Editor’s Note: Stocks started the week with a roller-coaster ride. Sky-high valuations have investors wondering if the rally’s running out of steam, but a dip here could be just what the market ordered to fuel the next climb. Below, I’ll break down why the bulls aren’t handing over the reins anytime soon.

Momentum Remains Intact

Despite growing anxieties on Wall Street, the broader market trend remains robust. The S&P 500, Dow Jones Industrial Average, and tech-heavy NASDAQ still remain above their 20-, 50-, and 200-day moving averages, signaling continued upward momentum.

An important breadth indicator, the New York Stock Exchange Advance/Decline line (NYAD), has been steadily rising over the past several months.

A rising NYAD is a bullish indicator for the stock market because it shows that a larger number of stocks are advancing than declining. This reflects broad-based participation in a market rally, indicating that gains aren’t concentrated in just a few large-cap stocks but are spread across different sectors.

A healthy NYAD suggests strong market breadth, which supports sustainable growth and signals investor confidence. It often precedes continued market strength and can confirm upward trends, making it a positive sign for the overall market’s health and momentum.

Corporate Earnings Are Solid

Despite record highs across the major indices, there’s still fuel left in the rally. Robust corporate earnings growth continues to propel the market, adding confidence that momentum will stay intact into the rest of 2024 and beyond.

Companies are reporting stronger-than-expected third quarter 2024 results, buoyed by resilient consumer demand and a steady economic backdrop.

As earnings growth outpaces expectations, it helps to justify higher valuations, providing a key support for the bulls. To be sure, the latest Q3 profit growth projection for the S&P 500 as a whole is modest, but neither has it imploded. We’re miles away from a recession in either the economy or earnings.

According to the research firm FactSet, the S&P 500 is projected to rack up Q3 year-over-year earnings growth of 3.4%. Leading the way is information technology, at 15.6% (see chart).

The Federal Reserve’s successful navigation of a “soft landing” further strengthens the case for further gains. By moderating interest rate hikes and successfully cooling inflation without triggering a deep recession, the Fed has paved the way for a prolonged economic expansion.

This soft landing should keep the rally alive well into 2025, particularly as cyclical stocks outperform in an expanding economy. Investors would be wise to increase their exposure to these sectors, as industries like health care, real estate, and financials are set to benefit from renewed economic strength.

Political Perceptions vs Reality

That said, the uncertainty of the upcoming presidential election is injecting short-term volatility into the markets. Political pundits and campaign propaganda are painting a bleak picture of the economy, stoking fear about inflation and growth. However, the reality tells a different story.

The U.S. economy is expanding, and inflation is falling—yet public perception, driven by partisan narratives, remains starkly negative. Investors must cut through this noise and focus on the fundamentals. Despite the political rhetoric, underlying economic conditions remain bullish.

The economy is growing, inflation is moderating, and corporate earnings are rising—critical factors that point to stock market strength. What’s more, the Fed is on track to cut rates further, adding more liquidity to the markets.

While volatility is likely to spike in the coming weeks due to election turmoil, the upshot is clear: investors should maintain a bullish outlook. With a favorable macroeconomic backdrop and robust corporate earnings on the horizon, the stock market rally has more room to run.

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John Persinos is the editorial director of Investing Daily.

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