This schooling super-charged my worry and my feeling of hopelessness because the world tipped into recession in 2007 and spiraled into International Monetary Disaster (GFC) in 2008. The extra I understood, the extra I felt like there was no means out of it. And lots of pundits appeared to agree. I keep in mind revered monetary market prognosticators occurring TV and proclaiming that the federal government’s bailouts of the large banks, the automakers, and the GSEs have been proof that it was “the tip of capitalism.”
The S&P 500 fell 57% from its Oct 2007 excessive of 1,565 to its March 2009 low of 666. (Supply: Yahoo Finance)
It wasn’t the tip of capitalism, although many have been satisfied the housing market would by no means come again as we entered a “new regular” of sluggish development. One other fashionable phrase within the wake of the disaster was “secular stagnation.” Admittedly, I used to be bought on the concept that financial development would ceaselessly be a protracted slog. You’ll be able to’t blame me. In 2010, I received laid off from my job and I re-entered a job market flooded with unemployed individuals with backgrounds in finance.
However the post-GFC restoration helped me recognize the resilience of the customers and companies propelling the financial system ahead. I received an amazing job in 2011, and over the following decade my earnings soared. These years have been riddled with quite a few macro hiccups, however nothing may preserve the financial system and the inventory market from accelerating once more and blasting via file highs.
After which got here the COVID-19 pandemic.
These first 6-9 months have been surreal. I keep in mind feeling like I used to be residing in a sci-fi horror movie. At many factors I assumed this new unusual lifestyle could be everlasting. In the meantime, I used to be consistently apprehensive that the entire financial system would collapse on itself.
COVID-19 induced the financial system to almost screech to a halt. (Supply: FRED)
The invention of the vaccine definitely helped issues flip round. Quick ahead a number of years, and most issues within the financial system are again to regular. Notably, cruise and air journey have greater than recovered as most individuals have gotten snug once more with being in tight areas with strangers — except it is in an workplace for work.
So regardless of the ache, the trauma, and even the lack of life, all these experiences ultimately confirmed that we’ll at all times bounce again.
The financial system and the inventory market have at all times had an upward bias.
This is smart if you concentrate on it. There are far more individuals who need issues to be higher, not worse. And that demand incentivizes entrepreneurs and companies to produce higher items and providers. The winners on this course of get greater as income grows. Some even get sufficiently big to get listed within the inventory market. As income grows, so do earnings. And earnings drive inventory costs.
I can not think about something altering these attitudes. Positive, there might be intervals of once we really feel offended and hopeless alongside the way in which. However we’re by no means gonna get up sooner or later and resolve we now have every little thing we wish or choose the concept that what we have cannot be improved on.
And there’ll at all times be a way of urgency. Even throughout troublesome intervals, individuals perceive that life will not wait. You are getting older. Your children are getting older. Your mother and father are getting older. When you’ve got the sources, you will not put your lives on maintain. That is bullish because it retains the wheels on the financial system spinning.
Positive, many issues change after all of the occasions I discussed. However issues are at all times altering. Importantly, the adjustments that caught have by no means prevented the financial system and the markets from setting new data.
For those who’ve been following the information at all around the previous two months, you have in all probability heard no less than a number of of us speaking about how the Trump administration’s strategy to commerce coverage is damaging the U.S. ‘s standing on the earth whereas additionally threatening to ship the worldwide financial system into recession.
Because the inventory market tumbled, phrases like “promote America” and “finish of American exceptionalism” started to pattern. Well-liked measures of investor sentiment tanked.
Barron’s Massive Cash ballot revealed historic ranges of bearishness. (Supply: Barron’s)
To be clear, I believe the previous two months created some injury, and we now have but to be taught the extent of that injury. It is definitely doable that we’re in a recession or headed for one. And it is definitely doable the inventory market may take one other leg decrease.
However I am nowhere close to satisfied that we’re destined for an prolonged, multi-year interval of turmoil and ache.
Our system is superb at self-correcting. Whether or not it is via votes or one thing else, we at all times appear to discover a method to get issues again on monitor towards rising prosperity and enhancing our way of life.
And to repeat what I stated final week: There’s mainly three situations buyers at all times have to contemplate: 1) Issues enhance from right here, and the market goes up; 2) Issues worsen earlier than they get higher, which implies markets may fall earlier than resuming a extra agency rally; or 3) Issues worsen and by no means get higher.
