Markets must hit 14% earnings growth forecast in 2026, says Jim Cramer

Macro Economy - The 10-year Treasury yield initially went to 4% first, briefly hitting a 52-week low of 388% in April, before rising again to around 415% [2][3] - The labor market weakened, with monthly job additions declining from over 100,000 to an average of around 17,000 in the past 6 months, and the unemployment rate rising from 4% to 46% [5] - Despite initial market concerns, the Trump administration's policies have overall been favorable for stocks, with the NASDAQ up over 21%, the S&P up almost 17%, and the Dow up almost 14% for the year [7] - S&P 500 earnings growth for 2024 is expected to be slightly lower than anticipated, around 10% instead of 12%, but earnings expectations for 2025 and 2026 have gradually climbed back to levels above initial forecasts [13][15] Market Performance & Outlook - The market initially reacted negatively to potential tariffs, with the S&P falling 21%, but quickly rebounded after the tariffs were reduced or postponed [8] - The "One Big Beautiful Bill Act" (OBBBA), particularly the immediate expensing of capital investments, could be a significant catalyst for earnings growth in 2026 [9] - Earnings growth is considered the most important determinant of stock direction, and the earnings growth outlook has improved over the past 12 months [17][18] - Earnings expectations for 2026 are now nearly 14%, higher than the initial projection of 12%, setting a high benchmark for market performance [16] Federal Reserve & Interest Rates - The Federal Reserve's actions, particularly cutting short-term interest rates, have influenced the tenure, which has touched the 4% level multiple times [2] - There is a lack of consensus on the number of rate cuts needed from the Federal Reserve, even among members of the open market committee [4] - Labor market weakness has allowed the Fed to remain accommodative [6]