This dynamic is concerning for investors for two big reasons: 1) it raises the costs of producing goods and services, and 2) it pressures demand from customers who have less money to spend due to their own rising costs.

But we’re currently about a third of the way through Q1 earnings season, and most companies haven’t exactly been sounding the alarm on higher energy costs.

On the contrary, most companies are reporting strong earnings growth, analysts have been revising up their estimates for future earnings, and the stock market is trading near all-time highs.

What gives?

To begin to make sense of it all, we have to remember that energy represents just one of many costs for companies. And while some industries have a lot of exposure to energy prices, most have relatively low exposure.

Let’s take a closer look.

Most industries have much bigger costs than energy 🛢️

Read more

This is especially true in the business world: Entrepreneurs and executives come and go, and industries and companies rise and fall.

These dynamics are very much at the core of TKer Stock Market Truth No. 9: There’s a lot of turnover in the stock market. Specifically, this observation concerns how stocks are regularly added to and removed from the market and the major indices.

But philosophically, Truth No. 9 also speaks to the many changes that long-lasting businesses experience during their time as going concerns.

People come and go 👋

Last Monday, Apple announced that Tim Cook, its CEO for 15 years, would step down from the top job in September.

This is a big deal as Cook oversaw many of the company’s wins, creating trillions of dollars of shareholder value. From the announcement:

He became CEO in 2011 and has overseen the introduction of numerous products and services, including new categories like Apple Watch, AirPods, and Apple Vision Pro, and services ranging from iCloud and Apple Pay to Apple TV and Apple Music. He was also instrumental in expanding existing product lines. Under Cook’s leadership Apple has grown from a market capitalization of approximately $350 billion to $4 trillion, representing a more than 1,000% increase, and yearly revenue has nearly quadrupled, from $108 billion in fiscal year 2011 to more than $416 billion in fiscal year 2025.

His departure surely has some investors concerned. Indeed, Apple shares fell 2.5% on the first trading day following the announcement, underperforming the market.

While leadership changes don’t always go as hoped, history also shows they can work out well. In fact, Apple is arguably the epitome of what shareholders hope for.

Cook had incredibly big shoes to fill in 2011 when he stepped in for visionary leader Steve Jobs. And he delivered.

“The fact of the matter is nobody is irreplaceable,” Berkshire Hathaway’s Ajit Jain said at his company’s 2024 shareholder meeting. “We have Tim Cook here in the audience who has proved that.”

Jain, who oversees Berkshire’s massive insurance operations, made his haunting observation after his boss Warren Buffett quipped, “We won’t find another Ajit.“

Buffett himself made his comment after the then-recent passing of Berkshire executive Charlie Munger, who had been at the company for over 40 years. Buffett, 95, handed the Berkshire CEO reins to a successor earlier this year.

No one leads a business forever.

Business models change 👟

Earlier this month, the once-popular, now-flailing shoe brand Allbirds announced a major pivot to its business model.

From the announcement:

In connection with this pivot, the Company anticipates changing its name to “NewBird AI.” … NewBird AI’s long-term vision is to become a fully integrated GPU-as-a-Service (GPUaaS) and AI-native cloud solutions provider. Over time, the Company intends to grow its neocloud platform by expanding its compute and service offerings, deepening partnerships with operators and customers, and evaluating strategic M&A opportunities.

People were quick to remember when the alcoholic beverage maker Long Island Iced Tea Corp pivoted to blockchain and changed its name to Long Blockchain Corp. Some noted the time AMC Theatres bought a stake in a gold and silver miner.

All this is to say, people — including me — have their doubts. It’s one thing to pivot to an adjacent business. It’s another thing to dive headfirst into an unrelated business that just happens to be hot right now.

That said, it’s not crazy for companies to make big changes to how they make money. Sometimes it happens gradually — think of Netflix becoming a streaming platform after starting as a DVD rental-by-mail business. Sometimes it happens through acquisitions — think of Berkshire Hathaway, which started as a textile company but bought its way into the insurance business.

There are a lot of prominent companies today in businesses that their founders probably couldn’t have imagined.

