Inflation risk has been a significant topic of discussion in the mainstream media for the last few years.

The American consumer is tapped out. The savings buffer is gone, wage growth is declining, and credit costs are rising. Corporate America is already adjusting to this new reality, with companies issuing cautious guidance for 2025.

Yield spreads are critical to understanding market sentiment and predicting potential stock market downturns. While yield spreads have widened, they remain well below the long-term averages. However, if recession risks increase due to tariffs, sentiment, or illiquidity, those yield spreads will widen further.

A Wall Street axiom states that the stock markets lead the economy by about six months. While not a perfect predictor, the stock market reacts to investor expectations about future corporate earnings, economic activity, interest rates, and inflation.

Last week, we noted that “nothing good happens below the 200-DMA,” and the tariff-induced market crash this past week confirmed that statement. However, we also noted that over the last 30 years, previous failures at the 200-DMA have also often been buying opportunities.

Following the latest Federal Reserve meeting, there was a massive surge in media headlines stating “stagflation.” The media’s stagflation panic is unsurprising as it elicits memories of the late 1970s during the Arab oil embargo.

Over the last couple of weeks, the market sell-off eclipsed 10% on an intraday basis, sending investor sentiment plummeting to levels usually seen during more significant declines and previous bear markets.

It has been an interesting correction. The average retail investor was “buying the dip” despite having an extremely bearish outlook.

Human stupidity is the one thing you can rely on in financial markets. I recently read a great piece by Joe Wiggins at Behavioral Investment, which discusses why “Investing is hard.”

The recent sell-off has certainly sparked concerns with investors but the NYSE advance-decline line is an important technical measure to watch. However, what is it, and why does it matter?

The risk of a recession in the U.S. is not zero. This is particularly true as the current Administration tackles Government bloat and implements tariffs. However, before we discuss why the risk of a recession could increase, it is crucial to remember the 2022 experience.

Investor’s bearish sentiment has surged to levels that generally align with previous market corrections and crashes.

One of the most referenced valuation measures is Dr. Robert Shiller’s Cyclically Adjusted Price-Earnings Ratio, known as CAPE.

Just recently, S&P Global released its 2026 earnings estimates, which, for lack of a better word, have gone parabolic. Such should not be surprising given the ongoing exuberance on Wall Street. Unsurprisingly, rationalizations justify illogic when too much money is chasing too few assets.

If Trump tariffs Chinese, European, or Canadian products, those countries tend to enact counter-balancing tariffs on U.S. products. Such slows demand for goods and services between all parties, again a deflationary process.

Retail investors are expected to become more bullish about increasing equity exposure when markets rise.

There are many media-driven narratives about the impact of tariffs on the economy and the markets. Most of them are incredibly bearish, predicting the absolute worst possible outcomes.

The market defies more negative news because retail investors continue to step in and “buy the dip.” In our recent Bull Bear reports, we discussed the push by retail investors, but looking at retail sentiment is quite remarkable.

The Federal Reserve’s record of forecasting has frequently led it to respond too late to changes in economic and financial conditions. In the most recent FOMC meeting, the Federal Reserve changed its statement to support a pause in the current interest rate-cutting cycle.

Over the weekend, President Trump announced tariffs of 25% on both Canada and Mexico, as well as a 10% tariff on China.

Bullish exuberance is returning to the markets and the economy in a big way following the Presidential election.

On Monday, markets were rocked by news that a Chinese Artificial Intelligence model, DeepSeek, performed better than expected at a lower development cost.

In today’s post, we will examine the money supply represented by M2, the Federal budget deficit, the Fed’s previous adventures with QE, and the correlation to inflation.

Retail investors are the most optimistic about higher stock prices in 2025 by the most on record. Unsurprisingly, that sentiment resulted in the psychological rush to overpay for assets, pushing forward 1-year valuations sharply higher.

As we head into 2025, investors are giddy over the market returns of the last two years. As shown, the annual returns, while elevated, have come with only average volatility along the way.

In last week’s discussion with Thoughtful Money, I noted that we are becoming more “tactically bearish” as we progress into 2025. While we have remained primarily bullish in equity positioning over the last two years, several risks are now worth considering.

I publish an updated version of my New Year “investor” resolutions yearly. The purpose of the process is to take an annual inventory of what I did and did not do over the last year to improve my portfolio management practices.

