By Teresa Rivas

Nothing gold can stay, Robert Frost lamented in his poem by that title. That's worth keeping in mind as the stock market desperately searches for a comeback.

On Monday, the three major indexes were up, building on gains that helped them snap their multiweek losing streaks on Friday. Any relief may be short-lived, though.

There's an argument to be made that stocks are long overdue for at least a near-term bounce.

Not only have they cratered so far and so fast that they're starting to attract bargain hunters, but there are glimmers of hope that the White House may blink again on trade: the reciprocal tariffs slated to go into effect on April 2 now appear to be narrower in scope, The Wall Street Journal reported on Sunday.

The pullback on tariffs helped buoy stocks to start the week and is simply a relief for everyone -- like Warren Buffett -- worried about their impact.

And then there are the federal budget cuts that Tesla CEO Elon Musk has made as DOGE chief, his side hustle in Washington.

David Zervos, chief market strategist at Jeffries, acknowledges that it's hard to know how the DOGE moves will play out in the markets in real time. But he has no doubt about the future: "The long-term outlook for risk asset returns couldn't be any brighter...."

"The process of realigning economy away from bloated federal government sector and toward the private sector will benefit both businesses and consumers, boosting U.S. economy," he goes on.

In a blue-sky scenario, the tariffs would be targeted enough not to hamper global trade but would allow the economy to remain resilient. Consumers could feel more confident about spending -- something they're bound to do as long as the job market remains strong.

And to Zervos' point, a strong economy would show that Trump's budget slashing is an overall positive.

Some technical strategists, like Piper Sandler's Craig Johnson, are upbeat, too.

"Despite concerns about inflation and slowing economic growth, we believe equities have more potential to continue the relief rally from correction territory and recent oversold conditions in the coming days and weeks," he writes.

Today's optimism has been a boon to riskier assets like tech, which explains the bigger gains for the Nasdaq Composite and the Roundhill Magnificent Seven exchange-traded fund, and has tamped down the CBOE Volatility Index, or VIX, the market's fear gauge.

Still, any coming relief rally deserves a skeptical eye.

First, the ongoing uncertainty out of Washington: It will be hard for investors to feel confident until tariffs are truly settled, particularly because tariffs have distracted from the parts of the Republican agenda -- cuts to taxes and regulations -- that Wall Street was cheering postelection.

The upshot is that companies whose stocks and earnings estimates were buoyed by these hopes have gotten zero benefits but have had to suddenly account for the negative fallout of tariffs. Several major companies -- from airlines to retailers and economic bellwethers -- have had to issue profit warnings.

"The problem is the Street just spent the last 90 days upselling us on animal spirits and high-octane Trump-driven growth," said Larry McDonald, editor of The Bear Traps Report. "They're trapped."

And that much is evident by the fact that for all the upheaval of the past couple of months, full-year S&P 500 earnings per-share estimates have barely budged. Consensus still hovers around $270.

"If we extrapolate the fairly violent path of earnings revisions, we think the S&P will end up near $230 of earnings per share," McDonald writes. Suddenly, stocks still seem pretty expensive -- even with their selloff.

From a technical standpoint, there's also a divergence between near-term patterns and the bigger picture, writes Oppenheimer's Ari Wald.

Wald expects stocks to climb into the summer but warns that there's more volatility to come later this year.

"While we believe longer-term leadership trends are reversing toward low-volatility defensives, this oversold deviation indicates current conditions are unfavorable for risk-off, and conversely, favorable for risk-on," Wald writes.

Even if the S&P 500 reclaims the 5,700 mark, "resistance becomes more formidable" around 5,900, its 50-day average, he points out.

Doug Ramsey, chief investment officer for the Leuthold Group, believes the Feb. 12 S&P 500 record close will ultimately prove to be the high water mark for this bull market, creating a vicious cycle in terms of consumer confidence and the economy.

"For the last year we've believed that stock market strength, via the wealth effect, has muted the impact of rate hikes on both economic growth and consumer price inflation," he writes. "If the cyclical uptrend in stocks is broken, it's difficult to see how an economic expansion with so many 'pre-recessionary' characteristics can possibly survive."

The data, which remain relatively stong, have yet to confirm that, but like so much else in the past several weeks, that could change rapidly.

Bear Traps' McDonald references the former Soviet leader Vladimir Lenin, who said: "There are decades where nothing happens; and there are weeks where decades happen."

Forget the dogs of the Dow; the whole market seems like it's aging in canine years.

Write to Teresa Rivas at teresa.rivas@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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March 24, 2025 14:27 ET (18:27 GMT)

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