• Nokia, the Finnish telecommunications company, got its start in 1865 as a paper pulp factory.

• Nintendo, the ubiquitous Japanese video game company, originally sold playing cards in 1889.

• Raytheon, the American defense company, was in the refrigeration business in 1922 long before it sold Tomahawk cruise missiles and Patriot missile defense systems.

• Samsung was exporting dried fish and produce in 1938 before getting into the electronics it’s known for today.

  

• DuPont, the 200-year-old chemical giant, had gunpowder as its first product.

• American Express was delivering packages in 1850 before it got into credit cards.

• Bayer, the German pharmaceutical giant, was originally in the production of dyes in 1881 before it started selling Aspirin. (If you dig a little deeper, you’ll find bottles of Heroin with the Bayer logo on it.)

• William Wrigley Jr. didn’t originally sell gum in 1891. He gave it away for free to customers who bought his soap.

To be clear, companies don’t have to exit their early businesses to survive and grow shareholder value. Alphabet (formerly Google) still offers search; Apple still sells personal computers; Microsoft still sells operating systems; Amazon still sells books online; and Meta (formerly Facebook) still operates its original social network. But all these companies got into many other massive businesses before they became trillion-dollar corporate behemoths.

At the end of the day, publicly traded companies aren’t out here to sell a product. They’re out here to allocate capital, make money, and increase shareholder value. Sometimes, this means shifting focus away from the original product the company was known for.

Zooming out 🔭

Leadership transitions and business pivots don’t always work out.

But the companies that pull it off sometimes go on to become the largest and most successful enterprises in the world.

And it’s often the case that turnover in the stock market and the major market indices can be explained by whether or not a company was able to execute these transitions successfully.

All of this makes investing in the stock market complicated and interesting. Who knows what businesses and which business leaders will be responsible for driving the market higher in the years to come?

-

Related from TKer:

• Ajit Jain’s haunting observation about impermanence in business 🤔

• Sometimes, the best business decision is to change businesses 💔

• Berkshire’s new CEO makes clear what this business is really about 🎯

• Trillion dollar exposure 💰

• 10 truths about the stock market 📈

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Review of the macro crosscurrents 🔀

📈The stock market rallied to all-time highs, with the S&P 500 setting an intraday high of 7,168.59 and a closing high of 7,165.08 on Friday. The index is now up 4.7% year-to-date. For market insights, check out the Stock Market tab at TKer. »

There were several notable data points and macroeconomic developments since our last review:

👎 Consumer vibes are in the dumps. From the University of Michigan’s April Surveys of Consumers: “Consumer sentiment ticked down 3.5 index points this month, now comparable to the trough seen in June 2022. Decreases in sentiment were seen across political party, income, age, and education. Expected business conditions declined for both short and long time horizons, nearly matching year-ago readings when the reciprocal tariff regime was implemented. After the two-week cease-fire was announced and gas prices softened a touch, sentiment recovered a modest portion of its early-month losses. The Iran conflict appears to influence consumer views primarily through shocks to gasoline and potentially other prices. In contrast, military and diplomatic developments that do not lift supply constraints or lower energy prices are unlikely to buoy consumers.”

For more on consumer sentiment, read: What consumers do > what consumers say 🙊

💼 New unemployment insurance claims, total ongoing claims remain low. Initial claims for unemployment benefits rose to 214,000 during the week ending Apr. 18, up from 208,000 the week prior. This metric remains at levels historically associated with economic growth.

Insured unemployment, which captures those who continue to claim unemployment benefits, ticked up to 1.821 million during the week ending Apr. 11.

For more on the labor market, read: The next couple of years for the job market could be tough 🫤

🤔 Recent private job growth has picked up. According to payroll processor ADP, private U.S. employers added 54,750 jobs in the four weeks ending April 4.

