Wednesday's Stock Surge May Be Just the Start: Why We Are More Bullish Moving Forward

The S&P 500 soared nearly 10% on Wednesday, wiping out waves of bearish sentiment as President Trump paused most of his planned reciprocal tariffs, initiating a 90-day negotiation period. The index recorded its largest one-day gain since 2008, while the Nasdaq posted its second-best day in history. With market confidence returning in force, there's a growing case for a more bullish outlook — driven by a more constructive tariff trajectory, reset valuations, and potential new catalysts on the horizon.

Since late February, market sentiment has revolved almost entirely around Trump's tariff agenda. Concerns about a recession triggered a broad selloff, largely ignoring underlying fundamentals. Panic peaked after the April 2 announcement of aggressive reciprocal tariffs, reinforcing fears that Trump would prioritize MAGA policies at the expense of economic stability. However, the sudden pause signals something important: the "Trump put" may still be alive — and the president is unlikely to risk pushing the economy into a real downturn without a flexible off-ramp.

The 90-day delay in tariff implementation is especially encouraging. Historically, Trump has left little time between announcement and enforcement. This time, however, he's offering breathing room for negotiations — a sign he may be more open to compromise than before. With many countries signaling willingness to make concessions, the U.S. appears poised to secure favorable deals on a case-by-case basis. Nations like the UK, Japan, and South Korea could become early strategic partners. This diplomatic progress would likely lift sentiment further, as markets respond to a more pragmatic trade stance.

From a technical standpoint, the current rebound resembles the March 2020 pattern — a sharp rally following multiple rounds of selloffs. Still, it's too early to determine whether this is a dead-cat bounce or a true bear-to-bull transition. Key indicators are flashing encouraging signals: the S&P's 3-day moving average (MA) is approaching its 7- and 10-day counterparts. A full crossover above both could confirm a bullish pattern. However, if it fails to break the longer-term averages, caution may be warranted.

Beyond technicals, the fundamentals are also compelling. Valuations have reset to more attractive levels as macro headwinds become clearer. Even after Wednesday's surge, the S&P 500 remains 13% below its all-time high. Nvidia, for example, trades at a 26% discount from recent peaks, with a P/E ratio of 38.89 — levels not seen since mid-2019. That kind of reset reflects excessive caution, driven largely by fears of an impending recession and weakening AI momentum.

Yet the macro picture remains more resilient than the headlines suggest. Delta Air Lines' latest earnings beat expectations on both revenue and profit, maintaining a profitable forecast for the year. While management struck a cautious tone on future guidance due to softening consumer sentiment, the actual results point to economic strength. It's worth remembering that in 2022, when nearly every economist predicted stagflation or recession, the market defied the narrative and climbed to new highs.

Delta doesn't represent the whole economy, but semiconductors might. TSMC just posted Q1 revenue of $25.6 billion — right in line with guidance — underscoring continued strength in electronics and AI spending. This supports the argument that a downturn isn't imminent, at least not based on current data.

Looking ahead, all eyes are on upcoming bank earnings, which could provide the next major catalyst. JPMorgan, Wells Fargo, Morgan Stanley, and others are set to report Friday. Given the solid economy and tight labor market, results are likely to exceed expectations. While executives may express caution about the outlook, such commentary is increasingly seen as noise. In today's market, actual results matter more than hypothetical risks — and better-than-expected earnings could offer the momentum needed to keep this rally alive.