Wall Street veteran Ed Yardeni told CNBC on Monday the corporate tax cut championed by President Donald Trump and Republican leaders on Capitol Hill will prevent the recent stock nosedive from tipping into a bear market.
"I've been listening to these [earnings] conference calls and they are almost giddy with excitement about all the money they have and what they are going to spend it on," the market historian said in a "Squawk on the Street" interview.
Under the new Republican tax law, the federal corporate income rate was cut from 35 percent to 21 percent.
"Since the tax cut, S&P 500 earnings expectations have been increased by $9 a share. That's a big, big number," said the president of Yardeni Research. "There's still plenty of room for good news in the next earnings season, not just this one."
"There's [also] still $1 trillion to $2 trillion in cash coming back from overseas as a result of the lower tax rate on repatriated earnings," he said.
The overseas income that companies have been hording and deferring paying U.S. taxes on will now be taxed at a one-time rate of 15.5 percent.
Perhaps Yardeni's comments might reassure the White House, which on Monday expressed concern about the sell-off. "We're always concerned when the market loses any value, but we're also confident in the economy's fundamentals," an official said in a statement to CNBC.
Trump, who has repeatedly pointed to the strong stock market as a yardstick of his success, has yet to encounter a significant market pullback since he took office.
The S&P 500 had been off to a roaring start to 2018, adding more than 7 percent as of the Jan. 26 record high to a gain already of 25 percent since Trump was elected in November 2016.
But at the open on Wall Street on Monday, after Friday's plunge, the index fell to the threshold of a 5 percent decline since that all-time high. But later in the morning, the index actually turned positive briefly on the session.
Yardeni said he won't start to worry unless the market falls 10 percent from all-time highs, which is the definition of a correction.
"Since the beginning of the bull market, we've looked at all these corrections and panic attacks. And this latest one makes it 60," he calculated. "One of these days, the panic attack will be the beginning of a bear market. But I don't think this is it." A bear market is defined by a drop of at least 20 percent from recent highs.
The bull market in stocks started in March 2009 when the S&P bottomed after the financial crisis. Since then, the S&P has surged about 300 percent, excluding dividends.