5/7/25 Charts & Ideas: What Markets Are Telling Us

05/09/2025 | Unsubscribe

Good Morning!

Here are some important charts and ideas capturing the latest trends in US markets to help you understand what is happening from multiple different perspectives:

🧠 Mindset Shift: The Secret Edge in Trading

A simple yet powerful way to improve your trading performance is to flip your perspective — instead of searching for reasons to enter a trade, focus on identifying reasons to stay out. This slight shift strengthens discipline and helps you avoid emotionally driven decisions.

📊 GDPNow Q2 2025: Growth Rebounds to 2.2%

• 📈 Revised Up: From 1.1% → 2.2%, signaling stronger-than-expected growth.

• 🛍️ Consumer Spending Strong: Personal Consumption Expenditures (PCE) remains a steady driver.

• 🏢 Business & 🏠 Residential Investment Improve: Now boosting GDP.

• 🛬 Imports Still Drag, But Less: Trade flows stabilizing.

• 📦 Inventories No Longer a Headwind: Post-shock supply chains are adjusting.

💼 What This Could Mean for You

• ✅ Soft Landing in Sight: Recession fears ease — supports risk assets (careful to jump to this conclusion - not enough data here).

• 📊 Equities Benefit: Especially cyclicals, consumer-facing stocks.

• ⚠️ Bond Risk Rises: Strong growth + sticky inflation = "higher for longer" rates.

• 🛑 Still Caution Warranted: Labor & geopolitical risks haven’t disappeared.

🔁 Alternative Views to Consider

• 🟠 Temporary Boosts: Inventories/govt. Spending may fade next quarter.

• 🔵 Quality of Growth Matters: Not all gains are sustainable.

• 🔴 Rate Cuts Could Be Delayed: Strong GDP may keep the Fed cautious.

📊 Cyclicals Flash Warning Despite S&P 500 Strength

• 🔁 Cyclicals Lag Defensives:
  Even as the index holds up, defensive leadership signals caution, not optimism.

• 📉 ETF Outflows Deepening:
  Cyclical sectors (industrials, financials, discretionary) seeing >2σ flow declines — institutional risk-off move.

• 📉 Defensives Favored:
  Flows into utilities, staples, and healthcare suggest classic late-cycle positioning.

💼 What This Could Mean for You

• ⚠️ Rally May Lack Real Support:
  Headline index is strong, but internals show defensive rotation.

• 🛡️ Shift to Resilience:
  Favor low-vol sectors if the slowdown persists (e.g., healthcare, staples).

• 📉 Rethink Cyclicals Exposure:
  Weak flows often lead to weaker performance — reassess allocations.

• 🧱 Don’t Be Fooled by the Index:
  Under the surface, market strength is fragile.

🔁 Alternative Views to Consider

• 🟢 Oversold = Bounce?
  Flow extremes may offer a tactical entry if macro stabilizes.

• 🟡 Sector Skew Warning:
  Energy/healthcare outflows may distort the full cyclical read. Bull markets are built on skepticism.

• 🔵 Fed Pivot = Flow Reversal:
  Any dovish signals could quickly revive interest in growth-sensitive sectors.

📊 Corporate Bankruptcies Spike to Post-COVID Highs

• 🚨 Q1 2025: 188 Filings:
  Up 35% YoY from Q1 2024 — highest since the 2020 recession.

• 📈 Trend Worsening:
  60–69 filings/month Jan–Mar — near cycle highs, no sign of stabilization.

• ⏱️ From Lagging to Real-Time:
  Surge points to real financial stress, not just sentiment.

💼 What This Could Mean for You

• 🛡️ Credit Risk Rising:
  Avoid high-yield debt and leveraged small caps.

• 🧾 Favor Quality:
  Focus on cash-rich, low-debt large caps with strong fundamentals.

• 🧱 Recession Signals Strengthening:
  Aligns with weak orders, soft data, and consumer strain.

🔁 Alternative Views to Consider

• 🟢 Healthy Reset?
  Could be cleansing weak, zombie firms after the easy-money era.

• 🟠 Sector-Driven Spike:
  Energy, retail, and transport may skew totals.

• 🔵 Intervention Likely if Worsens:
  Fed or fiscal support could return, especially in an election year.

📊 Earnings Revisions Signal Trouble Ahead

• 📉 Ratio Drops to 0.64:
  Among the lowest since COVID-19, signals aggressive global estimate cuts.

• 📊 Strong Lead Indicator:
  76% correlation with future EPS — typically leads earnings by ~6 months.

• ⏳ Mid–Late 2025 Risk:
  Global earnings may contract by Q3–Q4 if the trend holds.

💼 What This Could Mean for You

• ⚠️ Valuation Compression Likely:
  Be cautious with growth/cyclicals dependent on rosy EPS forecasts.

• 🌍 Global Exposure at Risk:
  Multinationals and EM equities may see sharper revisions.

• 💡 Prioritize Resilience:
  Focus on cash-generative, pricing-power companies with steady earnings.

🔁 Alternative Views to Consider

• 🟢 Bad News May Be Priced In:
  Markets often have front-run revisions, and some downsides may be absorbed.

• 🟠 U.S. Resilience Possible:
  AI + tech spending could shield U.S. earnings from global drag.

• 🔵 Soft Landing Still Plausible:
  If macro holds and cuts arrive, the contraction may be shallow.

📊 Bull vs. Bear Markets — What History Shows

• 🔵 Bulls Are Longer & Stronger:
  Avg.. duration: 5.3 years, +254% return.
  The post-2009 bull ran for over a decade.

• 🔴 Bears Are Short & Sharp:
  Avg.. duration: 1.1 years, -32% drop.
  2007–09 crash: -55% in 1.4 years.

• 📉 2022–23 Pullback Was -24%:
  Shorter than average. Recovery strong, but rebounds can include relapses.

💼 What This Could Mean for You

• 🧭 Stay Long-Term Focused:
  Time in the market beats timing it.

• 🛡️ Rebalance During Bears:
  Use dips to add quality and reassess risk.

• 💡 Bear Lows = Big Upside:
  Post-bear rebounds have been powerful (1974, 1982, 2009, 2020).

🔁 Alternative Perspectives to Consider

• 🟠 High Valuations = Lower Upside?
  Rich entry points may cap future gains.

• 🟢 Tailwinds Could Soften Bears:
  AI, easing policy may limit drawdowns.

• 🔴 Future Cycles May Differ:
  Structural shifts (debt, demographics, de-globalization) could reshape outcomes.

That’s it for today!

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Best Regards,

Ultimate Alerts Team

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