Read this week's Major Trend. 

In exploring how cross-asset behavior differs between recessionary and non-recessionary market selloffs, a more striking conclusion emerged: The presence of a Fed put—or the absence there of—looks to be the more powerful force in shaping market dynamics across assets.

While the stock market has reversed about half of its February–April decline, the risk of a self-fulfilling confidence collapse remains elevated. In April, the Conference Board’s Consumer Expectations Index dropped to a level that’s been observed only once outside of a recession (mid-2011).

A Zweig Breadth Thrust (triggered in late April), has historically been a boost for the seasonal market doldrums common from May through October, with stock gains much higher during that period than in the absence of a ZBT. Maybe that explains why the “Sell In May” phenomenon hasn’t received the usual attention this year.

Out of necessity, bear market rallies and the first leg of a new advance look nearly identical; if they didn’t, the game would be too easy. However, the action (or lack of it) within the most economically sensitive groups would seem to support our bearish take. 

Our research shows that weaker equity markets are favorable for active managers, and this quarter’s overall success rate of 57% is consistent with that expectation. Active managers outperformed in six of nine style boxes, led by an excellent 82% win rate for small-blend managers and a 74% success rate in large value.

Today’s disproportionate outflow from gold miners even as physical gold continues to attract new money, is the proverbial “canary in the mine” that serves as a warning of looming trouble. When the miners are bleeding assets, investors may wish to take precautions against the impending risk of lower gold prices.

Read this week's Major Trend. 

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.