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Some investors and strategists have remained befuddled at the stock market's ascent this year.

Corporate America entered an earnings recession in the first quarter, and even the already-bleak expectations for a second-straight decline in profits were deemed too optimistic.

Back in April, we highlighted work from Barclays that suggested estimates for 2023 earnings were still about 10% too high.

In other words, economic reality was due to eventually meet investors and management teams where it matters most for stock prices: the bottom line.

But a curious thing has happened in the intervening months.

While AI-related hype has driven stocks higher and captured the headlines, fundamentals have also turned around.

At the beginning of first quarter earnings season, analysts expected to see a 6.8% drop in profits from the prior year. By the end of the season, S&P 500 companies reported earnings per share that were down 2% from last year.

And market history tells us it should come as no surprise a better-than-feared quarter has powered stocks higher.

Or rather, that a stock market defying expectations by rallying in the first half of 2023 was signaling to analysts that earnings would likely need to be revised higher.

In a note to clients published Monday, RBC equity strategist Lori Calvasina highlighted the five charts that defined the first half of the year for her team.

And among them was the following chart, which shows earnings revisions turning positive — meaning more earnings forecasts were being revised higher than lower — tends to follow a stock market that has already bottomed out.

Looking through very recent market history, the S&P 500 reached a local bottom three to six months before earnings estimates turned higher in 2016, 2018, and 2020.