In the first half, we discuss the imminent arrival of “Liberation Day”, and why uncertainty over tariffs is causing consternation to consumer, business, and investor confidence. We look at the most recent inflation data from the government and examine the widely divergent inflation expectations based on political affiliation. We also tie this to the likelihood of further rate cuts and the necessity to drive rates lower as sizable government debt is due to be refinanced in 2025.

In the second half, we (finally) discuss what has been a challenging quarter for stocks, especially the Magnificent Seven:

• In the aggregate, the Mag Seven are in a bear market (down 20%).
• The S&P 500 is down 5% YTD and 10% below its all-time high, led lower by the Mag Seven.
• The average stock in the NASDAQ is 35% below its high.

The path forward for the market depends on the impact of tariffs and spending cuts, both of which are likely headwinds in the near term. With both valuations and earnings expectations still elevated, there remains downside in the event of either an economic or earnings recession. However, value stocks have performed well year-to-date, as have non-U.S. stocks, which are garnering attention as a result of changing U.S. trade and foreign policy. In other words, diversification has (finally) been helping.

Learn more about Formidable Asset Management, Will Brown, and Adam Eagleston by visiting www.formidableam.com.

In the first half, Will and Adam discuss the rapid deterioration in consumer sentiment and how it is cutting across both economic and political divides, albeit to differing degrees. Some sentiment indicators, especially concerns over job loss, are at levels normally seen during a recession, in part due to the uncertainty over tariffs with large trading partners like Canada. Another concern is spending cuts. We look past the headlines to see that cuts have not yet taken hold, though with 85% of job growth in 2024 attributable to government spending, we could be in for a volatile transition period as a result of the “detox” the administration is seeking.

In the second half, we look at the recent (albeit brief) market correction, and put it in historical context:

• Since 1980, the average yearly decline for the S&P 500 has been 14%.
• There have been about 117 10% corrections since 1928, so around one per year.
• Statistically, a 10% correction turns into a bear market around 25% of the time, and that normally occurs when the economy dips into a recession. The rest of the time, the market recovers in about eight months, on average.

Although modest, the 10% correction is equivalent to 12% of GDP. That type of hit to wealth has contributed to a recession in about half of the prior 12 occurrences.

With the Magnificent Seven, on balance, lagging this year, we look at the prospect of a broader market showing the benefits of diversification, not to mention the strong start to the year for non-U.S. stocks, which have been buoyed by the shift in spending priorities in both developed and emerging markets.

Learn more about Formidable Asset Management, Will Brown, and Adam Eagleston by visiting www.formidableam.com.

With headlines versus earnings moving markets, we look at the perceptions and realities influencing investors (and speculators).

In the first half, we discuss the sharp decline in consumer confidence and spike in inflation expectations, both of which represent challenges to continued equity market strength. We also look at how the bond market (and the Federal Reserve) are responding, and how the continued on again/off again/on again tariff headlines are causing consternation to consumers and investors.

In the second half, we delve into the perception versus reality of government efforts to cut waste and if that is enough to reduce the deficit enough to achieve the administration’s goal of a lower yield on longer term Treasuries. We also look into the effects of wealth and spending inequality on the economy. There is also a continued discussion of the effect of passive fund flows and levered ETFs on some of the markets biggest names, and how those are widening the dispersion between stock indices versus the average stock; to wit:

• The NASDAQ is only 5% from its year-to-date high, while the average NASDAQ stock is 25% from its high.
• Only 22% of stocks in the S&P 500 outperformed the index over the past 12 months.
• After six of the so-called Magnificent Seven outperformed in 2024, only one is ahead of the S&P 500 so far this year.

We close with our thoughts on where we are seeing positives and why, eventually, fundamentals may matter more than headlines.

Learn more about Formidable Asset Management, Will Brown, and Adam Eagleston by visiting www.formidableam.com.

With tariffs in the news, we sift through the torrent of headlines coming from both sides of the border and beyond.

In the first half, we look at the breaking news on tariffs, with an 11th hour agreement with Mexico giving a pause to the proposed 25% duty on imports. We also look at why Canada may be more reticent to strike a deal, and what the bigger objectives may be. Is it all about oil and inflation, or are we looking at a 21st century version of the Monroe Doctrine aimed at China? We also break down how the Fed is assessing the situation.

In the second half, we finally get to the stock market. We look at the effect of Deep Seek news coming out of China on AI stocks, and whether it represents a opportunity or a threat for the sector. We also recap the first big week of technology earnings:

• Four of the Magnificent Seven reported.
• While the initial reaction was positive for three of the four, only one has held onto its gains.

We close with our thoughts on where we are in the economic (and market) cycle, and where we are looking for opportunities.

Learn more about Formidable Asset Management, Will Brown, and Adam Eagleston by visiting www.formidableam.com.

After a holiday hiatus, we welcome 2025 with a look at what worked in 2024 and what that may mean for this year.

One thing that did not work: forecasts. The Fed cut rates fewer times than predicted, and we discuss the recent pivot toward a more hawkish tone, which is part of the reason for the increase in yields on longer bonds. Those higher yields are stressing consumers and businesses, not to mention grinding mortgage activity to a halt. We look at the implications of higher rates and compare some of the small business stress we are seeing in our community versus the strong jobs data being reported, which is influencing the Fed’s outlook for rate cuts.

In the second half, we discuss stock returns in 2024, which were biased upward by a handful of stocks in one (well, two, as defined by the S&P committee) sectors. We compare the level of index concentration, valuation, and performance dispersion versus history and find the clearest parallel with 1998 and 1999. After that period, we saw the following pattern emerge:

• The average stock beat the index each of the next six years.
• Value stocks beat growth stocks each of the next seven years.

We close with our thoughts on why that could be replicated again, specifically given the implications of likely Trump administration policy on merger and acquisition activity, which is off to a strong start.

Learn more about Formidable Asset Management, Will Brown, and Adam Eagleston by visiting www.formidableam.com.

We take a wicked look upward, where both unidentified drones and market valuations reside. We also discuss the upcoming Fed meeting, investor sentiment, and the outlook for corporate margins (and employment) as AI gains greater adoption.

Learn more about Formidable Asset Management, Will Brown, and Adam Eagleston by visiting www.formidableam.com.

We discuss the recent mania around levered ETFs and the market mechanics that make these so volatile. We also take our first look at investor response to Trump’s win and what we think some of the over (and under) reactions have been so far, and what the true implications of changes in fiscal and regulatory policy may mean.

Learn more about Formidable Asset Management, Will Brown, and Adam Eagleston by visiting www.formidableam.com.

This week, Will and Adam discuss how markets typically respond to the election cycle, and the importance of staying committed to the long-term view when it comes to investing. We also do a deep, some may say submarine, dive on the phenomenon causing some of the extreme weather we are seeing, and compare this type of explosion and its effects to how the explosion of post-Covid stimulus has affected inflation, stocks, and bonds.

Learn more about Formidable Asset Management, Will Brown, and Adam Eagleston by visiting www.formidableam.com.