MW Investors may be led into a trap as stock market discards new tariff threats, analyst warns
By Christine Idzelis
The start of earnings season 'hasn't been great,' says the founder of Sevens Report Research
Investors on Monday were taking President Trump's latest tariff threats in stride.
Investors could be led into a trap as the stock market discards President Trump's latest tariff threats and quarterly earnings kick into high gear, according to Tom Essaye, a professional trader and founder of Sevens Report Research.
"It's important investors don't fall into the trap of thinking nothing matters and stocks always rebound" after "policy chaos," said Essaye, the president of Sevens Report Research who has more than a decade of trading experience across asset classes - including U.S. and international stocks, as well as commodities and bonds.
The U.S. stock market is up this year despite fresh strains in U.S. international relations after Trump threatened new tariffs against European countries relating to his Greenland plans. The president said he wouldn't impose those levies after the U.S. got a "framework of a deal" relating to its security interests - but over the weekend, he threatened 100% tariffs on goods from Canada if the country pursues a trade deal with China.
Investors so far have largely looked past knee-jerk worries over geopolitical tensions and trade policy, with the S&P 500 index SPX rising Monday morning after ending Friday just 0.9% below its record close on Jan. 12.
Investors appear to be waving off Trump's latest tariff threats on expectations the stock market will remain resilient on the back of a solid U.S. economy and corporate earnings growth. That resiliency will be tested this week as more companies roll out their fourth-quarter earnings results, including some closely watched Big Tech companies.
While investors are shrugging off "volatile policy headlines" on expectations for earnings and economic growth, "neither are impervious," Essaye cautioned. "The next two weeks of earnings are the 'meat' of earnings season, and while we don't expect disappointing results, the start of the season hasn't been great," he said.
S&P 500 earnings
"At this early stage of the earnings season, the S&P 500 is reporting mixed results for the fourth quarter," according to John Butters, senior earnings analyst at FactSet.
"Due to this performance compared to expectations and downward revisions" to earnings-per-share estimates since December 31, S&P 500 companies have reported "slightly lower earnings today relative to the end of the quarter," Butters said in a note Friday.
Microsoft $(MSFT)$, Facebook parent Meta Platforms (META), Tesla $(TSLA)$ and Apple $(AAPL)$, which are among Big Tech stocks known as the "Magnificent Seven," are expected to report their latest quarterly earnings this week. Big Tech stocks have an outsize weighting in the S&P 500, which is heavily concentrated in the Magnificent Seven, which also includes Google parent Alphabet $(GOOGL)$ $(GOOG)$, Nvidia (NVDA), and Amazon.com (AMZN). Alphabet and Amazon report earnings next week.
As of Friday, 13% of the companies in the S&P 500 had reported actual results for the fourth quarter, with the index still reporting year-over-year earnings growth for a 10th straight quarter, according to Butters.
The S&P 500 was rising 0.6% in early-afternoon trading Monday, while the Dow Jones Industrial Average DJIA was gaining 0.4% and the technology-heavy Nasdaq Composite COMP was climbing 0.8%, according to FactSet data, at last check. So far this year, the S&P 500 has risen 1.7% based on Monday afternoon trading levels.
After Trump threatened to impose new tariffs on Canada, Canadian Prime Minister Mark Carney said Sunday that his country wasn't intending to pursue a free trade deal with China, according to a report from the Associated Press.
Investors are keeping their eyes on trade policy and tariffs amid worries over affordability in the still-expanding U.S. economy. Investors will also be watching the Federal Reserve this week as the central bank holds a two-day policy meeting that concludes on Wednesday.
"On economic growth, the economy is in solid shape and it's been 'run hot,' but that doesn't mean affordability challenges can't cause a slowdown," said Essaye. "If we all of a sudden see doubts about earnings growth or [doubts over] continued economic growth emerge, then a suddenly resilient market will be anything but. We therefore can't get complacent."
-Christine Idzelis
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(END) Dow Jones Newswires
January 26, 2026 12:55 ET (17:55 GMT)
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