Capital Market Outlook: The Five Shocks of 2026 and the Extraordinary Resilience of the U.S. Economy – Merrill Lynch

Merrill Lynch (A Bank of America Company) · September 28, 2026

Despite facing five unexpected macro shocks in 2026—including surging diesel prices, Fed rate hikes, and midterm political volatility—the U.S. economy and corporate profits have surprised to the upside. Equities continue to show resilience, and investors are advised to look through election uncertainty and capitalize on strong economic fundamentals.

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Finvaulta summarizes Merrill Lynch (A Bank of America Company)'s analysis. Attribute opinions, forecasts, time-sensitive values, and chronology to the issuer and report date; do not treat this page as an independent verification or a current market-data source.

Key Takeaways

1.The U.S. economy and corporate sector have shown remarkable resilience against five major shocks in 2026: elevated diesel prices, Fed policy shifting to rate hikes, an earnings boom, hotter-than-expected GDP growth, and midterm election political shifts.
2.Equities have defied the traditional volatile midterm playbook, experiencing a maximum drawdown of only 9% versus the historical average of 20%, with seasonal trends pointing to constructive post-election performance.
3.Yield curve flattening and drift higher in long-dated yields reflect solid underlying real economic growth and Fed policy rather than unanchored inflation expectations.

Portfolio Considerations
Macro Strategy: The Five Shocks of 2026—And the Extraordinary Resilience of the U.S. Economy
Market View: 2026 Has, So Far, Defied the Traditional Midterm Year Playbook
The Ticker Tape: What is the bond market telling us?
Markets in Review
Equities
Fixed Income
Commodities & Currencies
Economic Forecasts
Asset Class Weightings
CIO Equity Sector Views

Report data

Exhibit 1: The Five Shocks of 2026: What Investors Expected vs. What They Got — as of September 28, 2026.

Metric	Estimate	Context
S&P 500 2026 EPS consensus estimate	340 USD per share	Consensus estimate rose from roughly $290 at the start of the year to $340 per share by late September.
U.S. Diesel Price	6.52 USD/gallon	Surged from $3.55 a gallon at the start of the year due to refinery disruption in the Middle East and Ukraine.
Q2 S&P 493 Earnings Growth (ex-Magnificent 7)	31.8%	Strongest profit expansion for the non-megacap index members since late 2021.
U.S. Public Debt	40 trillion USD	Surpassed $40 trillion for the first time, oscillating around 100% of GDP.
Atlanta Fed GDP tracker Q3 real GDP estimate	5.1%	Running at a red-hot annualized rate, refuting slowdown expectations.

Source: Bloomberg; Author(s) / Energy Information Administration; FactSet; U.S. Treasury, Bureau of Economic Analysis; Atlanta Fed. This is a dated model snapshot, not a live forecast.