Sam Stovall

#FedChairPowell highlighted the unknown effects of #tariffs, which are causing investor concern. We expect 2025 #GDP growth above 2.0% and #inflation to ease, leading to possible #RateCuts. #SP500 EPS growth is projected to be over 9%, indicating a slower upward market trend.

Dip-buying investors recall Baron Rothschild’s quote, “The time to buy is when there’s blood in the streets.” However, after the #SP500's two consecutive years of over 25% returns, a 10% pullback hardly qualifies as a #bloodbath.

Frm the peak on Feb 19 to the end of the 10.1%⬇️on Mar 13, bearishness was prevalent. The #SP500 & #Nasdaq100 saw many stocks⬇️below oversold levels, the @CNNFearandGreed was in the #ExtremeFear category & the @AAIISentiment indicated a #caution not seen since the 2022 bear mrkt.

History hints (but does not guarantee) that quick⬇️ below 10% often lead to: 1) shallower avg ⬇️ 2) shorter durations for the total ⬇️& 3) quicker recoveries. However, the primary challenge remains the ongoing #tariff dispute, which adds uncertainty to both the⬇️& recovery.

In response to these concerns, the #SP500 1st entered a pullback, ⬇️over 5% on March 4. It then⬇️into #correction territory by surpassing a 10% drop on March 13, just 22 days after hitting a new high, compared to the avg of 80 days for past selloffs over 10% since World War II.

After reaching a new all-time⬆️on Feb 19, the #SP500 ⬇️, pressured by the manufactured headwind of #tariffs imposed on our major trading partners, which resurrected the whisper of #recession. #BullMarkets don’t die of old age. They die of fright & are most afraid of recession.

On Friday, the #SP500 saw a counter-trend move, likely due to a near-term oversold condition, as investors stepped in to buy the dip despite a #WeakerThanExpected jobs report. Time of this cautious sentiment will be how quickly global trade concerns & recession threats subside.

The limited bright spots in the past wk came from the international developed & emerging mrkts, as the U.S.💲index⬇️& investors decided it best to temporarily sidestep the #tariff turmoil by rotating into those areas that have underperformed the #SP500 in 12 of the last 15 yrs.

.@cfraresearch see this retrenchment as a #healthy sign for the #BullMarket & expect a shift back to #GrowthSectors as the year unfolds. With February behind us, the seasonal recovery brings #optimism for investors.

As we enter the month named after the Roman god of war, #GrowthSectors like the #SP500GrowthIndex, #CommServices, #ConsumerDiscretionary, & #Industrials are struggling, trading below their 10- & 40-week moving avgs. In contrast, #DefensiveSectors are outperforming MTD & YTD.

As winter turns to spring, the stock mrkt typically rebounds in #March. The #SP500 has an avg rtn that ranks 5th⬆️since 1945 w/a 65% chance of➕rtns, outpacing the 60% avg 4 other mos. But, Mar also sees both the⬆️&⬇️rtns w/⬇️std dev compared to other mos, despite freq pullbacks.

Last week’s sell-off saw rtrns among sectors reflecting patterns frm the 15 #SP500⬇️of 10% or more since 1990. It’s still early to determine if the #SP500 is entering a #pullback (5.0% to 9.9%⬇️) or a #correction (10.0% to 19.9%), sector & bond performance can provide insights.

The cyclical sectors like #ConsumerDiscretionary, #Industrials, & #Financials fell ⬇️as investors grew concerned about the economy's health & the effects of steep #tariffs. Last week's performance resembled fainting goats reacting to a sudden shock.

In the last 2 days of last week, the #SP500⬇️2.1% due to concerns over #ConsumerConfidence, #Earnings, & #Inflation. However, #ConsumerStaples, #HealthCare, & #utilities sectors performed well, as #demand for their products typically remains #stable in good and bad times.

