What's Driving This Bull Market?

Welcome to MktContext! I am a professional money manager, trader, and investor who has been timing and beating the market for over a decade. We specialize in predicting market direction by studying the economy and market signals. Join 9,500 subscribers at MktContext.com in improving your portfolio returns — it’s free!

Let’s rehash our stock market outlook. We’ve been in a bull market driven by three major factors: 1) resilient economic data, 2) growing corporate earnings, and 3) a thawing of the trade war.

The economy has been resilient as layoffs are low. Yes, there was a modest pickup in jobless claims (you can see it in the chart below if you squint really hard), but nothing overly concerning. When people have jobs, they can continue to pay off their loans and buy stuff. That’s why consumer spending and delinquencies have also been steady.

Corporate earnings have also been growing steadily. For the S&P500, Q2 earnings growth rate is shaping up to be 10%. Not only is this a strong quarter, this marks the third consecutive quarter of double-digit earnings growth for the index. To put it simply, big corporations are making record profits and flush with cash. With the money, they’ve been investing heavily into AI which further spurs the economy.

And finally, all signs point to the trade war ending. This removes a critical source of concern for investors. Trade deals have been signed with most major trading countries, and the remaining ones are assumed to follow. We know that global tariffs will settle at around 15%, a bit higher than last year but lower than expected, and that’s positive for markets. Despite Trump's constant threats of high tariffs, the end goal has always been to reach deals.

These three pillars form the long-term trend for the stock market, and is why we remain 100% invested in equities at the moment. The proof is in the pudding — SPX is up a whooping 31% from April lows in the span of a few months. Investors are starting to worry that it has run too far too fast, but our technical analysis suggests it can still go higher by the end of the year… Notwithstanding any shorter-term pullbacks that we are likely to face in the Aug-Oct timeframe.

To read the rest of this article, and to see our portfolios and get more market timing content, head over to MktContext.com and subscribe today!