Look who finally agrees with me: Wall Street’s biggest players!
Goldman Sachs strategist Peter Oppenheimer recently noted that “the asymmetry for equity investing is poor. Sharp rallies within bear markets are the norm, not the exception.” According to Goldman’s research, since 1980, global markets have experienced numerous bear market rallies averaging 44 days in duration with gains of about 14%—remarkably similar to our current situation.
Here’s a comprehensive analysis of how the S&P 500 and broader U.S. equity markets performed during the week of May 5–9, 2025.
Weekly Market Performance
- S&P 500: Declined 0.5%, closing at 5,659.91.
- Dow Jones Industrial Average: Down 0.3%, ending at 41,249.38.
- NASDAQ Composite: Essentially flat, with a marginal gain of 0.78 points to 17,928.92.
- Russell 2000: Slightly up by 0.1%, closing at 2,023.07.
Despite a recent rally, major indexes faced resistance, with the S&P 500 stalling near the 5,700 level.
Technical Indicators
- Support & Resistance: The S&P 500 remained above its 50-day moving average but struggled to surpass the 200-day moving average, indicating potential resistance at higher levels.
- Volatility: The CBOE Volatility Index (VIX) decreased to 21.90, suggesting reduced investor anxiety.
- Momentum Indicators: Technical signals were mixed, with some indicators like the MACD showing bullish trends, while others like the Stochastic RSI indicated oversold conditions.
Earnings Overview
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- Q1 2025 Earnings: Approximately 90% of S&P 500 companies reported results, with 78% surpassing EPS estimates. The blended earnings growth rate stood at 13.4%, marking the second consecutive quarter of double-digit growth.
- Revenue Growth: Blended revenue growth was 4.8%, below the 5-year average of 7.0%.
- Sector Highlights:
- Information Technology: Led with a 17.4% earnings growth, driven by semiconductors and software.
- Communication Services: Reported a 29.1% earnings increase, bolstered by companies like Alphabet and Meta Platforms.
- Energy: Faced a 12.7% decline in earnings due to lower oil prices.
Macroeconomic Factors
- Trade Developments: Investor sentiment was influenced by ongoing U.S.-China trade negotiations and a new trade deal with the U.K.
- Federal Reserve: Held interest rates steady, expressing concerns over potential inflation from tariffs.
- Global Central Banks: The Bank of England cut rates in response to economic pressures, while the Bank of Japan paused its tightening cycle.
Valuation & Sentiment
- Valuations: The S&P 500’s forward 12-month P/E ratio rose to 20.5, above the 5-year average of 19.9, indicating elevated valuations.
- Investor Sentiment: While optimism was fueled by strong earnings and trade developments, concerns about high valuations and potential economic slowdown tempered enthusiasm.
Outlook
The market’s trajectory remains clouded, with key factors including the outcome of U.S.-China trade talks, Federal Reserve policy decisions, and upcoming economic data releases. Investors should stay informed and consider a cautious approach amid potential volatility.
TLDR:
The last several weeks have had all the makings of a bear market rally! Find out why tomorrow. If you can take money off the table, I am of the opinion that it is a great idea. I have said that since February. Cash is king!