Wall Street may be riven by anxiety, political melodrama in America may be the new normal, and state-sanctioned assassinations may seem like the plot twists of an over-the-top Tom Clancy thriller. Yet amid this chaos, the stock market rally continues apace.

The alarming daily headlines can obscure the fact that companies are still profitable, which is ultimately the key driver of stock prices. The foundation of this bull market is solid, propelled by a Federal Reserve poised to cut interest rates and a pronounced uptrend in corporate earnings.

Back-to-back assassinations in the Middle East last week of Hamas and Hezbollah leaders, as well as the continuing carnage of the Russia-Ukraine war, have been roiling energy markets and by extension the broader stock market.

An Israeli air strike killed Hezbollah commander Fuad Shukr in Beirut, Lebanon, on July 30. Then a few hours later on July 31, a bomb smuggled into a Tehran guesthouse months ago killed the Hamas leader Ismail Haniyeh.

An explosive device hidden in a heavily guarded VIP complex where Haniyeh was known to stay in Iran was the means of his demise. Israel’s foreign intelligence service Mossad is believed responsible. Investors are on edge as the region stands on the precipice of wider war.

Volatility this week was exacerbated by disappointing earnings reports from a handful of tech giants. However, the overall earnings landscape tells a considerably more positive story.

The S&P 500 is on track to achieve year-over-year earnings growth of over 11% in the second quarter. Keep your eye on the corporate bottom line; that’s the main pillar of this equity rally.

For the entire year, S&P 500 earnings are projected to grow by over 10%, a robust figure that should provide strong support to equity markets for the second half of this year and into 2025.

Overall, 75% of the companies in the S&P 500 have reported actual results for Q2 2024 to date, according to research firm FactSet. Among these companies, 78% have reported actual earnings per share (EPS) above estimates, which is above the five-year average of 77% and above the 10-year average of 74%.

As we approach the fourth quarter of 2024, it’s expected that the primary contributors to earnings growth will shift away from the technology sector. This broadening of market leadership to include both growth and value/cyclical sectors is a healthy sign for the market’s long-term stability and diversification.

As the following chart shows, the New York Stock Exchange Advance/Decline Line (NYAD) has dipped a bit lately but still reflects long-term upward momentum:

The NYAD is a popular market breadth indicator that measures the difference between the number of advancing and declining stocks on the New York Stock Exchange.

When the NYAD is trending upwards, it indicates that more stocks are advancing than declining on a cumulative basis. When the line is trending downwards, it suggests that more stocks are declining than advancing.

A broad participation of stocks in the market’s movement is a sign of a healthy and sustainable trend. This breadth suggests that the rally is not just driven by a few large-cap stocks but is supported by a wide range of sectors and companies.

On the economic front, U.S. real gross domestic product (GDP) grew by 2.8% on an annualized basis in the second quarter, and the Atlanta Fed’s GDPNow tracker estimates a 2.5% growth rate for the third quarter. These figures suggest that while the economy is cooling, it is not on the brink of collapse.

I think fears of a recession are unwarranted and a “soft landing” is in the cards. To support my contention, the government reported Thursday that initial jobless claims totaled a seasonally adjusted 233,000 for the week, a decline of 17,000 and lower than the estimate for 240,000.

Next week’s consumer price index (CPI) report is expected to show a decline in headline inflation to 2.9% year-over-year in July, down from 3.0% in the previous month. This trend of moderating inflation, coupled with the Fed’s inclination to reduce interest rates, creates a supportive environment for financial markets.

Investors should look beyond the televised mayhem and focus on the underlying strengths that continue to drive market performance.

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Robert Rapier is the chief investment strategist of Utility Forecaster, Income Forecaster, and Rapier’s Income Accelerator.

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John Persinos is the editorial director of Investing Daily.

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This article previously appeared on Investing Daily.