It’s been a wild six months. Earnings are deteriorating at the fastest rate since the 2020 crash, the Fed keeps tightening to the recession point and inflation is alive and well. And yet the S&P 500 is up 16% while the NASDAQ has surged close to 40%.

The next six months could be even better. While there’s always a chance that some totally unexpected shock will crash the economy and the market, the likely scenarios suggest that the bulls will have more to work with and an easier time getting stocks back on a record-breaking track later this year.

Start with the factors that have driven the rally so far. Last year, the bears drove the market to levels that lined up with a total economic disaster . . . basically unwinding all of the progress investors made in the zero-rate era. But there was a problem with that. So far, that disaster remains elusive.

Stocks priced for euphoria deserved to take a step back. Stocks priced for the worst-case scenario deserved to take a step forward. That’s just how life works . . . the Wall Street pendulum swings between extremes.

And in the meantime, great companies kept moving the ball forward. Earnings for the market as a whole are deteriorating, but a lot of big names like Amazon (AMZN) and Microsoft (MSFT) are still making progress while those caught in the inflation trap find ways to get their margins back on track.

It’s not hard to put together a portfolio of companies that are raising the bottom line 10-15% this year, openly defying what’s going on elsewhere. There’s no earnings recession for these companies. They’re becoming more relevant, more resilient and more valuable day by day.

But this isn’t about the companies I like. This is about my outlook for the market as a whole. On that front, I think the inflation trap is getting less lethal day by day. Executives have learned how to get around it. They’ve invested in productivity and efficiency and now those investments have had time to start paying off.

Never forget that inflation is calculated in year-over-year terms. If prices stay high for a year and don’t get higher, those costs remain baked into corporate margins . . . but headline inflation drops to zero. In other words, it stays bad, but it doesn’t get much worse.

And big corporations have proved that while they aren’t enjoying the current cost environment, they can survive it. The worst-case scenario of total implosion seems incredibly remote now. This is not fun but it is sustainable.

Inflation definitely goes down from here. We are now 15 months out from the initial Ukraine oil shock. Guess what? Higher energy prices are largely normalized. The latest energy CPI was actually down 5% from last year.

Similarly, the Fed might tighten overnight lending rates another 0.50 point in the next six months, but contrary to what people want you to believe, a world that keeps spinning here a little above 5% probably won’t grind to a halt at 5.5%. In the last six months, we survived a full point of tightening. A little more will hurt . . . but it isn’t automatically lethal.

And maybe a recession will emerge here in the 5.0-5.5% zone. We’ve trained ourselves to think of recessions as extremely painful, even apocalyptic: think of the 2008 meltdown or even the brief but severe COVID plunge. The word has been redefined so many times that it’s just another word for cooling the overheated economy.

It could mean getting back to normal. Taking a break. That’s not so bad as long as people keep working and companies keep making money for shareholders. Either way, I doubt that a recession will be called this year.

I know the yield curve is inverted. But a curve inversion tends to prefigure a recession by up to 3-4 years. And guess what? Historically, recessions are rarely more than 27 months away. We’re officially 37 months from the last one. Do the math.

Staying out of the market because you’re afraid of a recession is a great way to get stuck on the sidelines while other people are risking their money in order to make money. You avoid the risk and so you avoid the returns.

Granted, this is not a prediction that the market as a whole or any individual stock will go straight up from here . . . but when the threats recede, the worst case looks a lot better. That’s the world we’re moving into now.

And as earnings start increasing again, the best case starts looking better as well. The ceiling rises. The S&P 500 is still making more money than it was 18 months ago. In terms of the fundamentals, these companies are doing fine.

It’s just that sentiment has deteriorated to the point where the stocks can’t support the outrageous multiples they commanded in the zero-rate era. Bonds and even money market funds now pay high enough yields to compete better for investor dollars.

As a result, the market may not support lofty 22X valuations for some time to come. But once earnings start expanding again, multiples can stay relatively tight and stocks can move up with the bottom line.

Those fundamental gains are coming for the market as a whole. Later this year, we’ll get confirmation that a lot of stocks that are currently foundering (AAPL, GOOG, maybe even TSLA) are ready to grow again.

That’s when the recession ends for those companies. And of course for some companies there’s no recession whatsoever. Valuations come and go but their fundamentals keep growing.

If you’re scared of a recession, consider owning these companies. Many are still available at multiples similar to what they commanded before the pandemic . . . or even at a significant discount. Bigger company, smaller stock.

I see that META is technically a value name now. Bigger company, smaller stock, lower multiple than the market as a whole. It sounds crazy to see “value” funds stuffed with META shares, but that’s just how the math goes.

Value investors chase value. Growth investors chase growth. And if you can find a fast-growing company at a cheap price, grab it!