Green Book April 2025
Bear-ing Down
The market decline will almost certainly be accompanied by a recession. For months we’ve maintained that the wealth effect had become the main support of an expansion whose list of beneficiaries had been narrowing like that of stock breadth and leadership. The administration’s draconian tariffs will deserve some blame, but it’s not partisan to underscore that the expansion was on precarious footing long before the Tariff Tantrum.
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Featured Articles
Dot-Com 25th Anniversary Series Part 5: A Pocket Guide To Financial Bubbles
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.
A Cycle In Value Is Underway
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.
Slowdown Or Recession? Watch The S&P 500 Index!
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.
How Low Could It Go?
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.
Growth Cracks Deepen: Worst Two-Month Stretch Since 2008
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.
That Sinking Feeling
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 Long-Term Take On Earnings
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.
A Terribly-Timed Tariff Tantrum
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.
Factor Tilt Update
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.
Table of Contents
Stock Market
- Bear-ing Down
- That Sinking Feeling
- A Terribly-Timed Tariff Tantrum
- “NOPE” Dashes Hopes
- A Cycle In Value Is Underway
- Updating Our Archives, But With Erasable Ink
- Some Stats On Whether Or Not To Buy
- Allocation: It’s Suddenly Relevant
- How Low Could It Go?
- A Long-Term Take On Earnings
Of Special Interest
Macro Monitor
The Leuthold Refresh
Equity Strategies
Quant
Market Internals
- A Year Of Improvement
- Valuations: Small Cap Vs. Large Cap
- Leadership Dynamics: Growth/Value/Cyclical
- Other Market Undercurrents
Portfolios
Major Trend
Estimating the Downside
At Random
Dot-Com 25th Anniversary Series Part 5: A Pocket Guide To Financial Bubbles
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.
A Cycle In Value Is Underway
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.
Slowdown Or Recession? Watch The S&P 500 Index!
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.
How Low Could It Go?
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.
Growth Cracks Deepen: Worst Two-Month Stretch Since 2008
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.
That Sinking Feeling
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 Long-Term Take On Earnings
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.
A Terribly-Timed Tariff Tantrum
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.
Factor Tilt Update
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.
Stock Market
- Bear-ing Down
- That Sinking Feeling
- A Terribly-Timed Tariff Tantrum
- “NOPE” Dashes Hopes
- A Cycle In Value Is Underway
- Updating Our Archives, But With Erasable Ink
- Some Stats On Whether Or Not To Buy
- Allocation: It’s Suddenly Relevant
- How Low Could It Go?
- A Long-Term Take On Earnings
Of Special Interest
Macro Monitor
The Leuthold Refresh
Equity Strategies
Quant
Market Internals
- A Year Of Improvement
- Valuations: Small Cap Vs. Large Cap
- Leadership Dynamics: Growth/Value/Cyclical
- Other Market Undercurrents
Portfolios
Major Trend
Estimating the Downside
At Random
Perception for the Professional
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