5/8/25 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:

📈 S&P 500 Tests Long-Term Uptrend — Key Moment

• 🔄 Pullback to Decade-Long Trendline:
  Past support held in 2015, 2018, 2022 — inflection point approaching.

• ⚠️ “Tariff Tantrum” = Familiar Pattern:
  Mirrors prior stress events (Yuan shock, Volmageddon, Rate Reset) — but long-term trend endured.

• 🟢 Momentum Still Intact:
  Uptrend slope remains positive — pullback may be healthy mean reversion, not a breakdown.

💼 What This Could Mean for You

• 🧭 Long-Term View Favored:
  Historically, a solid buying zone — don’t overreact to volatility.

• 🛡️ Rebalance Smartly:
  Reduce crowded trades (e.g., tech) and add defensives/dividend payers.

• 💰 Deploy Cash Gradually:
  Consider dollar-cost averaging at these key technical levels.

🔁 Alternative Views to Consider

• 🔴 Trendline Break Still Possible:
  Escalating macro risks (tariffs, earnings) could lead to a deeper correction.

• 🟠 Liquidity & Earnings Tailwinds Fading:
  Tight policy and cost pressures may cap rebounds.

• 🟣 Sentiment Not Washed Out:
  High retail flows + complacency = potential for more volatility.

📊 Capex Confidence Holding — But Caution Creeps In

🔵 Capex Guidance (Left Chart):

• 2.3x Above vs. Below Consensus (3-mo avg): Well above long-term 1.4x average — strong investment sentiment.

• 📉 April Cooled to 1.4x: Still solid, but momentum slowing.

• 🟢 Overall, Firms remain willing to invest despite macro headwinds.

⚠️ Project Delays (Right Chart):

• Mentions rising in Q1 2025 earnings calls — signs of caution.

• Still far below COVID-era levels = friction, not crisis.

💼 What This Could Mean for You

• 🧱 Capex = Economic Support:
  Infrastructure, industrials, and tech tied to long-cycle spend still look resilient.

• ⏳ Delays = Revenue Lag Risk:
  Manufacturing, energy, and construction may see timing issues — stay selective.

• 🧩 No Recession Signal Yet:
  Investment softening, not collapsing — focus on quality, cash flow stability.

🔁 Alternative Perspectives to Weigh

• 🔴 Capex May Lag Reality:
  Strong guidance could fade if macro deteriorates (e.g., tariffs, demand shocks).

• 🟠 Delay Mentions Could Snowball:
  If supply chains stall, earnings may take a hit.

• 🟣 Sector Split Emerging:
  AI, defense, semis = capex strong. Consumer, small caps = at risk.

📊 What the Charts Show

• Main Street Meter (MSM) = Consumer Confidence ÷ Unemployment Rate.

• Current MSM is near historical lows, signaling pessimism despite low unemployment, similar to major market bottoms in 1982, 2009, and 2020.

• Historically, low MSM levels (bottom 25%) led to +17% 1-year and +14.3% 3-year S&P 500 returns.

• We're currently at the 25th percentile, suggesting strong forward equity potential.

💼 What This Could Mean for You

• 📈 Positive Return Outlook: History supports investing now or increasing equity exposure if your foundation is strong.

• 🕰️ Early Bull Market Signal: Low MSM often marks the start of multi-year gains.

• 🧘‍♂️ Ignore Fear, Stay Invested: Pessimism may be emotional, not fundamental.

• 🔄 Keep Diversified: Don’t go all-in — balance risk with broader exposure.

🔁 Alternative Perspectives to Consider

• 🟥 Pessimism Might Be Justified: MSM may reflect real underlying risks.

• 🟠 History May Not Repeat: Structural shifts could dull return patterns.

• 🟡 Expect Volatility: Even if long-term returns are good, near-term swings are likely.

• 🟦 Other Risks Overlooked: MSM doesn't capture earnings, debt risks, or geopolitics.

🔍 Buybacks Hit Record Highs — $192B in Q1 2025

• 📈 New All-Time High: 3-month total surpasses 2022 peak of $160B.

• 💵 Sign of Corporate Confidence: Management ramping up repurchases despite macro uncertainty.

• 📊 EPS Boost Effect: Fewer shares = stronger reported earnings — even if fundamentals lag.

💼 What This Could Mean for You

• 📈 Short-Term Equity Support: Buybacks can help cushion market pullbacks.

• 🧭 Favor Large-Cap Quality: Mega-cap firms benefit most, especially in tech and mature sectors.

• 📊 Watch Earnings Quality: Buybacks inflate EPS, but may hide weak margins or sales.

🔁 Alternative Perspectives to Weigh

• 🟥 Not Growth-Driven: Repurchases may reflect limited reinvestment options.

• 🟥 Poor Timing History: Firms often buy high, not during dips.

• 🟥 Fragile Cushion: Recession = buyback cuts — don’t treat this as recession-proof support.

🔍 Hedge Funds Pile Into Defensives — Goldman Prime Book Signals

• 🛡️ Defensive Rotation Spikes:
  Health Care, Utilities, and Staples seeing flows >1σ above 1-year norms.

• 🏥 Health Care & Utilities Favored:
  Stability and recession resilience are driving flows.

• 🛍️ Staples = Safety Play:
  Reliable revenues prioritized over high-growth exposure.

• 💡 Financials & Real Estate Outflows:
  Rate and credit risk fears may be behind the shift.

💼 What This Could Mean for You

• 🛡️ Volatility Hedge:
  Hedge funds are bracing for macro stress or drawdowns.

• 📊 Sector Rebalancing Opportunity:
  Consider tilting toward defensives if the growth outlook dims.

• 💡 Watch for Confirmation:
  Rotation suggests caution, not panic — monitor data and Fed signals.

🔁 Alternative Views to Weigh

• 🟢 Short-Term Hedge:
  May just be tactical risk-off positioning.

• 🟠 Laggard Rebound Play:
  Some defensives are rebounding from underperformance.

• 🔴 Reactive, Not Predictive?:
  Could be a late shift — not a leading indicator.

That’s it for today!

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Best Regards,

Ultimate Alerts Team

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