As we enter 2025, the financial markets are optimistic. That optimism is fueled by strong market performance over the last two years and analyst’s projections for continued growth. However, as “Curb Your Enthusiasm” often demonstrates, even the best-laid plans can unravel when overlooked details come to light. Here are five reasons why a more cautious approach to investing might be warranted in 2025.

In a recent discussion on TheRealInvestmentShow, Bob Farrell and his 10 investment rules were discussed, which elicited several email questions asking, “Who is Bob Farrell, and where are these rules?”.

I never thought someone would label me a “Permabull.” This is particularly true of the numerous articles I wrote over the years about the risks of excess valuations, monetary interventions, and artificially suppressed interest rates.

It’s that time of year when Wall Street polishes up its crystal balls and predicts next year’s market returns. Since Wall Street never predicts a down year, these forecasts are often wrong and sometimes very wrong.

Understanding the trajectory of corporate earnings is crucial for investors, as these earnings significantly influence stock valuations and market performance.

While analysts are currently very optimistic about the market, the combined risk of high valuations and the need to rebalance portfolios in the short term may pose an unanticipated threat.

Corporations are currently producing the highest level of profitability, as a percentage of GDP, in history.

Financial markets often move in cycles where enthusiasm drives prices higher, sometimes far beyond what fundamentals justify.

Credit spreads are critical to understanding market sentiment and predicting potential stock market downturns.

Following President Trump’s re-election, the S&P 500 has seen an impressive surge, climbing past 6,000 and sparking significant optimism in the financial markets. Unsurprisingly, the rush by perma-bulls to make long-term predictions is remarkable.

With the re-election of President Donald Trump, the worries about tariffs and pro-business policies sparked concerns of “Trumpflation.” Inflation has been a top concern for policymakers, businesses, and everyday consumers, especially following the sharp price increases experienced over the past few years.

Paul Tudor Jones recently voiced concerns that rising U.S. deficits and debt and increasing interest rates could lead to a fiscal crisis. His perspective reflects the long-standing fear that sustained borrowing will trigger inflation, raise interest rates, and eventually overwhelm the government’s ability to manage its debt obligations.

Investor exuberance has rarely been so optimistic. In a recent post, we discussed investor expectations of returns over the next year, according to the Conference Board’s Sentiment Index.

The prospect of a Trump presidency has led to much debate and speculation about how markets might react. Depending on what policies are eventually passed, there are potential risks and opportunities in both the stock and bond markets.

Corporate buybacks have become a hot topic, drawing criticism from regulators and policymakers. In recent years, Washington, D.C., has considered proposals to tax or limit them.

Key market indicators for November 2024 present a complex but opportunity-filled environment for traders and investors. Following the first phase of Federal Reserve rate cuts and growing global uncertainties, the technical landscape suggests several notable shifts. Let’s explore the key market indicators to watch.

I was emailed several times about a recent Morningstar article about J.P. Morgan’s warning of lower forward returns over the next decade. That was followed up by numerous emails about Goldman Sachs’ recent warnings of 3% annualized returns over the next decade.

Seasonality has long influenced stock market trends, offering insights into predictable cycles of strength and weakness throughout the year. Yale Hirsch, the creator of the Stock Trader’s Almanac, is one of the most well-known contributors to studying these patterns.

Recent events, particularly the devastation caused by Hurricanes Helene and Milton in 2024, provide a clear example of why destruction does not create long-term economic prosperity. Despite the short-term boost in economic activity from rebuilding efforts, the broader economic implications are far more detrimental.

While greed is necessary to build wealth, excessive greed often has far more terrible consequences when investing.

The Bureau of Economic Analysis (BEA) recently released its second-quarter GDP report for 2024, showcasing a 2.96% growth rate. This number has sparked discussions among investors and analysts, particularly those predicting an imminent recession.

When most people hear the word “risk,” they think about wild market swings, scary headlines, and losing money overnight, but Howard Marks, Co-Chairman and Co-Founder of Oaktree Capital Management, takes a different approach. In his new video series How to Think About Risk, Marks digs deep into what risk is and how investors should handle it. Spoiler alert: It’s not just about volatility.

As the November 2024 election draws near, the election outcome will profoundly affect the financial markets. Whether Donald Trump or Kamala Harris wins the presidency, each administration will bring distinct policies creating investment opportunities and potential risks for investors. With a divisive political landscape, it is crucial to understand how these potential outcomes can shape the stock market and your portfolio strategy.