I recently heard an analyst on one of the financial “news” shows utter this dubious wisdom: “How the S&P 500 trades in January often foretells how the year to come will perform.”

January was a terrible month for equity investors, with the S&P 500 losing 7%. But the final two trading days of January witnessed powerful rallies.

As February gets underway, should you subscribe to the bull side, or the bear side?

Instead, I suggest you heed the words of legendary investor Jesse Livermore: “There is only one side of the market, and it is not the bull side or the bear side, but the right side.”

February so far is belying the notion of January as a barometer. On Tuesday, the main indices surged as follows: the Dow Jones Industrial Average +273.38 (+0.78%); the S&P 500 +30.99 (+0.69%); the NASDAQ +106.12 (+0.75%); and the Russell 2000 +22.29 (+1.10%).

Before Wall Street’s opening bell Wednesday, U.S. index futures were trading in the green, with the NASDAQ soaring in the wake of strong tech sector earnings. Global stocks also were rallying, as companies in the U.S. and Europe continue to beat Q4 2021 earnings expectations and bargain hunters come to the fore.

Watch This Video: Optimism Returns to The Street

New data revealed Tuesday that the economic expansion is slightly slowing, but still on track. The January Manufacturing Purchasing Managers’ Index (PMI) registered 57.6%, a decrease of 1.2 percentage points from the seasonally adjusted December reading of 58.8%.

However, the January PMI figure indicates expansion in the overall economy for the 20th month in a row after a contraction in April and May 2020 (see chart).

Tuesday’s report stated: “The U.S. manufacturing sector remains in a demand-driven, supply chain-constrained environment, but January was the third straight month with indications of improvements in labor resources and supplier delivery performance.”

The Department of Labor’s monthly jobs report, scheduled for release Friday, will provide an updated look at the strength of hiring and labor force participation.

Those help wanted signs you see in windows are part of the inflation equation. The delivery of services is highly dependent on labor costs, and those expenses are escalating. Falling unemployment, a stubbornly low workforce participation rate, and mandates for higher minimum wages in some states are responsible.

Also, higher service prices tend to stick once increased. Consumers are not conditioned to see service prices drop. (I’ve never known a landscaper, plumber or car mechanic to start charging me less.)

The bellwethers are crushing it…

On the earnings front, more than 100 companies in the S&P 500 are set to report fourth quarter 2021 results through Friday. The market-moving large caps have been crushing expectations.

Alphabet (NSDQ: GOOGL), Advanced Micro Devices (NSDQ: AMD), Exxon Mobil (NYSE: XOM), and United Parcel Service (NYSE: UPS) all posted stellar operating results this week, beating expectations on the top and bottom lines. General Motors (NYSE: GM) beat on earnings.

There’s still plenty of fuel left in the tank for the bull market to keep running. For Q1 2022, analysts are projecting earnings growth of 5.6% and revenue growth of 9.8%. For Q2 2022, analysts are projecting earnings growth of 4.3% and revenue growth of 8.0%.

Read This Story: Panic Is Not an Investment Strategy

I expect inflation to moderate in the second half of 2022, which would give the Fed room to tighten less aggressively than the consensus of analysts currently believes.

It’s unexpected news that drives future stock prices. Regardless of whether the future news is good or bad, what matters is whether the news is better or worse than already anticipated. After talking tougher, and thereby reassuring Wall Street that it’s not ignoring inflation, the Fed may surprise investors later this year by stepping back a bit from tightening.

The beginning of Fed tightening usually results in more moderate stock market returns and greater volatility, but history shows that it doesn’t necessarily kill bull markets.

Looking to make profits, but with protection against the risks I’ve just described? To guide you through these perilous times, our analysts have compiled a special report of seven shocking investment predictions for 2022, and how to profit from them. To download your free copy, click here.

John Persinos is the editorial director of Investing Daily.

Subscribe to John’s video channel: