Equity bulls bought weakness owing to DeepSeek and tariff jitters. Near term, the major indices act like they want higher prints. Mid- to long-term, the outlook gets muddied thanks to uncertainty owing to the new administration’s trade policy in particular.As of Tuesday this week, Investors Intelligence bullish percent rose 1.7 percentage points week-over-week to 49.2 percent, while the bearish percent increased seven-tenths of a percentage point to 30.2 percent. Bulls hit a 67-week low of 42.4 percent in the week to January 14, while the bearish count of 16.1 percent in the week to December 3 was at an 18-week low. When the bullish count hit that low last month, the ratio of bulls to bears reached a two-year low of 1.32, representing a sharp drop from 3.91 in the week to December 4. This week, the ratio reached an oversold 1.63, and, if past is prologue, has room to continue higher (Chart 1).The S&P 500 bottomed in the same week that the bulls-to-bears ratio hit the two-year low, ticking 5773 intraday on January 13. By then, the large cap index was down 5.4 percent from the all-time high of 6100 posted on December 6. As sentiment began to lift from the oversold territory it was in, the S&P 500 eclipsed that high on January 22, followed by a new intraday high of 6128 two sessions later.Then came the DeepSeek-induced selloff on the 27^th, touching 5963 intraday. That weakness was bought, culminating in 6121 by the 31^st – a reversal session closing at 6041. Once again, this week got off to a weak start in reaction to the tariffs news, and once again, Monday’s weakness was welcomed, with the index tagging 5924 intraday and closing at 5995. By Wednesday, the S&P 500 closed at 6061 (Chart 2).It strongly feels like the index wants a higher print in the near term. Both DeepSeek and tariffs jitters were unable to sustainably shake the bulls off their comfy pedestal. The January 24^th high is merely 1.1 percent away, even as the bullish percent is below 50 percent and the bearish percent is at an elevated north of 30 percent.The bearish count hit 32.2 percent in the week to January 14, which was the week before President Trump was sworn in on the 20^th. From regulatory cuts to deportation of illegal immigrants to tax cuts to tariffs, he had promised many things to his voters. Markets were confused what to price in and what not to.If the first few weeks under Trump are a sign of things to come the next four years, it is going to be volatile, although equities do not currently think so. Tariff developments in particular can have global consequences if the issue lingers beyond the next 30 to 60 days.There is no question the US has a big problem on the trade front. We learnt Tuesday that the goods deficit last month amounted to $119.7 billion, and in goods and services this was $98.4 billion. On a 12-month basis, they respectively totaled $1.21 trillion and $918.4 billion, with the former at a new high and the latter closely so (Chart 3).As the chart shows, the trade situation has progressively deteriorated over time. It is impossible to correct the situation merely through tariffs. The truth of the matter is that there is nothing wrong in importing a good because it is cheaper to do so. It is, however, wrong to consume beyond one’s means. While this gets sorted out, the issue has the potential to create uncertainty, which businesses hate.As things stand, orders for non-defense capital goods ex-aircraft – proxy for business capex plans – are barely growing on a year-over-year basis (Chart 4). Last month, they grew 0.9 percent from a year ago to a seasonally adjusted annual rate of $74.7 billion – a record. That said, orders have been north of $73 billion since January 2023.Business hesitancy is vividly apparent in small-business surveys.Post-Trump election, small-business optimism shot up, with the NFIB optimism index surging from October’s 93.7 to 105.1 in December, for a back-to-back reading of north of 100. Similarly, the ‘outlook for expansion’ sub-index jumped from six in October to 20 in December. There is a lot of optimism in the air.However, when it comes to opening the purse strings, these businesses for the most part continue to be on a wait-and-watch mode. Job openings was unchanged at 35 between October and December (Chart 5), although capex plans have gone from 22 to 27.The point in all this is that it is early for companies to figure out what the Trump administration’s policy prescription will mean for growth, inflation, and what have you. The tariff uncertainty is just one example. The sooner the fog is lifted, the better it is for planning purposes. The longer uncertainty lingers, it will begin to get reflected in equities.More By This Author:CoT – Futures Positions Of Noncommercials, MoreCoT: The Future Through Futures, How Hedge Funds Are Positioned, More4Q24 Earnings Season Begins