Nightmarish health crisis, dreamlike stock returns: it’s a paradox, but not surprising. Allow me to explain why, despite the coronavirus and its Delta mutation, you should remain bullish.

The late Benjamin Graham, father of value investing, once said: “Buy not on optimism, but on arithmetic.” Graham’s words carry weight. After all, he was Warren Buffett’s idol and mentor. As of this writing, Buffett’s net worth hovers at $110 billion (that’s not a typo).

As sensational headlines about COVID Delta continue to bombard us, here’s the arithmetic you should keep in mind:

Stock prices are forward-looking, based on projected corporate earnings.

The surge of COVID Delta has intermittently spooked investors, triggering sharp daily and intraday volatility. However, robust corporate earnings growth continues to save the day.

COVID is spiking in under-vaccinated parts of the country, especially the South, but the markets have determined that the human toll, albeit tragic, is isolated to certain “hot spots” and won’t be severe enough to derail the economy and corporate profits. For example, COVID Delta is raging in Florida, but multinational corporations derive profits from all corners of the globe.

According to recent data from FactSet, companies that generate more than 50% of revenue inside the U.S. posted a blended earnings growth rate for Q2 of 62.0%. For companies that generate more than 50% of revenue outside the U.S., the blended earnings growth rate is considerably higher at 87.0%.

Such are the coldly rational calculations of professional traders. To expropriate a famous quote from Bill Clinton’s political adviser James Carville: It’s the bottom line, stupid.

Despite jarring headlines that depict COVID Delta’s deadly spread, stocks soared on Tuesday. The Dow Jones Industrial Average jumped 278.24 points (+0.80%), the S&P 500 climbed 35.99 points (+0.82%), and the tech-heavy NASDAQ rose 80.23 points (+0.55%). It was the S&P 500’s 42nd record closing high of 2021. The small-cap Russell 2000 gained 8.09 points (+0.36%). In pre-market futures contracts Wednesday, stocks were trending slightly lower.

A bonanza of beats…

The financial community’s consensus is increasingly bullish about corporate bottom lines. The second quarter of 2021 has witnessed a wave of earnings beats and it appears the third quarter will be prosperous as well.

The blended earnings per share (EPS) growth rate for the second quarter is 85.1%, compared to an EPS growth rate of 74.1% last week and an EPS growth rate of 63.1% at the end of the second quarter (June 30). For Q3 2021, analysts are projecting EPS growth of 27.7%.

The emergence of COVID Delta is frightening from a public health standpoint, but the fact is, a wide-scale return to quarantines and lockdowns is politically unfeasible, especially in “red states.” Instead, the federal government is emphasizing the aggressive expansion of vaccinations, a campaign that’s making progress and could turn the tide.

Read This Story: The COVID-Defying Bull Market, Explained

During the month of July, analysts boosted EPS projections for S&P 500 companies for the third quarter, according to FactSet data. The Q3 bottom-up EPS estimate increased by 3.6% (to $49.22 from $47.50) during this period. “Bottom-up” is an aggregation of the median EPS estimates for Q3 for all the companies in the index. Take a look:

Historically, analysts typically reduce EPS estimates during the first month of the quarter. During the past 15 years (60 quarters), the average decline in the bottom-up EPS estimate during the first month of a quarter has been 2.2%.

However, Q3 2021 marked the fifth consecutive quarter in which the bottom-up EPS estimate rose during the first month of the quarter, which is the longest upward streak since FactSet started tracking this metric in 2002.

Nine S&P 500 sectors posted an increase in their bottom-up EPS estimate for Q3 during the first month of the quarter, led by the energy (+14.0%) and materials (+8.8%) sectors. The consumer staples sector posted the largest decline (-2.1%) in the bottom-up estimate for Q3 during this period.

As the bottom-up EPS estimate for the index increased during the first month of the quarter, the value of the S&P 500 also increased during this same period. The consensus of analysts is that the S&P 500 is on track to finish 2021 with a double-digit gain, in the low teens.

Don’t get me wrong: COVID Delta is a genuine public health threat, and you should do whatever is necessary to protect the well-being of you and your family. But as an investor, you’d be foolish to run for the exits.

I’ve been hearing doom-and-gloom predictions about the stock market ever since the November 2020 election, and if you had heeded those overwrought warnings, you would have incurred a huge opportunity cost.

That said, measured prudence is warranted during these uncertain times. If you want to stay long on equities but also reduce risks, we’ve pinpointed five safe, high-yielding stocks. These “bulletproof buys” have weathered every dip and crash over the last 20 years and still hand out massive gains. Click here for details.

John Persinos is the editorial director of Investing Daily. Send your questions or comments to mailbag@investingdaily.com. To subscribe to his video channel, follow this link.