For more on the labor market, read: About that ugly jobs report 📉

⛽️ Gas and diesel prices remain elevated. From AAA: “Drivers are getting a bit of relief at the pump as the national average went down by 6 cents since last week to $4.03. Crude oil prices have come down below $100/barrel, helping drive down the cost of gasoline for consumers. But how long the downward trend will last is uncertain with continued instability along the Strait of Hormuz. Currently, pump prices are the highest they’ve been during this time of year since 2022, when the national average on April 23 was $4.11.“

Here’s a look at the trajectory of gas and diesel prices, as tracked by the EIA.

For more on energy prices, read: Our love-hate relationship with rising oil prices in charts 💔🛢️📊

💳 Card spending data is holding up. From BofA: “Total card spending per HH was up 3.3% y/y in the week ending Apr 18, according to BAC aggregated credit & debit card data. Total ex gas spending was up 2.4% y/y, in part impacted by unfavorable base effects from Good Friday timing change. Overall, spending remains solid. Y/y entertainment spending declined the most while transit grew the most since last week.“

Consumer spending data has looked a lot better than consumer sentiment readings. For more on this contradiction, read: We’re taking that vacation whether we like it or not 🛫 and Household finances are both ‘worse’ and ‘good’ 🌦️

🛍️ Retail shopping activity rose. Retail sales in March jumped 1.7% to a record $752.1 billion, fueled by higher gasoline prices.

Excluding autos and gas, which tend to be volatile over the short-term, retail sales climbed 0.6%.

Most retail categories grew.

🏠 Mortgage rates dip. According to Freddie Mac, the average 30-year fixed-rate mortgage declined to 6.23%, down from 6.30% last week. “This improvement, coupled with a pickup in purchase applications and refinance activity, as well as an increase in monthly pending home sales, underscores signs of improving momentum in the market.“

As of Q4, there were 148.7 million housing units in the U.S., of which 87.8 million were owner-occupied and about 40% were mortgage-free. Of those carrying mortgage debt, almost all have fixed-rate mortgages, and most of those mortgages have rates that were locked in before rates surged from 2021 lows. All of this is to say: Most homeowners are not particularly sensitive to the small weekly movements in home prices or mortgage rates.

For more on mortgages and home prices, read: Why home prices and rents are creating all sorts of confusion about inflation 😖

👍 Economic activity survey improves. From S&P Global’s April U.S. Flash PMI: “A rebound in business output growth in April is good news after the near-stagnation seen in March, but over the past three months we have seen the weakest expansion of output recorded since the start of 2024 with the war in the Middle East squarely to blame. The April PMI is broadly consistent with the economy struggling to manage annualized growth in excess of 1%, with the vast service sector acting as the principal drag. Orders for services ranging from travel and tourism to financial products barely rose as the war caused hesitancy for spending among both household and business customers, with surging prices and the prospect of higher borrowing costs acting as a further deterrent.“

Keep in mind that during times of perceived stress, soft survey data tends to be more exaggerated than actual hard data.

For more on this, read: What businesses do > what businesses say 🙊 and 4 sometimes-conflicting ways I’m thinking about the economy 😬😞😎🙃

📈 Near-term GDP growth estimates are tracking positively. The Atlanta Fed’s GDPNow model sees real GDP growth rising at a 1.2% rate in Q1.

For more on GDP and the economy, read: It’s too ambiguous to just say ‘the economy’ 🤦🏻‍♂️ and Economic data can often be both ‘worse’ and ‘good’ 🌦️

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Putting it all together 📋

Earnings look bullish: The long-term outlook for the stock market remains favorable, bolstered by expectations for years of earnings growth. And earnings are the most important driver of stock prices.

Demand is positive: Demand for goods and services remains positive, supported by healthy consumer and business balance sheets. Personal spending activity remains at record levels. Core capex orders, which are a leading indicator of business spending, have been on the rise.

Growth is cooling: While the economy remains healthy, growth has normalized from much hotter levels earlier in the cycle. The economy is less “coiled” these days as major tailwinds like job openings and excess savings have faded. Job creation is hovering at near-zero. It has become harder to argue that growth is destiny.

Actions speak louder than words: We are in an odd period, given that the hard economic data decoupled from the soft sentiment-oriented data. Consumer and business sentiment has been relatively poor, even as tangible consumer and business activity continues to grow and trend at record levels. From an investor’s perspective, what matters is that the hard economic data continues to hold up.

