As U.S. Stocks Break Ground, Is the Market Betting Too Hard on a Soft Landing?

Equity markets delivered a mixed session Tuesday, with the S&P 500 capturing an intraday peak at fresh territory, climbing 0.16% despite subdued trading volumes that suggested investors remained cautious. The broader moves were muted across other major benchmarks—the Nasdaq 100 and Dow Index held relatively flat as participants digested labor market signals for hints on the Federal Reserve’s next policy moves.

Behind the lukewarm tape lies a more intriguing narrative. Tom Essaye, who leads The Sevens Report, offered perspective on what’s really driving sentiment as the calendar winds down: Wall Street has essentially locked in a base case of economic resilience—a so-called soft landing—with conviction. That conviction, he suggests, has room to expand further.

The calculus is straightforward. If the soft landing thesis holds and the Fed stays pat or eases, the case for equities strengthens considerably. Markets are already factoring in robust earnings expansion over the next several quarters, a tailwind that could propel indices higher despite the intraday consolidation currently on display. The question investors face: is this optimism premature, or does the data eventually catch up to the bullish consensus?

The muted trading activity itself deserves scrutiny. Light volume during year-end periods often masks underlying conviction—some participants have already positioned for what comes next, while others remain on the sidelines awaiting clarity. That dynamic creates both opportunity and risk, depending on which side of the trade you occupy.