Market resilience has become evident after the recent decline, and what underpins this resilience is that market opportunities are gradually outweighing risks. Let's first look at a set of data.

In the just-concluded first quarter of 2026, the S&P 500 index's projected year-over-year growth rate reached 13.2%. This marks the sixth consecutive quarter of double-digit earnings growth!

On one side, the market is panicking as if the world is about to end; on the other side, corporate earnings remain completely unaffected, even continuing to improve—this contrast is precisely the "golden buy signal" we are looking for.

Looking at valuations: the forward P/E ratio of the S&P 500 index has fallen to 19.8x, while not long ago it was around 23.0x. It's important to note that its five-year average P/E ratio is 19.9x, meaning that after this round of decline, market valuations are already slightly below the five-year average.

Earnings continue to surge, while valuations have returned to a reasonable or even low range, highlighting market opportunities and resilience.

How much potential is there if you buy now?

If you feel "low valuation, strong earnings" isn't intuitive enough, let's do a clear calculation to see how much upside potential there is if you buy now.

The market currently generally uses the S&P 500 index's 2027 earnings per share of $372.45 as a reference indicator:

● If we adopt the most conservative P/E ratio of 20x, the 12-month target price would be around $7,400;

● If the P/E ratio returns to the 22-23x seen earlier this year, the stock price could reach $8,000 or even higher;

● Currently, Wall Street analysts, including myself, generally expect the 12-month target price to be slightly above $8,300.

You can do the math yourself to see what kind of upside potential this implies.

The crisis persists, but after the crisis...

Some might ask, "What about the risks?" The current risks mainly stem from two aspects: first, high oil prices ($110 per barrel), and second, persistently high 10-year US Treasury yields (4.31%), which is also the main reason for the compression of market P/E ratios. Affected by US-Israel military actions against Iran, oil prices have continued to climb, pushing up US Treasury yields and indirectly suppressing stock market valuations.

But everyone must pay attention to a key point: as the market sells off, corporate earnings have not only not deteriorated but have actually improved.

In addition, geopolitical uncertainty and the current tariff war will indeed have some impact on short-term earnings, but these are only external shocks, not a structural collapse of earnings. Like past crises, these shocks will eventually be digested by the market, and after digestion comes a new round of gains.

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