If we’re going through state of affairs 3, then we might have greater issues than shares not recovering. However state of affairs 3 has by no means performed out.
Situations 1 and a pair of favor long-term buyers. Perhaps issues worsen earlier than they get higher. (Notice: Timing market bottoms is sort of not possible.) However staying lengthy the inventory market covers you in case the low of this cycle is behind us.
I will depart you with Warren Buffett stated earlier this month at Berkshire Hathaway’s annual assembly:
“We’re at all times within the technique of change. We’ll at all times discover every kind of issues to criticize within the nation. … For those who do not assume the US has modified since I used to be born in 1930… We have gone via every kind of issues. We have gone via nice recessions. We have gone via world wars. We have gone via the event of the atomic bomb that we by no means dreamt of once I was born. So I might not get discouraged about the truth that it would not appear like we have solved each downside that is come alongside.”
The 94-year-old investor has lived via every little thing, and he is made a fortune investing within the inventory market alongside the way in which.
There have been a number of notable knowledge factors and macroeconomic developments since our final assessment:
🇺🇸 Moody’s downgraded its score on the U.S. from Aaa to Aa1. Like most analysts on the market, I am not too shocked or involved by the motion. You’ll be able to learn my ideas on credit standing downgrades within the this 2023 TKer: Some ideas on the U.S. credit standing downgrade 🤔
🛍️ Purchasing ticks greater. Retail gross sales elevated 0.1% in April to a file $724.1 billion.
(Supply: Census through FRED)
For extra on shopper spending, learn: We’re gonna get ambiguous indicators within the financial knowledge 😵💫 and People have cash, they usually’re spending it 🛍️
💳 Card spending knowledge is holding up. From JPMorgan: “As of 08 Could 2025, our Chase Shopper Card spending knowledge (unadjusted) was 2.3% above the identical day final yr. Based mostly on the Chase Shopper Card knowledge via 08 Could 2025, our estimate of the US Census Could management measure of retail gross sales m/m is 0.54%.”
(Supply: JPMorgan)
From BofA: “Complete card spending per HH was up 1.3% y/y within the week ending Could 10, in line with BAC aggregated credit score & debit card knowledge. Relative to final week, the most important features have been in shops & grocery whereas leisure & lodging noticed the most important decline. Spending has recovered from the Easter slowdown. General, there was some moderation however spending momentum stays.”
Could spending is probably going being boosted by customers pulling ahead purchases in an try and front-run tariffs.
For extra on shopper spending, learn: We’re gonna get ambiguous indicators within the financial knowledge 😵💫 and People have cash, they usually’re spending it 🛍️
👎 Shopper sentiment is tumbling. From the College of Michigan’s Could Surveys of Customers: “Sentiment is now down virtually 30% since January 2025. Slight will increase in sentiment this month for independents have been offset by a 7% decline amongst Republicans. Whereas most index elements have been little modified, present assessments of private funds sank practically 10% on the premise of weakening incomes. Tariffs have been spontaneously talked about by practically three-quarters of customers, up from virtually 60% in April; uncertainty over commerce coverage continues to dominate customers’ fascinated with the financial system.”
(Supply: College of Michigan)
Politics clearly performs a job in peoples’ notion of the financial system.
(Supply: Michael McDonough)
Notably, expectations for inflation seem like a partisan matter.
(Supply: Michael McDonough)
For extra on the state of sentiment, learn: We’re gonna get ambiguous indicators within the financial knowledge 😵💫 and Beware how your politics distort the way you understand financial realities 😵💫
📦 Stock ranges fall. Complete enterprise inventories elevated simply 0.1% to $2.58 trillion in March. Nonetheless, this lagged gross sales development throughout the interval. Because of this, the inventories/gross sales ratio declined to 1.34 in March, down from 1.35 in February.
(Supply: Census)
For extra on why we’re watching inventories, learn: How a lot stock did firms truly construct forward of tariffs? 🤷🏻♂️
👍 Inflation cools. The Shopper Worth Index (CPI) in April was up 2.3% from a yr in the past, down from the two.4% fee in March. Adjusted for meals and power costs, core CPI was up 2.8%, unchanged from the prior month’s stage.
(Supply: Nick Timiraos)
On a month-over-month foundation, CPI and core CPI elevated simply 0.2%. For those who annualize the three-month pattern within the month-to-month figures — a mirrored image of the short-term pattern in costs — core CPI climbed 2.1%.
