Over the past year, the S&P 500's climb has rested on a narrow but solid base: earnings expectations going up, not investors paying more for the same profits. That's a key distinction, and it's at the heart of a recent discussion between Ritholtz Wealth Management CEO Josh Brown and DataTrek co-founder Nick Colas.

Their point? The quality of a rally matters as much as its size. This one, so far, has been built on earnings, not euphoria.

With the index trading at roughly 20 times earnings, the room for further gains depends largely on whether analysts keep raising forecasts—and whether risks like interest rates, oil, and geopolitics ease enough to justify a richer valuation. Brown and Colas walk through three bullish paths for the next 12 months, each demanding evidence, not just optimism.

Earnings Carry, Valuations Stay Put

The most straightforward scenario: if profit growth continues, the market can rise without any help from valuation expansion. Colas puts the likely upside at 6% to 16%, with the multiple holding around 20x.

"No expansion… we just maintain the multiple we're at, but the corporate earnings growth that we've been experiencing continues," Brown noted.

At current valuations, there's little room for disappointment, but also a clear path forward if corporate America—especially mega-cap names—keeps executing. Colas backs this up with data, noting this year's move has been "100% earnings" and that in most years analysts "start high and trim," rather than raise forecasts midyear.

What Unlocks a Better Outcome?

The middle scenario implies 13% to 28% upside, requiring both earnings growth and multiple expansion to about 22x. "That would be awesome, but that's not most likely," Brown said, drawing the line between possibility and probability.

This path ties geopolitics, oil, and valuation into one chain. If conflict risk fades and energy prices retreat, inflation pressure eases, rate volatility calms, and investors may be willing to pay more for each dollar of earnings.

The AI Test Is Revenue, Not Narrative

The most bullish path—12% to 39% upside with a 24x multiple—faces the toughest scrutiny. Colas insists that AI enthusiasm must translate into measurable revenue across both suppliers and customers, not just coding productivity. It's a similar argument to Bob Elliott's recent Kellogg's remark, where the economist stressed that ultimate revenue must come from the real economy.

Investors need confirmation across the full AI stack, with monetization and enterprise customers showing earnings tied to AI spending. The most bullish scenario isn't impossible, but everything has to align for it to work.

"You need all three things to go right. The sun, the moon, the stars, they all have to align," Colas concluded.