Despite signs of a slowing economy, stock market bulls remain remarkably unshaken, and there are key reasons behind this resilience. In 2025, global economic growth has decelerated due to various factors, including heightened trade tensions and new tariffs, especially between major economies. This slowdown led to a sharp correction in stock markets earlier in the year, with the S&P 500 experiencing a rapid decline as investors grappled with uncertainty stemming from policy shifts.

However, investor sentiment quickly rebounded when policymakers paused aggressive tariff actions. This move was interpreted as a form of “fiscal put,” with markets perceiving government intervention as a backstop against further declines. The result was a V-shaped recovery; major indices not only recouped their losses but also reached new all-time highs by mid-year. This swift bounce-back underscores the market’s faith in responsive policy measures and central bank support.

Another factor keeping bulls optimistic is the expectation of continued, albeit modest, earnings growth. While valuations remain elevated and earnings forecasts have been trimmed for the remainder of the year, growth is still anticipated. Many investors believe this will provide a floor under stock prices, limiting the depth of market corrections, even if economic momentum softens further.

Additionally, historical patterns indicate that non-recessionary bear markets tend to be milder than those accompanied by an economic downturn. If corporate earnings stabilize and interest rates remain manageable, any pullback in stock prices is likely to stay moderate. As a result, while caution is warranted given global uncertainties, the belief in policy support and improving corporate fundamentals continues to fuel the stock market’s bullish outlook, even as broader economic indicators show signs of fatigue.