(Supply: Nick Timiraos)
For extra on inflation, learn: The tip of the inflation disaster 🎈and The Fed closes a chapter with a fee minimize ✂️
⛽️ Gasoline costs tick greater. From AAA: “Gasoline costs are creeping again up simply in time for the busy summer time driving season. The nationwide common for a gallon of normal is up 4 cents from final week, as the value of crude oil rises and demand goes up. Sometimes, the seasonal improve in gasoline costs begins earlier within the spring, however decrease crude oil costs thus far this yr have stored that from occurring. Now, we’re beginning to settle in a extra typical sample. Regardless of the upward pattern, drivers are paying about 40 cents much less in comparison with final yr, which is nice information for the file 39.4 million People anticipated to take highway journeys over Memorial Day weekend.”
(Supply: AAA)
For extra on power costs, learn: Larger oil costs meant one thing completely different up to now 🛢️
💰 Family funds are deteriorating but in addition normalizing. From the New York Fed’s Q1 Family Debt & Credit score report: “Transition into early delinquency held regular for practically all debt varieties; the exception was for scholar loans, which noticed a big uptick within the fee at which balances went from present to delinquent because of the resumption of reporting of delinquent scholar loans on credit score studies after an almost 5-year pause because of the pandemic.”
(Supply: NY Fed)
Whereas the speed at which debt goes into delinquency has moved greater, the full quantity of debt in delinquency stays low at simply 4.3% of excellent debt.
(Supply: NY Fed)
And whereas bank card delinquency charges could also be up, it is a mistake to say customers are maxing out their bank cards. The $1.2 trillion in bank card balances as of Q1 represents only a tiny fraction of bank card limits.
(Supply: NY Fed)
For extra on family funds, learn: People have cash, they usually’re spending it 🛍️
💼 Unemployment claims tread. Preliminary claims for unemployment advantages fell to 229,000 throughout the week ending Could 10, unchanged from the week prior. This metric continues to be at ranges traditionally related to financial development.
(Supply: DoL through FRED)
For extra context, learn: A notice about federal layoffs 🏛️ and The labor market is cooling 💼
👎 Small enterprise optimism falls. From the NFIB’s April Small Enterprise Optimism Index report: “Only a few small companies export their items and providers, however hundreds of thousands purchase imported items as inputs to their operations and people provide chains are at present in danger. Tariff coverage is all of a sudden and dramatically altering relative costs (prices), and relative costs drive all choices. Uncertainty stays elevated and thus warning clouds spending, hiring, and investing choices.”
(Supply: NFIB)
For extra on the state of sentiment, learn: The post-election sentiment sea change 🔃 and Beware how your politics distort the way you understand financial realities 😵💫
🏠 Homebuilder sentiment sinks. From the NAHB’s Robert Dietz: “Coverage uncertainty stemming largely from the stop-and-start tariff points has damage builder confidence however the preliminary commerce preparations with the UK and China are a welcome improvement. Nonetheless, the general actions on tariffs in latest weeks have had a adverse influence on builders, as 78% reported difficulties pricing their houses just lately because of uncertainty round materials costs.”
(Supply: NAHB)
🔨 New house development begins rise. Housing begins grew 1.6% in April to an annualized fee of 1.36 million models, in line with the Census Bureau. Constructing permits ticked down 4.7% to an annualized fee of 1.41 million models.
(Supply: Census)
🏠 Mortgage charges tick greater. In accordance with Freddie Mac, the typical 30-year fixed-rate mortgage rose to six.81%, up from 6.76% final week. From Freddie Mac: “The 30-year fixed-rate mortgage remained beneath the 7% threshold for the seventeenth consecutive week. Steady mortgage charges coupled with reasonably rising stock are attracting homebuyers into the market, with buy software exercise up 18% from final yr.”
(Supply: Freddie Mac)
There are 147.8 million housing models within the U.S., of which 86.1 million are owner-occupied and about 34.1 million of that are mortgage-free. Of these carrying mortgage debt, virtually all have fixed-rate mortgages, and most of these mortgages have charges that have been locked in earlier than charges surged from 2021 lows. All of that is to say: Most owners aren’t significantly delicate to actions in house costs or mortgage charges.
For extra on mortgages and residential costs, learn: Why house costs and rents are creating all kinds of confusion about inflation 😖
😬 That is the stuff professionals are apprehensive about. From BofA’s Could International Fund Supervisor Survey: “The US-China assembly in Geneva was introduced in the course of the Could FMS survey interval; even nonetheless, commerce conflict triggering international recession continues to be seen as the most important ‘tail danger’ per 62% of buyers, albeit down from peak 80% in April (in 15-year historical past).”
