The S&P 500’s estimated bottom-up operating EPS nosed slightly higher during the first month of Q1 reporting. This is a welcome development following the steeper-than-usual decline over the past six months. Projections for the next three quarters of 2025 weren't as fortunate in April, as they all experienced a noticeably steep leg down of around 3%. The full-year 2025 operating EPS estimate for the index now sits at $260.72, down a conspicuous 4% since the beginning of the year.

Read this week's Major Trend.

Read this week's Major Trend.

Read this week's Major Trend. 

The latest CPI report came in softer than consensus. The market ignored it. We expect a stagflationary scenario over the near term, but the longer term outlook has tilted materially toward a recession.

Read this week's MTI update

This cycle’s earnings performance has been exceptional. If EPS were to top out today, the peak-to-peak annualized performance from the last cycle high will have been the strongest among six cycles since the early 1970s. Nonetheless, nominal growth in EPS has been boosted by elevated inflation, which has supplied almost one-half of the last five years’ growth rate.

It’s worth considering that “this time” is not different. In fact, this time and may well be the same as it ever was, and the recent stock market collapse could morph into a perfectly normal cyclical bear market. Based on the average loss of the last 13 (non-recessionary) bear markets, SPX could drop to 4,153. 

The stock market declines of April 3rd and 4th were a mass liquidation with no distinguishing between Growth or Value. Still, there are signs that a rotation from the former to the latter is underway. And keep in mind that the most reliable catalyst for a transition in leadership is a bear market.

The risk is now extremely high that the breakdown in confidence will become self-fulfilling. The near 30-point collapse in Consumer Expectations from the post-election high could translate into a reduction in real-GDP growth of more than two percentage points over the next year.

The stock market losses in 2025 have materialized so rapidly that many investors might feel trapped, hoping for a bounce that provides better exit prices. The challenge may be that an imminent bounce and the “new narrative” to support it will seem so compelling that the urge to exit may dissipate.

A synopsis of ten historical bubbles, with price charts detailing the scope and duration of each, beginning prior to the onset of the hysteria through the aftermath of the bursting of the bubble. At the end of these cycles, the asset typically returns to the base trend in place before the insanity took hold. These quick anecdotes may be of particular interest to those whose tenure as professional investors has not yet reached the quarter-century mark.

March marked the second consecutive month of historically poor growth performance, capping the worst back-to-back stretch since the global financial crisis. While low volatility and value surged, growth and momentum were hit hard—raising big questions about how much downside remains and whether safety now comes at too steep a price.

Uncertainty surrounding Trump’s second term and the risk of escalating tariffs have shifted market focus from inflation to growth, raising fresh concerns about a potential recession. Our updated Recession Dashboard shows a delicate balance, with risk now slightly above 50%—driven largely by weakness in equities and full-time employment. While some indicators have improved, the market remains the most important signal to watch. A sharp selloff could tip the economy from slowdown into recession territory.

S&P 500 performance turned negative in the first quarter of 2025 and factor returns responded as expected. Defensive factors including Low Volatility and dividend-focused styles produced positive returns, and Value managed to eke out a tiny gain.

Read this week's Major Trend. 

Extended bull markets are the primary attraction of equity investing and play an integral role in generating long-term returns.  However, investors must take heed when psychological excesses turn a garden variety bull market into mania-induced price chasing.  Instead of reaping the customary gains offered up by a typical bull, the risk and reward tradeoffs become exponentially larger when exuberance overpowers prudence.  Recognizing the difference between a bull market and a bubble is critical for building a respectable long-term track record.   There are subjective attributes common to most manic equity markets, and although these signposts are not mechanical or quantitative, taken together they tell a coherent story.

With yesterday commemorating the 25th anniversary of the S&P 500 Y2K peak, it’s worth evaluating the long-term results of the unlucky purchases of U.S. equities occurring at that time. Of course, it’s doubtful that many investors decided to dump their money-market funds and go “all in” on stocks that day. Instead, think of this analysis as a review of how one’s dutiful, monthly 401(k) contribution for March 2000 has likely performed over the subsequent 25 years.

Read this week's Major Trend. 

This essay takes a broader view of Manias, Bubbles, Panics, and Crashes by expanding on these terms, considering the benefits of studying stock market bubbles, and looking for commonalities that mark each phase of a euphoric price cycle.  The most practical reason to study bubbles and crashes is the simple fact that they appear far more often than one might expect. Rational investors may be inclined to dismiss the periodic appearance of bubble conditions as just so much noise and frivolity, leaving us to focus on real world issues like the economy, profits, and expected returns. However, we believe the impact of manias and crashes on investment performance over an entire career is significant to the point of being decisive, and that is the most compelling reason to study the history of financial manias.