Reward 500 Tiger-coinsOn 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! 🐯
Comments
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.
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The TACO pattern (Trump Always Chickens Out), a key behavioral finance concept in early 2026, describes a cycle where aggressive policy or tariff threats lead to a market sell-off, followed by a pivot or negotiation that triggers a rapid relief rally。。。
With the S&P 500 erasing its 2026 losses and back in the green, the prospect of double-digit percentage gains over the next three months is doable, but sustaining momentum will depend on strong earnings growth, favorable rates, and stable inflation as key catalysts to drive the market ahead
While the S&P 500 may be the safer option for broad market exposure, rotating into the higher-beta Russell 2000 small caps could be a high-conviction play for the next quarter if risk appetite is strong, with the latter offering greater potential but volatility at a cost
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.