6 Reasons to Ride the Wild Bull Market

Sharp pullbacks in the stock market are making investors increasingly uncertain about its future direction, but there are a number of sound reasons to stay in equities right now, and resist the temptation to cash out. A detailed story in MarketWatch today offers various rationales for continued optimism about stocks, including these six: strong M&A and IPO activity; the best quarterly earnings since 2011; consumer confidence at an 18-year high; benign readings on the CBOE Volatility Index (VIX); clear direction from the Federal Reserve on interest rates; and pullbacks so far in 2018 have been expected and normal.

If that were not enough, MarketWatch also cites another positive. While the S&P 500 Index (SPX) is down from its record high close on Jan. 26, the year-to-date low close on Feb. 8 has held as a support level. And that's despite escalating fears about a trade war with China and, more recently, increased U.S. involvement in the shooting war in Syria. (See also: What to Do When Stocks Tank: Dalio, Buffett.)

Confidence Boosters

The biggest reason for continued confidence in stocks comes from a stellar first-quarter earnings season. MarketWatch reports that the latest figures from FactSet Research Systems point to a year-over-year (YOY) increase of more than 17% in earnings for the S&P 500, which would be the biggest improvement since 2011. Better yet, despite all the uncertainties overhanging the market in recent months, this forecast has jumped from 11% on Dec. 31.

IPOs are running strong so far this year, especially in the technology sector, and M&A enjoyed a "record-breaking first quarter," per MarketWatch. They take this as a sign of strong business confidence, including confidence in the bull market.

While volatility as measured by the VIX hit its highest level since 2015 in early February, this was a short-lived spike that nonetheless fell far below previous record highs, MarketWatch notes. Moreover, while this so-called fear gauge subsequently has been a range that is above where it spent most of 2017, MarketWatch calls this "a slightly elevated but rather unimpressive level." Regarding interest rate policy, the Fed is working hard to avoid rattling the market with surprises. MarketWatch says that the Fed has done "an impeccable job" of enunciating policy and managing expectations.

More Reasons to Stay Invested

Despite a variety of concerns, including those centered on increased volatility, another MarketWatch article offers three more fundamental and technical reasons to stay invested right now. These are: First, strong earnings reflect a strong economy; second, inflation is modest and interest rates are not rising much higher; third, both the S&P 500 and the Dow Jones Industrial Average (DJIA) have recovered from recent dips below their 200-day moving averages, indicating medium-term technical support for stock prices.

In addition to earnings, sales revenues also are expected to register their best YOY increase since 2011 in the first quarter. "Sales growth is much less amenable to corporate spinning than earnings per share," MarketWatch observes, adding that, as a result, it is much more indicative of underlying economic strength. Goldman Sachs agrees, and advises investors to choose stocks with strong sales growth. (See also: 9 Stocks Fueled By High-Octane Sales Growth.)

Another Bullish Trend

Another bullish trend is emerging, according to CNBC contributor Matt Maley, an equity strategist at Miller Tabak. He sees increasing market breadth in a rising advance/decline (A/D) line. "Right now, the line relative to the market is appearing to be quite positive, as fewer names are beginning to participate in declines," Maley writes, adding, "When both the A/D line and the market rise together, it confirms that a lot of stocks are participating in the rally; this is healthy, and bullish."