Stocks are not the economy: There’s a case to be made that the U.S. stock market could outperform the U.S. economy in the near term, thanks largely to positive operating leverage. Since the pandemic, companies have aggressively adjusted their cost structures. This came with strategic layoffs and investment in new equipment, including hardware powered by AI. These moves are resulting in positive operating leverage, which means a modest amount of sales growth — in the cooling economy — is translating to robust earnings growth.

Mind the ever-present risks: Of course, we should not get complacent. There will always be risks to worry about, such as U.S. political uncertainty, geopolitical turmoil, energy price volatility, and cyber attacks. There are also the dreaded unknowns. Any of these risks can flare up and spark short-term volatility in the markets.

Investing is never a smooth ride: There’s also the harsh reality that economic recessions and bear markets are developments that all long-term investors should expect as they build wealth in the markets. Always keep your stock market seat belts fastened.

Think long-term: For now, there’s no reason to believe there’ll be a challenge that the economy and the markets won’t overcome. The long game remains undefeated, and it’s a streak that long-term investors can expect to continue.

For more on how the macro story is evolving, check out the previous review of the macro crosscurrents. »

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Key insights about the stock market 📈

Here’s a roundup of some of TKer’s most talked-about paid and free newsletters about the stock market. All of the headlines are hyperlinked to the archived pieces.

10 truths about the stock market 📈

The stock market can be an intimidating place: It’s real money on the line, there’s an overwhelming amount of information, and people have lost fortunes in it very quickly. But it’s also a place where thoughtful investors have long accumulated a lot of wealth. The primary difference between those two outlooks is related to misconceptions about the stock market that can lead people to make poor investment decisions.

The makeup of the S&P 500 is constantly changing 🔀

Passive investing is a concept usually associated with buying and holding a fund that tracks an index. And no passive investment strategy has attracted as much attention as buying an S&P 500 index fund. However, the S&P 500 — an index of 500 of the largest U.S. companies — is anything but a static set of 500 stocks.

The key driver of stock prices: Earnings💰

For investors, anything you can ever learn about a company matters only if it also tells you something about earnings. That’s because long-term moves in a stock can ultimately be explained by the underlying company’s earnings, expectations for earnings, and uncertainty about those expectations for earnings. Over time, the relationship between stock prices and earnings has a very tight statistical relationship.

Stomach-churning stock market sell-offs are normal🎢

Investors should always be mentally prepared for some big sell-offs in the stock market. It’s part of the deal when you invest in an asset class that is sensitive to the constant flow of good and bad news. Since 1950, the S&P 500 has seen an average annual max drawdown (i.e., the biggest intra-year sell-off) of 14%.

How the stock market performed around recessions 📉📈

Every recession in history was different. And the range of stock performance around them varied greatly. There are two things worth noting. First, recessions have always been accompanied by a significant drawdown in stock prices. Second, the stock market bottomed and inflected upward long before recessions ended.

In the stock market, time pays ⏳

Since 1928, the S&P 500 has generated a positive total return more than 89% of the time over all five-year periods. Those are pretty good odds. When you extend the timeframe to 20 years, you’ll see that there’s never been a period where the S&P 500 didn’t generate a positive return.

What a strong dollar means for stocks 👑

While a strong dollar may be great news for Americans vacationing abroad and U.S. businesses importing goods from overseas, it’s a headwind for multinational U.S.-based corporations doing business in non-U.S. markets.

Stanley Druckenmiller's No. 1 piece of advice for novice investors 🧐

…you don't want to buy them when earnings are great, because what are they doing when their earnings are great? They go out and expand capacity. Three or four years later, there's overcapacity and they're losing money. What about when they're losing money? Well, then they’ve stopped building capacity. So three or four years later, capacity will have shrunk and their profit margins will be way up. So, you always have to sort of imagine the world the way it's going to be in 18 to 24 months as opposed to now. If you buy it now, you're buying into every single fad every single moment. Whereas if you envision the future, you're trying to imagine how that might be reflected differently in security prices.