(Supply: BofA)
For extra on dangers, learn: When uncertainty turns into unambiguously excessive 🎢, Three observations about uncertainty within the markets 😟 and Two occasions when uncertainty appeared low and confidence was excessive 🌈
🍾 The entrepreneurial spirit is alive. From the Census Bureau: “Complete U.S. Enterprise Purposes have been 449,508 in April 2025, down 0.9% from March 2025.”
(Supply: Census)
TKer is a small enterprise that launched three years in the past. For extra, learn: TKer’s third birthday comes with an awfully common inventory market stat 📈🎂
🛠️ Industrial exercise flattens. Industrial manufacturing exercise in April did not change a lot from prior month ranges. Manufacturing output decreased 0.4%.
(Supply: Federal Reserve)
For extra on financial exercise cooling, learn: 9 once-hot financial charts that cooled 📉
📈 Close to-term GDP development estimates are monitoring constructive. The Atlanta Fed’s GDPNow mannequin sees actual GDP development rising at a 2.4% fee in Q2.
(Supply: Atlanta Fed)
For extra on GDP and the financial system, learn: 9 once-hot financial charts that cooled 📉 and You name this a recession? 🤨
🏢 Places of work stay comparatively empty. From Kastle Methods: “Peak day workplace occupancy was 62.8% on Tuesday final week, down half a degree from the earlier week. New York and San Jose skilled the most important declines, falling 2.5 factors to 66.8% and a pair of.9 factors to 57.1%, respectively. The common low was on Friday at 34.8%, identical because the earlier week.”
(Supply: Kastle)
For extra on workplace occupancy, learn: This stat about workplaces reminds us issues are removed from regular 🏢
Improve to paid
🚨 The tariffs introduced by President Trump as they stand threaten to upend international commerce — with vital implications for the U.S. financial system, company earnings, and the inventory market. Till we get some extra readability, this is the place issues stand:
Earnings look bullish: The long-term outlook for the inventory market stays favorable, bolstered by expectations for years of earnings development. And earnings are an important driver of inventory costs.
Demand is constructive: Demand for items and providers stays constructive, supported by wholesome shopper and enterprise steadiness sheets. Job creation, whereas cooling, additionally stays constructive, and the Federal Reserve — having resolved the inflation disaster — has shifted its focus towards supporting the labor market.
However development is cooling: Whereas the financial system stays wholesome, development has normalized from a lot hotter ranges earlier within the cycle. The financial system is much less “coiled” lately as main tailwinds like extra job openings have pale. It has turn into more durable to argue that development is future.
Actions communicate louder than phrases: We’re in an odd interval on condition that the arduous financial knowledge has decoupled from the gentle sentiment-oriented knowledge. Shopper and enterprise sentiment has been comparatively poor, at the same time as tangible shopper and enterprise exercise proceed to develop and pattern at file ranges. From an investor’s perspective, what issues is that the arduous financial knowledge continues to carry up.
Shares aren’t the financial system: Analysts anticipate the U.S. inventory market may outperform the U.S. financial system, thanks largely because of constructive working leverage. Because the pandemic, firms have adjusted their value constructions aggressively. This has include strategic layoffs and funding in new gear, together with {hardware} powered by AI. These strikes are leading to constructive working leverage, which implies a modest quantity of gross sales development — within the cooling financial system — is translating to sturdy earnings development.
Thoughts the ever-present dangers: In fact, this doesn’t imply we should always get complacent. There’ll at all times be dangers to fret about — reminiscent of U.S. political uncertainty, geopolitical turmoil, power value volatility, cyber assaults, and so forth. There are additionally the dreaded unknowns. Any of those dangers can flare up and spark short-term volatility within the markets.
Investing isn’t a clean trip: There’s additionally the tough actuality that financial recessions and bear markets are developments that each one long-term buyers ought to anticipate to expertise as they construct wealth within the markets. At all times preserve your inventory market seat belts fixed.
Assume long run: For now, there isn’t any purpose to consider there will be a problem that the financial system and the markets will not have the ability to overcome over time. The lengthy recreation stays undefeated, and it is a streak long-term buyers can anticipate to proceed.
A model of this put up first appeared on TKer.co
