Despite widespread investor anxiety over inflation and rising Treasury yields, the Vanguard Total Stock Market ETF (NYSEMKT: VTI) remains an attractive long-term holding for growth-focused investors.
Traders currently see a 90% probability that the Federal Reserve raises interest rates at its September meeting, adding to broader market uncertainty heading into the final stretch of 2026.
Even so, corporate earnings are proving remarkably resilient and are projected to continue growing at a healthy rate through at least the end of 2027.
The key insight here is that stocks do not necessarily need falling interest rates to move higher if corporate profits keep growing fast enough.
Second-quarter results demonstrated how the artificial intelligence boom has been a powerful driver of earnings growth across U.S. companies of all sizes.
Strong reports and revised guidance prompted Barclays to increase its 2026 earnings-per-share estimate for the S&P 500 (SNPINDEX: ^GSPC) from $337 to $365, and its fiscal 2027 projection from $389 to $414.
Barclays also raised its 2026 year-end S&P 500 forecast to 7,950, which would represent another 4% gain from current levels.
One of the most compelling elements of this earnings cycle is that small-cap companies are finally participating in the growth story alongside their large-cap counterparts.
AI development has helped reignite stagnant earnings growth in the small-cap segment, making it a more attractive risk/reward opportunity based on current valuations.
VTI’s broad structure, covering the entire investable U.S. equity universe, provides just enough exposure to small-cap names to add growth potential without making the portfolio excessively risky.
The five largest tech companies are expected to have invested more than $1 trillion into AI by the end of this year, a figure that underscores the sheer scale of capital flowing into the sector.
This sustained investment theme has driven S&P 500 earnings growth over the past couple of years and is expected to continue doing so over the next several quarters.
Questions about whether AI development should slow for safety reasons are unlikely to translate into meaningful action, given the enormous financial stakes involved for major corporations.
Over the long term, equity prices need fundamental balance-sheet strength and actual earnings results to sustain higher valuations, and the current environment appears to be delivering on both counts.
Earnings growth across companies of all sizes is expected to remain robust for at least the next few quarters, which should translate into continued gains for VTI holders through the near term and well beyond.