Peter Lynch made a remarkably prescient market observation in 1994 🎯

Some event will come out of left field, and the market will go down, or the market will go up. Volatility will occur. Markets will continue to have these ups and downs. … Basic corporate profits have grown about 8% a year historically. So, corporate profits double about every nine years. The stock market ought to double about every nine years… The next 500 points, the next 600 points — I don’t know which way they’ll go… They’ll double again in eight or nine years after that. Because profits go up 8% a year, and stocks will follow. That's all there is to it.

Warren Buffett's 'fourth law of motion' 📉

Long ago, Sir Isaac Newton gave us three laws of motion, which were the work of genius. But Sir Isaac’s talents didn’t extend to investing: He lost a bundle in the South Sea Bubble, explaining later, “I can calculate the movement of the stars, but not the madness of men.” If he had not been traumatized by this loss, Sir Isaac might well have gone on to discover the Fourth Law of Motion: For investors as a whole, returns decrease as motion increases.

Most pros can’t beat the market 🥊

According to S&P Dow Jones Indices (SPDJI), 79% of U.S. large-cap equity fund managers underperformed the S&P 500 in 2025. As you stretch the time horizon, the numbers get even more dismal. Over three years, 67% underperformed. Over 5 years, 89% underperformed. And over 20 years, 93% underperformed. This 2025 performance was the 16th consecutive year in which the majority of fund managers in this category have lagged the index.

Proof that 'past performance is no guarantee of future results' 📊

Even if you are a fund manager who generated industry-leading returns in one year, history says it’s an almost insurmountable task to stay on top consistently in subsequent years. According to S&P Dow Jones Indices, just 4.21% of all U.S. equity funds in the top half of performance during the first year were able to remain in the top during the four subsequent years. Only 2.42% of U.S. large-cap funds remained in the top half

SPDJI’s report also considered fund performance relative to their benchmarks over the past three years. Of 738 U.S. large-cap equity funds tracked by SPDJI, 50.68% beat the S&P 500 in 2022. Just 5.08% beat the S&P in the two years ending 2023. And only 2.14% of the funds beat the index over the three years ending in 2024.

The odds are stacked against stock pickers 🎲

Picking stocks in an attempt to beat market averages is an incredibly challenging and sometimes money-losing effort. Most professional stock pickers aren’t able to do this consistently. One of the reasons for this is that most stocks don’t deliver above-average returns. According to S&P Dow Jones Indices, only 19% of the stocks in the S&P 500 outperformed the average stock’s return from 2001 to 2025. Over this period, the average return on an S&P 500 stock was 452%, while the median stock rose by just 59%.

This isn’t sitting well with many people.

From HSBC’s Max Kettner (via Lisa Abramowicz): “‘This doesn’t make sense’ and ‘Risk assets are detached from reality.’ This is how a lot of our meetings start right now.”

And it’s not just the Wall Street pros and their clients having this conversation. The big newspapers I opened this past weekend all featured columns addressing skepticism about the stock market’s recent moves. Some excerpts:

“Markets are not properly pricing risk, because they really don’t have to. They have assumed that the U.S. government will not allow them to implode, and that assumption is putting the world economy at stake. What’s more, the new rescuer investors are counting on — artificial intelligence — is vulnerable to the exact risks markets are ignoring.“ - New York Times contributor Kyla Scanlon

“Current prices for both the AI stocks and oil are based on the market’s best guess for the two themes of the moment: Data-center building and the Iran war. This has made the market look cheaper than before. But it wouldn’t take much—the AI boom’s turning to bust or a peace deal in the Gulf—to make today’s cheapness look expensive in retrospect.“ - Wall Street Journal markets columnist James Mackintosh

“Still, the upshot of all the noise, AI enthusiasm and Taco is that overall the market appears to be looking through Trump’s term. For now, the Earnings Before Iran, Tariffs and Dubious Announcements approach prevails.“ - Financial Times opinion writer Tej Parikh

These highlights are just scratching the surface. Every major financial media outlet has writers wrestling with the rally. And if you thumb through X or Substack, you’ll easily find folks pushing more cynical and even conspiratorial narratives.

