Today's Charts: What Markets Are Telling Us

04/26/2025 | Unsubscribe

Mission: Ultimate Alerts was designed for active and passive US investors to notify you about short-term and long-term risks and opportunities. Our mission is to provide you with an objective and historically accurate understanding of financial markets, macroeconomics and how it all affects your saving and investing.

Good Morning!

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

While its too soon to suggest this is a start of a new bull market (we do not think so), in the short-term the balance of risk, news flow & positioning suggests there is more upside than downside potential for markets.

The short-term could be weeks or months, need more information to understand the sustainability of this trend.

Always be prudent in your decision making, and understand that capital preservation is more important than growth, especially in times of uncertainty.

📈 What This Chart Shows

This is the U.S. 10-Year Treasury Term Premium — the extra return investors demand for holding long-term government bonds instead of rolling over short-term ones. After years of being deeply negative, it’s now surging toward zero, as shown in the red circle.

🚨 Why This Could Be a Red Flag (a.k.a. "Alarm Bells for Scott Bessent")

• Rising term premium suggests investors are nervous about future inflation, policy, deficits, and/or rate volatility.

• It means investors want extra compensation to hold long bonds, which can push long-term yields higher, even if the Fed isn’t raising rates.

• That makes borrowing more expensive across the economy (mortgages, business loans, etc.) and can pressure asset prices.

🔔 Why It Matters Before His Speech

• Investors and policy makers watch the term premium as a signal of deeper stress — it reflects fiscal concerns, inflation risks, or a breakdown in confidence in long-term policy direction.

• This surge (circled in red) might prompt him to address the following topics:

  • Whether the U.S. bond market is re-pricing long-term risk?

  • Recent equity volatility

  • What does it signal for future policy?

📉 What This Chart Shows

We’re currently in a textbook market correction — down over 10% from recent highs — and the pattern eerily mirrors the 1998 playbook: sharp drop, temporary rebound, retest of lows, then a strong rally after the Fed stepped in with rate cuts.

⏳ Long-Term Implications

If history rhymes with 1998, we could see a strong rebound once the market digests the correction and fiscal and/or monetary policy signals support.

However, elevated valuations mean any rebound could be fragile unless supported by real earnings growth and economic growth - both of which look problematic right now.

Investors who rely only on P/E ratios might miss the turn, just like some did in the late ’90s, thinking stocks were still “too expensive.”

📊 What This Chart Shows

This chart tracks three types of P/E ratios (Price-to-Earnings) for the S&P 500 — how expensive the market is compared to company earnings. While valuations dipped after the recent market selloff, all three P/E ratios remain well above their long-term averages.

🔍 Quick Take in 3 Lines:

Even after the market drop, stocks are still relatively expensive compared to historical norms.

High valuations can lead to short-term volatility if earnings don’t improve and if there is no sign of improving (second derivative).

📈 What This Chart Shows

When over 96% of S&P 500 stocks move up on at least 2 days within 10 days, it’s called strong market breadth. Historically, this kind of broad buying often signals momentum, with the S&P usually rising in the following months.

⏳ Long-Term Implications (More Than 6 Months)

Broad participation like this often points to healthy market strength, and 80% of past cases show positive returns 1 year later.

However, it’s not foolproof — 2008 shows that strong breadth can also appear before big declines - especially during a structural bear market.

Whether this is a structural bear market or temporary decline, we do not know but our view is that there is downside risks for 2025 and 2026 before we see any sustainable and meaningful growth in the markets and economy.

📉 What This Chart Shows

The S&P 500 has just experienced 41 straight trading days with an RSI (Relative Strength Index) below 50 — a technical signal of weak price momentum.

The S&P 500’s Relative Strength Index (RSI) has closed below 50 for 41 or more consecutive sessions only 24 times since 1930.

This current instance is marked as the 21st longest streak in history, highlighting how rare and significant such prolonged weak momentum is. Nearly all these past streaks occurred during or near bear markets, making it a notable technical signal for long-term investors to monitor.

📉 What This Chart Shows

Companies are pulling back on plans to invest in equipment, factories, and tech — aka CapEx (capital expenditures). The capex tracker (grey line) just fell to its lowest level since early 2020, suggesting a slowdown in business spending.

⏳ Long-Term Implications

When businesses spend less, it can signal economic weakness, leading to slower job growth, fewer pay raises, and weaker corporate profits.

This could weigh on stock market returns and the broader economy over time.

However, less spending now could also lower inflation pressures, giving the Fed more room to cut rates down the road — a possible silver lining for borrowers and investors alike.

However, cutting interest rates could cause inflation to resurge pretty quickly depending on the circumstance and timing of events - so be careful thinking there is one uniform solution that doesn’t hurt everyone.

📉 What This Chart Shows

Both services (light blue line) and manufacturing (black line) sectors are weakening, and services, which comprise most of the U.S. economy, are now performing worse than last fall. That’s a red flag for economic momentum.

⏳ Long-Term Implications (More Than 6 Months)

If the services sector keeps sliding, it could drag down job growth, consumer spending, and corporate earnings — all of which matter for stock performance and economic stability.

This may eventually force the Fed to cut interest rates, but it could be too late to prevent serious economic decline/slowdown. However a prolonged slowdown is what is needed to reduce persistent inflation pressures.

For long-term investors, it’s a cue to stay diversified and prepare for slower growth in portfolios and the economy.

That’s it for today!

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