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.