There are also plenty of folks arguing for the other side.

I lean toward the more optimistic side of the argument. Mostly because I believe that over time, stocks are driven by earnings. And the outlook for earnings has been improving in recent weeks, all things considered.

Maybe the outlook for earnings eventually deteriorates, validating the more tactically bearish market prognosticators. We’ll see. But that’s not what’s happening right now.

Markets aren’t ‘ignoring’ anything 🙈

Read more

When stocks are up, I worry they’ll go down. And when they’re down, I worry they’ll go lower.

Even when I look back and see the progress my portfolio has made toward my financial goals, I struggle to recall moments where I felt totally sanguine about the money I had at risk. Sure, in hindsight, I’m grateful for how far I’ve come. But my memory of the process is of anything but a smooth ride.

As the stock market set new highs this week, I reflected on this poorly timed, lump-sum purchase I made back on Feb. 18, 2025, when the S&P 500 was at 6,129. That was a day before the market topped and then tumbled 19%. Fortunately, stocks quickly recovered those losses, and I was back to breakeven within a few months. (Read more about that here and here.)

Fast-forward to today. The S&P closed at 7,126 on Friday. So in about 14 months, that purchase has returned about 16%. That’s pretty damn good. It means my portfolio continues to make significant progress toward my financial goals.

And again, while I’m grateful for the progress, the process was anything but pleasant.

Stay educated🙇‍♂️

In many ways, this period was typical.

While the past 14 months were riddled with risk events (e.g., tariffs, wars, volatile energy prices, shifting market narratives), it was also arguably consistent with TKer Truth No. 7: There will always be something to worry about. (For more on this, check out the Mar. 8 TKer.)

And as Truth No. 2 reminds us: You can get smoked in the short term. Since 1980, the S&P 500 has experienced an average intra-year max drawdown (i.e., a decline from its high) of 14.2%. Taken together, last year’s 19% drawdown and this year’s 9% pullback reflect historically typical volatility.

Finally, Truth No. 5 says: Earnings drive stock prices. And recent earnings and future earnings estimates both look very strong. So it’s not crazy to see stocks recover quickly from their recent sell-off.

The worst thing you or I could’ve done was make some bad trades in an effort to time the market’s peaks and troughs. This process of selling and then buying is incredibly difficult to do in a way that beats just holding through the volatility.

All this speaks to the power of education. Knowing what’s always happening in terms of uncertainty, what could happen in terms of volatility, and what drives prices over time helps keep you psychologically prepared for moments when your emotions pressure you to make what could be costly mistakes.

Earlier this month on The Bull of Wall Street podcast, I discussed the power of well-timed financial education. If you missed it, check it out on YouTube, Spotify, or Apple Podcasts!

-

Related from TKer:

• Remembering moments when I thought things took a permanent turn for the worse 🙇‍♂️

• The unluckiest market timer I know made another poorly timed trade 🤦🏻‍♂️

• Checking in on the unluckiest market timer I know 🍀

• Investing in the stock market is an unpleasant process 📉

• BofA: ‘Q: Is it better to sell early or late? A: Neither.’ ⏰

• The best investing wisdom shares a common theme 🧐

• 10 truths about the stock market 📈

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Watch 📺

I was on the J.D. Durkin show on Thursday. We talked about consumer spending, household finances, energy intensity, and record-high profit margins. Check it out on YouTube!

🏛️ The NYSE invited me to participate in their inaugural Creator Summit last week! I met some incredibly talented and successful finance influencers, LinkedIn thought leaders, and pro Twitch streamers! We discussed the evolving media landscape and why readers like you are paying attention to independent writers like me.

Everyone agreed that the opportunity lies in the fact that the audience is not a monolith. Readers and viewers want something more tailored and personal than the one-size-fits-all content being churned out by legacy media.

As always, I’m doing my best to find new ways to serve you better!

