The Stock Market's Resilience Amidst Tariff Turmoil: Key Signs of Strength

Despite ongoing concerns over President Trump's tariff initiatives, the stock market has exhibited notable resilience, signaling a continued upward trajectory for equities.

Minimal Market Impact

Since last week's AI-driven sell-off, the S&P 500 has gained 0.3%, despite sharp pre-market downturns. On Friday and Monday, amidst rampant tariff speculation, the index declined by less than 1%.

Volatility Remains Subdued

Nicholas Colas, DataTrek co-founder, highlights that the index's average daily move has been within a range of 1.1% in either direction over the past decade, indicating recent losses are not unusual. The CBOE Volatility Index (VIX) has fluctuated slightly but remains below 19.5, a key level signaling significant market volatility.

Fundamental Strength

Equity strategists remain optimistic despite trade war concerns, citing strong earnings growth as a key factor. The S&P 500 is projected to report 13.2% year-over-year earnings growth for Q4, the fastest pace in three years. Analysts are confident in future earnings growth as well, with estimates only marginally revised downward.

Positive Economic Data

Recent economic data also points to strength. The December JOLTS survey indicates a stable labor market, with a ratio of job openings to unemployed workers remaining steady. Additionally, the Institute for Supply Management's manufacturing PMI shows sector expansion for the first time in over two years.

Analysts' Outlook

Barclays head of US equity strategy, Venu Krishna, expects earnings to accelerate this year. Tom Lee, Fundstrat head of Research, observes a correlation between increased manufacturing activity and stronger S&P 500 earnings per share.

Overall, the stock market continues to demonstrate underlying strength, with investors largely disregarding trade war headlines. Strategists remain bullish, citing positive earnings expectations, economic stability, and resilient market behavior.