We are all in the market as of two Fridays ago and enjoying a great run higher. How long will this trend last? It will last exactly until it doesn't... (You knew that was coming... right?)
So... the market is down a bit this morning... what does that mean? It means that ALL the traders, investors, financial advisors, newsletter-writers, economists, forecasters, 401k's, etc., have come to the conclusion that the market is a tiny bit less valuable this morning than it was as of the close on this past Friday.
It means that every single conclusion about what Trump's tariffs are going to do to this country has been weighed and assessed and is now completely reflected in this market. It means that whatever you think is going to happen in the future to this market has already been thought through and counted or discounted by the millions upon millions of traders of this stock market and the result is a tiny change in the assessed value of the market. Has the market changed enough to change the direction of the current bullish trend? Not by a long-shot.
I saw an article last week about how the market is distracted by corporate earnings and economic data and is "overlooking" a looming economic crisis signaled by a dramatic decline in US port traffic. The author went on to explain how a sharp drop in port activity from China and Asia will trigger a severe economic shock, impacting agriculture, transportation, manufacturing, and retail sectors, among others potentially leading to a business cycle recession that could result in overall stock market declines of 30%-50%.
Guess what? The market already knows about the "sharp drop in port activity"... what did the market do last week? It moved nicely higher. Was this because it doesn't know what the author of the article 'knows'? Not in the least. The current price in the market at any one time is the collective wisdom of all knowledge available about anything that would be positive or negative about the market.
Articles like the one referenced above are nothing more than self-aggrandizing egos trying to get their readers to think that they have some special insight that no one else and certainly the stock market doesn't already have. Another word for this kind of drivel is "Noise". Now... I am not naive enough to realize that a small percentage of extremely low probability events will occur that someone predicted (guessed) correctly will come to pass and that if you had acted on that low probability event occurring, you would have benefited from the guess. This is somewhat similar to spinning the Roulette wheel in Vegas with all your money on one number... sometimes you will hit it right, but most of the time you are throwing your money away. But, we do not believe that relying on guesses or hopes or low probability events occurring is smart and certainly not worth the risk of chasing.
We make 100% of our decisions on when/how to be in the market based on what the market has done (trend) and is doing. We rely on the fact that the market knows as much about what 'might' happen in the future as is possible to know or to speculate on. Our job is to detect when the market has decided it is in a tradable trend, meaning the collective wisdom of the market has decided that the market is becoming more valuable over time (a bullish trend) or less valuable over time (a bearish trend).
We do not care about why the market is trending one way or the other. We care immensely about the what the market is doing. We know that ALL the collective wisdom available in the economic universe is already reflected in where the market is and how the the market is trending. I know this is hard to believe... Afterall, the world is full of writers who prey on the investing public with what-if scenarios and world-is-coming-to-an-end and the-market-is-on-the-verge-of-crashing opinions. And, on occasion, one or more of those purveyors of hype will be right. But you and I live in what is known and not in the infinite world of what-if's. We should be looking at what we know to be "the truth" and not at what "might be the truth". The truth is, for now, the trend of the market is moving higher and we should have our money riding along on that trend. And never lose sight of the fact that if/when this bullish trend HAS ended, we will simply step off the train and wait patiently for the next trend (train) to come along.
Two weeks ago, "The Market" assimilated all known information about Trump's tariffs, the drop-off in shipping, the potential for a recession, the potential for 100% of all things that could go wrong and/or could go right, and moved up above the 86-week moving average enough to signal a bullish trend. When the market moves into a bullish trend, we move all into the market because the market is, at that moment in time, telling us that it has looked at all the potential future risks in the economy and the world and and has concluded that the future market looks positive as billions of dollars move from being on the sidelines into buying shares of equities, pushing the market into an upward trajectory. As this trajectory (trend) continues on an upward trend, more confidence is gained by holders of cash that want to move that cash into the ownership of more shares of stock; pushing the trend higher. This process (trend) will continue until selling shares of those equities becomes more pronounced than buying... and then the ship begins to turn... and if it turns enough, the upward trend will end.
Can the market change its bullish trend to a bearish trend at any time? Absolutely, but those decisions (from longer-term trends perspectives) tend to be slow... sort of like trying to turn the world's largest aircraft carrier. The market is not like a one-man skiff... that turns on a dime. Market trends (bullish or bearish) tend to be longer in duration than not. This is not always the case, but it is more times than not.
So... two Fridays ago, we went all in long. We will remain all in long until the current bullish "trend" (volatility, by the way, is NOT a trend) in the market ends. Could that be this week? Sure. Could it be two years from now? Yes. We will stay all in until the current trend "has" (past tense) ended. Oh... and one last thing... all the movement in the market this week (until the Friday close) is just noise. The only thing that matters, since we look at the market through a weekly lens, is how the market ends this week.
This is why you will never hear us, egotistically, tell you what 'could' happen if this or that event occurs. We don't guess and we don't forecast. Why? Because no one can consistently and accurately predict the future and to try to do so is simply taking on far too much risk of being wrong.
Please read the commentary below on "The Market Is Never Wrong — And Never Caught Off Guard".
From Alex Goodwin, Vice President:
The markets maintained their upward momentum last week, riding a wave of optimism fueled by better-than-expected earnings and softening inflation data. The S&P 500 climbed 2.9% for the week while the Nasdaq surged 3.4%, marking the second straight weekly gain and pushing both indexes to their longest winning streaks of the year. Despite the strength, the S&P is still around 7% off its February highs, reminding investors that the recent rally, while encouraging, is still clawing back from April’s sharp falloff.
The week’s economic headlines were mixed, but largely supportive for stocks. GDP for Q1 came in with a surprise contraction of 0.3%, the first negative print in three years. On the surface, that might look bad—but investors took it in stride, attributing most of the drag to a rush of imports ahead of newly imposed tariffs. At the same time, the jobs report showed a healthy 177,000 jobs added in April and inflation cooled, with core PCE coming in at 2.6% year over year.
In the height of earnings season, Big Tech delivered a much-needed boost. Microsoft and Meta both posted strong results, with Microsoft jumping 7.6% on upbeat cloud revenue and Meta riding a wave of ad growth. Apple, however, tempered the mood by warning of a $900 million tariff-related hit and scaling back its buyback plans, which sent the stock down 4%. Amazon also came in mixed, with cloud growth slowing but losses narrowing. Energy stocks added fuel to the S&P’s rally, with Chevron and Exxon posting solid results that helped balance out some of the tech-sector volatility.
It’s tempting to believe that the worst is behind us, and it certainly could be—but there are still major wildcards on the table. Trade remains a key driver, and while Trump hinted at easing tensions, no official agreement with China has materialized. Inflation is cooling, but not dead, and the Fed is still navigating a tricky path. As always, we won’t chase the noise, we’ll let the trend play out and respond with discipline when the time is right.
