S&P 500 Stages a Massive Rebound! Is 3-Month Rally Really in Play?
On January 21, 2026, $S&P 500(.SPX)$ logged one of its largest single-day gains since last November.
Trump quickly reversed the market’s early-year slump after announcing at the Davos forum a delay of the tariffs on Europe originally scheduled for February 1, and claiming that a “framework agreement” had been reached on Greenland.
Markets interpreted this pivot as a classic “TACO” (Trump Always Chickens Out) moment—where extreme pressure triggers sharp volatility, followed by a White House retreat or compromise.
Historically,“TACO trades” have often been followed by strong upside.
Looking back to the April 2025 “Liberation Day” tariff, the S&P 500 suffered only a brief pullback before policy delays sparked a nearly 40% rally spanning into the following year.
The current foundation remains solid: across 36 major geopolitical events since 1940, U.S. equities rose in the subsequent three months 60% of the time.
More importantly, the recent turbulence has proven to be an excellent buy-the-dip opportunity, as it was driven not by recession risk, but by policy flexibility creating a temporary sentiment premium.
Earnings Season in Full Swing: Can It Further Support Valuations?
Q4 corporate results have provided a firm floor for the broader market.
Analysts of Factset expect double-digit profit growth across all quarters of 2026.
Over the past ten years, actual earnings reported by S&P 500 companies have exceeded estimated earnings by 7.0% on average. During this same period, 76% of companies in the S&P 500 have reported actual EPS above the mean EPS estimate on average.
The latest data from Bank of America (BofA) and JPMorgan suggest that this robust earnings cycle is offsetting tariff-related valuation concerns.
Technical signals further reinforce the sustainability of the uptrend. Last week, roughly 70% of S&P 500 constituents were trading above their 200-day moving averages, while both the Russell 2000 and the equal-weight S&P 500 hit new all-time highs, indicating broad market breadth.
Discussion
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Does the TACO pattern remain the most reliable signal for adding exposure in U.S. equities?
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Now that the S&P 500 has erased its 2026 losses, do you think we could see double-digit percentage gains over the next three months?
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With earnings growth staying strong, would you stick with the S&P 500, or rotate into the higher-beta Russell 2000 small caps?
Share your trading plan in the comments and earn Tiger Coins! 🐯
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With the S&P 500 $S&P 500(.SPX)$ now erasing its early-2026 losses, I think double-digit gains over the next three months are achievable, even if volatility persists. Earnings remain the backbone of this move, and improving breadth suggests the rally is healthy rather than narrowly driven.
Positioning-wise, I’m keeping the S&P 500 as my core exposure while selectively adding higher-beta names. New highs in small caps are encouraging, but I prefer scaling into the Russell 2000 on pullbacks instead of chasing momentum.
@Tiger_comments @TigerStars @TigerClub
What the data has shown is that the TACO pattern (Trump Always Chickens Out) has produced repeatable, profitable dip buying opportunities whenever tariff threats triggered sharp sell offs, followed by policy reversals that sparked relief rallies.
The latest episode like the Greenland tariff scare is a great example of a TACO pattern.
However some analysts have cautioned that the TACO Trade may not always work especially if the markets become desensitised or if a deeper sell off is needed to influence policy.
In other words, the TACO pattern has been reliable as long as the political behaviour behind it stays predictable.
@Tiger_comments @Tiger_SG @TigerStars @TigerClub @CaptainTiger
2. The outlook for the us economy is highly negative at this time which reduces the likelihood of double digit returns
3. Sp500 $SPDR S&P 500 ETF Trust(SPY)$ tends to outperform the broader Russell 2000 index
Now that the S&P 500 has erased its initial 2026 losses and is hovering near record highs (around 7,000), a double-digit gain over the next three months is considered unlikely but not impossible.
Stick with the S&P 500 for core stability and reliable earnings, but use the Russell 2000 for tactical alpha, as it currently has the longest streak of outperformance relative to large caps since 1990.
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