The International Wrinkle
Slimmon is also positioning beyond US borders after years of skepticism on European valuations. “We’re starting to find more ideas where companies are starting to beat and raise, and they’re starting to be much more pro-shareholder friendly,” he said. He is keeping US exposure intact because “we are the focus of the AI rollout.” His view is that a global approach should outperform the S&P 500 without abandoning American equities.
The important takeaway for investors weighing whether all-time highs equal expensive: anchor on revisions data above headline price levels. If Q1 and Q2 2026 earnings sustain the 9%-plus YoY profit growth trajectory from the back half of 2025, multiples that look stretched today get cheaper by the quarter. Keep an eye on the breadth of beat-and-raise activity heading into summer guidance updates.
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