A three-bagger? Three macro issues have dominated the stock market in the last six months: the Fed and inflation, Covid-19 lockdowns in China and the Russian invasion of Ukraine. In the last 24 hours, all three have moved in a manner beneficial to markets. Yesterday, it was signs inflation may finally be cooling off. Overnight, we got word that China was beginning to ease its Covid restrictions. And now there's word that the Russians are retreating from the strategically important Ukrainian regional capital of Kherson. The implications of this for markets are very clear. Earnings have been under pressure due to concerns that this combination was going to create an "earnings apocalypse" that would cause profits to decline by 20% or more in Q4 and into 2023. The global recession that would occur would also cause the market multiple (the P/E ratio — what investors are willing to pay for a future stream of dividends and earnings) to collapse, causing a "double whammy" to the markets. This is how some strategists glumly predicted the S & P 500 would drop to 3,000-3,200 this fall. But now, if the inflation numbers really start moving in the right direction, it could lead the Fed to end its hiking plan a bit earlier, at the same time as China could start to open up, and there may be a path to a negotiated settlement in Russia-Ukraine. That means an earnings apocalypse is unlikely. Yes, it's all very tentative. There are still quarantines in China. There is only talk of negotiations in Ukraine. And Carl Icahn said on CNBC that he believed we were still in a bear market. "I am still very, quite bearish on what is going to happen," Icahn said, insisting it would take a long time for inflation to go away. Here's the point: investors have been taking down earnings estimates for months, especially in the growth sectors of technology and communication services. Estimates for the fourth quarter are now slightly negative. But other sectors are still expecting growth in Q4 and into 2023. S & P 500 Q4 earnings: - 0.1% Communication Services: - 20.2% Technology: - 7.7% Energy: + 70.2% Industrials + 42.1% Source: Refinitiv The key point: what investors were fearful of — a massive decline in earnings across the board — looks less likely due to events in the last 24 hours.