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?
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与标普500 $S&P 500 Index(.SPX)$ 现在抹去了2026年初的损失，我认为即使波动性持续存在，未来三个月两位数的涨幅也是可以实现的。盈利仍然是这一走势的支柱，广度的提高表明反弹是健康的，而不是狭隘驱动的。
就定位而言，我将标普500作为我的核心投资，同时有选择地添加更高贝塔值的名称。小盘股的新高令人鼓舞，但我更喜欢在回调时买入罗素2000指数，而不是追逐势头。
@Tiger_comments @TigerStars @TigerClub
I think the s&p500 could potentially see double digit returns in the next 3 months as earnings have been strong and job market also has remained resilient. All of these point to a strong economy that should continue to deliver in the next quarter. This is of course barring any freak incidents or crazy announcements by trump like hiking tariffs along.
I think the s&p valuation has hit historical averages and going along the higher end. So I feel that it is better to rotate to the small caps which may yield greater returns compared to the s&p500, especially with the mag7 concentration in s&p500.
With the S&P 500 back to flat YTD, double-digit gains in 3 months is possible but not the base case. I’d frame it as +4% to +8% unless we get multiple upside catalysts (clean earnings beats + softer inflation + clearer rate-cut path).
Rotation: I’d still anchor in S&P 500 (quality + AI leaders), and only add Russell 2000 tactically if:
yields stop rising,
USD cools off,
and breadth improves (small caps need easier financial conditions).
My plan: Core long SPY/QQQ, buy dips on headline-driven flushes, keep dry powder, and add IWM only on a breakout + falling yields. Not financial advice.
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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