Investors who wanted to know which sectors would likely be winners and losers during a sharp selloff in the equity market could have channeled Captain Renault in the 1942 classic film Casablanca, who frequently ordered “round up the usual suspects!”.

4) Investors have concluded that #StockPrices can still #rise this year, absent rate cuts & P/E multiple expansion since earnings are forecasted to post double-digit gains in 2025 & 2026.

3) The treasure trove of #tariffs, imposed and then postponed, have caused the markets to conclude that tariffs remain more rhetoric than reality.

2) Recent economic data continue to support the #FederalReserve's (Fed) “no hurry to cut” stance. However, Fed Chair #Powell’s testimony before #Congress suggested that #RateCuts are still the Fed’s preferred scenario and remain a possibility.

For example, 1) a hotter-than-expected reading for the Jan #ConsumerPriceIndex was met by a more tame #ProducerPriceIndex, which allowed investors to expect a favorable #PersonalConsumptionExpenditure reading later this month.

Investors appear to be in a “yeah, but” kind of mindset. Despite being delivered unsettling news that initially caused the markets to fall, stock prices recovered quickly after investors convinced themselves that these negatives would likely be offset by positives.

The #SP500 disappointed investors this week, continuing its trend of➖rtrns in Feb. A⬇️this month doesn’t usually signal a failing year, as the index often⬆️after a Feb drop. When Feb follows a Jan gain, the #SP500 has ended the yr⬆️97% of the time, an average growth of over 20%.

Earnings miss from $GOOGL & $AMZN & Friday’s nonfarm payrolls report⬆️#inflation concerns & led to a sharp selloff. Q4 2024 EPS forecasts now predict a 13.7%⬆️up from the 8.7% projection, per #SPCapitalIQ. We also anticipate two 25 basis point rate cuts in the 2nd & 4th Qtrs.

After #tariff announcements for major #TradingPartners, stocks saw significant selling, with most sectors and 80% of #SP1500 subindustries⬇️. However, President Trump’s 30-day extensions & strong Q4 earnings spurred a relief rally mid-week.

46 stocks have favorable investment rankings (CFRA 4-STARS or 5-STARS), according to @cfraresearch. Combining fundamentals w/technicals, a baker’s dozen of these 46 also have #PowerRatings above 90, along w/favorable short- & intermediate-term trends, according to @LowryResearch.

This week, 98 #SP500 companies are reporting Q4 earnings, with the ⬆️ number in #Industrials, #Financials, & #InformationTechnology. The reporting companies represent the ⬆️sector weightings for #Energy, #ConsumerDiscretionary, & #Industrials.

In 2024, the #SP500 ⬆️over 23%, setting 57 new all-time⬆️, including 6 in Jan. In Jan 2025, it reached its 1st⬆️of the yr, fueled by dovish inflation, strong retail sales,➕producer sentiment & an expected EPS growth of 9.7% for Q4 2024,⬆️frm 8.7%, w/ 5 sectors seeing⬆️revisions.

Join me for my session, The #FreeLunchPortfolio, @ the @MoneyShow's 2025 Portfolio Playbook Virtual Expo. I will discuss whether history advises buying last year’s #winners or #losers. Register today for your free pass. ow.ly/YVem50UH0jc

Join me at the @MoneyShow's 2025 Portfolio Playbook Virtual Expo on Jan 28-29. My industry colleagues & I will provide guidance &recommendations for stocks, bonds, precious metals, real estate, cryptocurrencies, & more during this event. Register today! ow.ly/oHzq50UHh3k

Despite the forecast for an increase in volatility, @cfraresearch continues to predict another price increase for the #SP500 in #2025 & maintains its #overweight rankings in the #CommunicationServices, #financials, & #InformationTechnology sectors.

Since 1993, the top four sectors from #election to #inauguration day averaged a 17.0% ⬆️, outperforming the #SP500's 15.9% rise 75% of the time. Additionally, the top 10 #SP500 sub-industries averaged a 26.8% increase & also beat the market 75% of the time.