Bullish Market Outlook Amidst Tariff Noise

Despite the recent market volatility triggered by President Donald Trump's tariff plans, the stock market exhibits several indicators of strength.

Modest Declines and Limited Volatility

Since the AI-driven sell-off last Monday, the S&P 500 has gained approximately 0.3%. Despite sharp intraday swings, the index's decline on Friday and Monday was less than 1% during peak tariff speculation.

DataTrek's Nicholas Colas notes that the index's average daily movement over the past decade is within 1.1%, indicating that recent losses are not anomalous. The CBOE Volatility Index (VIX) has risen but remains below 19.5, a key level signaling elevated volatility.

Resilient Earnings Growth

Despite the tariff concerns, earnings continue to drive market optimism. The S&P 500 is on track for 13.2% year-over-year earnings growth in the fourth quarter, the fastest pace in three years. Deutsche Bank's Binky Chadha observes that earnings estimates have been revised down by only 0.6%, indicating minimal impact from the noise.

Analysts anticipate continued earnings acceleration. Barclays' Venu Krishna expects earnings to rebound this year.

Positive Economic Signals

Recent economic data provides further support for the bullish outlook. While the JOLTS report showed declining job openings, the ratio of openings to unemployed workers remains tight, indicating a healthy labor market.

The Institute for Supply Management's manufacturing PMI expanded in January for the first time in over two years, which often coincides with increased S&P 500 earnings. Fundstrat's Tom Lee emphasizes that the data remains constructive for market positivity.

Conclusion

Despite the tariff headlines, the stock market has shown resilience and ample reasons for investors to believe in the continued bull run. Earnings growth, limited volatility, and positive economic signals underpin the bullish sentiment among equity strategists.