Bearish investors often point to two charts to confirm why they are negative on stocks.But according to Ed Yardeni, the bears get it wrong as they misunderstand what really drives stock market performance.”We think that the stock market’s trend is driven mostly by the trend in earnings,” Yardeni said.LoadingSomething is loading.Thanks for signing up!Access your favorite topics in a personalized feed while you’re on the go. download the appThere is a lot of doubt about where the stock market goes from here as investors worry about everything from a potential recession to a debt-ceiling impasse that leads to the US defaulting.No matter what the fundamental reason of the day, week, or month is, bearish investors often highlight two different charts that help confirm their negative view on stocks.But market veteran Ed Yardeni isn’t buying it, and in a Monday note countered that bears get it all wrong with those two charts because they fundamentally don’t understand what drives the stock market higher: corporate profits.”We think that the stock market’s trend is driven mostly by the trend in earnings,” Yardeni said, and that trend, over time, has moved up.Here are the two charts often used by bearish investors, and Yardeni’s take on them.1. The Fed’s balance sheet vs. the S&P 500.Ed YardeniThis chart shows the S&P 500 overlaid on the Fed’s growing balance sheet. Bearish investors argue that the bull market in stocks from 2009 through 2021 was solely driven by the Fed’s quantitative easing programs.Now that the Fed is reducing its balance sheet by nearly $100 billion on a monthly basis, stocks are due to fall, or so goes the bearish thinking.”The S&P 500 peaked at a record high on January 3, 2022 as investors started to anticipate quantitative tightening, which started during June of that year. The Fed remains on its QT course, which suggests to these bears that the rally since October 12, 2022 is a rally within a bear market,” Yardeni explained.But as long as corporate earnings continue to grow, the stock market can rise in the face of a declining Fed balance sheet, as it did in 2017 and 2019. “We doubt that QT will cause either an economic or an earnings recession, let alone both. In our ‘rolling recession’ scenario, earnings growth may be weak, but it should be positive,” Yardeni said.2. The year-over-year growth of M2 money supply.Ed Yardeni”Another current favorite chart of the permabears is the year-over-year growth of M2. M2 was down 4.1% year-over-year in March, the lowest growth rate on record, they point out. But that followed a record-high growth rate of 26.9% during February 2021,” Yardeni said.The bearish idea is that with less money sloshing its way throughout the economy, less money will be able to flow into risk-assets like stocks, essentially removing a bullish factor from the equation. But Yardeni offered a different perspective on the M2 growth rate by revealing a third chart.Investors should instead focus on the absolute chart of M2 money supply and deposits across commercial banks.The chart shows that both M2 and total deposits at commercial banks remain about $1 trillion to $2 trillion above its pre-pandemic trend. So, while the growth has slowed recently, that’s a natural effect of the astounding gains it experienced during the pandemic. Ed YardeniInstead of focusing on those charts, the bears would do better to focus on corporate earnings growth, which is expected to experience a slight decline this year. This chart from Fidelity’s Jurrien Timmer lays out the long-term direct relationship between stock prices and earnings.”The scatter plot below is a good reminder that, over the long-term, stock prices follow earnings,” Timmer said.Fidelity