A couple of years ago, I wrote about absolute versus relative returns. Given the latest market run, I am getting a lot of questions about chasing returns, and individuals comparing themselves to the S&P 500 index.
Next week, the Q2-2025 earnings season will begin in earnest as a barrage of S&P 500 companies report, starting with the Wall Street money center banks on Tuesday and Wednesday. Since earnings drive the market by supporting investor expectations, what should investors expect? Let’s dig into the details.
The bull market is alive and well, even amid widespread talk of the “death of U.S. exceptionalism.
For sophisticated investors, this technical shift marks a subtle but powerful pivot in monetary mechanics. It could create demand for Treasuries, improve market liquidity, and push yields lower at a time when the economy is slowing.
The Fed’s credibility rests not on never being wrong, but on being adaptive and forward-looking. Inflation has cooled, wage growth has moderated, and economic momentum is slowing. Now is the time for the Fed to focus not on headline fears, but on real-time data.
The recent decline in the dollar relative to other currencies is well within historical norms. Notably, previous declines were much larger without the “fear-mongering” from the “experts of doom.”
Given the uncertainty of future events, global investors seek a “safe haven” for investment dollars. As such, U.S. Treasury Bonds and the U.S. dollar appreciate given their perceived “financial safety.” Last week, global investors were already starting to make that shift with the dollar rising.
The Iran-Israel conflict and equity markets are now in sharp focus. As direct strikes escalated in June 2025, global financial markets responded immediately. Israel’s airstrikes on Iranian nuclear and energy infrastructure triggered retaliatory missile and drone attacks from Iran.
Lately, the “deficit narrative” has dominated much of the financial media, particularly those channels that are continual “purveyors of doom.” In this post, we will discuss the “deficit narrative,” the likely outcomes, and why the cure for the deficit may be found in Artificial Intelligence.
In recent years, “buying the dip“ and more vulgar variations have often been equated to “dumb money” or retail investors, who are presumed to always make a mistake. However, as investors, we need to rethink how we view “buying the dip” because the whole goal of investing is to “buy low and sell high.”
It would seem evident that most investors would understand that consumer spending drives economic growth, ultimately creating corporate earnings growth. Yet, despite this somewhat tautological statement, Wall Street appears to ignore this simple reality when forecasting forward earnings.
Buying stocks is always hard. Particularly during corrections. Or, near market peaks. Or, when stocks are falling. And when they are rising. Oh, buying stocks is also tricky when valuations are high. And when they are low. You get the point.
It doesn’t take much to understand that Ray Dalio, a hedge fund titan, is like every other human being and is prone to error. I will not dismiss Dalio entirely, as his track record of managing money at Bridgewater is nothing to be scoffed at.
Given the uncertainty of what potentially happens next, the recent rally is an excellent opportunity to adjust portfolio risks to navigate the next leg of this market cycle.
Keep your market perspective in check, avoid anchoring, and focus on your investment goals rather than market volatility.
As investors, we need to step back and examine the history of previous debt downgrades and their outcomes for the stock and bond markets. Let’s start with what Moody’s rating agency stated about its rating change.
Fisher Investments recently wrote an interesting article asking whether corporate stock buybacks affect markets.
Assessing a bear market rally proves challenging when you experience it firsthand. It is only in hindsight that the complete picture reveals itself to investors. Of course, after a bear market rally, investors tend to review their investments and speculate on what they should have done differently.
While coming in much stronger than expected, the latest employment data confirmed what we already suspected: the economy is slowing.
Over the past two weeks, the market has had a furious nine-day rally, the longest winning streak in 21 years.
In investing, success is often judged by numbers—returns on investment, percentage gains, and the ability to outperform benchmarks like the S&P 500. However, some investors frequently pursue a peculiar set of “awards” without realizing the pitfalls they embody.
Despite the recent rally, the correction continues. While wanting to “buy the dip” is tempting, there has been enough technical damage to warrant remaining cautious in the near term.
Are you a “speculator” or an “investor”? This is an essential question that every individual deploying capital into the financial markets must answer. The reason is that how you answer that question determines how you should behave during market cycles.
In financial markets, few technical patterns generate as much attention and anxiety as the death cross.
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.
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.
