QuickTakes

The stock market has become tariff-scare-proof now that the S&P 500 is only 2.3% below its February 19 record high despite Trump's Tariff Turmoil (TTT) since then. After Friday's better-than-expected employment report, the stock market has also become recession-scare-proof. According to Polymarkets, the odds of a recession were back down to 27% on Friday from a recent peak of 66% on May 1 (chart).

So, do we have nothing to fear but nothing to fear? That would represent much to fear, as fearless investors create meltups, which then become meltdowns. But in fact, the stock market's sentiment gauges are showing plenty of fear, which is bullish from a contrarian perspective (chart).

Perhaps we need to fear the next three quarterly earnings seasons? Since the start of this year, industry analysts have been sharply cutting their S&P 500 earnings-per-share estimates for Q2 through Q4 (chart). That's even though Q1 turned out much better than expected. They must have been spooked by the guidance issued by many company managements since early this year about the possible negative consequences of TTT.

Then again, the 2026 annual consensus S&P 500 earnings-per-share estimate seems to be bottoming around $300 per share (chart). If so, then S&P 500 forward earnings should rise to new record highs in coming weeks following a slight dip in recent weeks.

We continue to recommend overweighting the S&P 500 Information Technology, Communication Services, Financials, and Industrials sectors. Industrials is on the verge of breaking out to new highs along with the S&P 500 (chart).