This chart shows why the bull market deserves the benefit of the doubt as tech stocks try to rebound

The S&P 500 has shown unusual resilience, avoiding a 5% pullback since April, leading Truist's CIO Keith Lerner to affirm the bull market's strength despite recent volatility. This is largely driven by robust corporate earnings, with S&P 500 forward 12-month estimates, particularly in the tech sector, reaching record highs, indicating an intact secular growth story. However, the recent government reopening has delayed economic data releases, complicating a clear economic assessment ahead of the Federal Reserve's next policy meeting and raising concerns about potential growth deceleration.

Analysis

The S&P 500 has demonstrated unusual resilience, avoiding a 5% pullback since April, a period longer than the average 77 days observed since 2010, according to Truist CIO Keith Lerner. This sustained performance, despite recent market weakness and tech sector volatility, suggests the bull market retains strength, largely underpinned by robust corporate earnings. The S&P 500 finished Thursday up 35.2% from its April 8 low, reflecting a strong rebound.

Forward 12-month earnings estimates for the S&P 500 have reached record highs, particularly driven by the technology sector, which saw a 4.5% decline this month but remains up 23.5% for the year. Lerner emphasizes that there is no fundamental deterioration in profits, reinforcing the secular growth story for tech despite its recent 2.4% slump on Thursday. The market's overall sentiment is moderately positive, with an optimistic tone regarding underlying fundamentals.

However, the recent government reopening has introduced uncertainty by delaying the release of critical economic data, including labor market and inflation figures. This data vacuum complicates a clear economic assessment for the current quarter, potentially impacting the Federal Reserve's policy decisions ahead of its December 9-10 meeting. Concerns about the shutdown's impact on consumer spending and the S&P 500's tech exposure persist, contributing to short-term volatility.

Despite these concerns, the weight of evidence suggests the tech sector's growth story remains intact, supported by strong earnings momentum. Pullbacks of 5% are considered a normal part of a bull market, and recent volatility is not surprising given the S&P 500's significant rebound. Investors who are underweight in tech may consider leaning into further weakness.

Key Decisions for Investors

• Investors should maintain exposure to the equity market, particularly the technology sector, given the strong earnings momentum and intact secular growth story, considering any further weakness as a potential buying opportunity.
• Monitor the delayed economic data releases closely for clearer insights into consumer spending and overall economic health, as this will influence Federal Reserve policy decisions.
• Be prepared for potential short-term volatility stemming from economic data uncertainty and the S&P 500's concentration in tech, but recognize that pullbacks are normal in a bull market.