Review of the macro crosscurrents 🔀

📈The stock market rallied to all-time highs, with the S&P 500 setting an intraday high of 7,147.52 and a closing high of 7,126.06 on Friday. The index is now up 4.1% year-to-date. For market insights, check out the Stock Market tab at TKer. »

There were several notable data points and macroeconomic developments since our last review:

🛢️Oil prices are down from their highs. But they remain above the levels we had before the Iran War and the closure of the Strait of Hormuz.

It could be weeks before we better understand how the recent price volatility has affected the U.S. economy. So be mindful of the data you see below because much of it is released on a lag.

💳 Card spending data is holding up. From BofA: “Total card spending per HH was up 2.6% y/y in the week ending Apr 11, according to BAC aggregated credit & debit card data. This slowdown in the week ending Apr 11 was largely because spending tends to be weak on Easter Sunday (Apr 5). Easter aside, from Apr 6-11, total card & total ex gas spending were up a solid 5.6% & 4.7%, respectively on a 52 week basis.“

Consumer spending data has looked a lot better than consumer sentiment readings. For more on this contradiction, read: We’re taking that vacation whether we like it or not 🛫 and Household finances are both ‘worse’ and ‘good’ 🌦️

⛽️ Gas and diesel prices remain elevated. From AAA: “The national average for a gallon of regular gasoline decreased 7 cents over the past week to $4.09. After last week’s announcement of a two-week ceasefire between the U.S. and Iran, the price for a barrel of crude oil has continued to trade below $100. However, maritime traffic transiting the Strait of Hormuz remains subdued as regional tensions persist and negotiations continue.”

Here’s a look at the trajectory of gas and diesel prices, as tracked by the EIA.

For more on energy prices, read: Our love-hate relationship with rising oil prices in charts 💔🛢️📊

🎈 Wholesaler price inflation was hotter. The Producer Price Index (PPI) in March jumped 0.5% month over month, driven by higher energy prices. Adjusted for food and energy prices, core PPI was up 0.2%. On a year-over-year basis, PPI was 4.0% and core PPI was up 3.6%.

From EY-Parthenon’s Gregory Daco: “It’s choppy out there. Nearly 50% of the March PPI Final Demand for goods advance is attributable 15.7% gas prices. The indexes for diesel fuel, jet fuel & home heating oil also rose. Prices for airline passenger services +2.8%. But margin (markup) fell 0.3% led by food & alcohol.“

💼 New unemployment insurance claims, total ongoing claims remain low. Initial claims for unemployment benefits declined to 207,000 during the week ending Apr. 11, down from 218,000 the week prior. This metric remains at levels historically associated with economic growth.

Insured unemployment, which captures those who continue to claim unemployment benefits, ticked up to 1.818 million during the week ending Apr. 4.

For more on the labor market, read: The next couple of years for the job market could be tough 🫤

🤔 Recent private job growth has picked up. According to payroll processor ADP, private U.S. employers added 39,250 jobs in the four weeks ending March 28.

For more on the labor market, read: About that ugly jobs report 📉

🏠 Mortgage rates dip. According to Freddie Mac, the average 30-year fixed-rate mortgage declined to 6.30%, down from 6.37% last week. “Compared to one year ago when rates were at 6.83%, this is a meaningful improvement for homebuyers during what is typically the busy spring homebuying season.“

As of Q4, there were 148.7 million housing units in the U.S., of which 87.8 million were owner-occupied and about 40% were mortgage-free. Of those carrying mortgage debt, almost all have fixed-rate mortgages, and most of those mortgages have rates that were locked in before rates surged from 2021 lows. All of this is to say: Most homeowners are not particularly sensitive to the small weekly movements in home prices or mortgage rates.

For more on mortgages and home prices, read: Why home prices and rents are creating all sorts of confusion about inflation 😖

🏚 Home sales fell. Sales of previously owned homes declined 3.6% in March to an annualized rate of 3.98 million units. From NAR chief economist Lawrence Yun: “Lower consumer confidence and softer job growth continue to hold back buyers. … Inventory remains a major constraint on the market,” Yun said. “The inventory-to-sales ratio, or supply-to-demand ratio, is below historical norms. An additional 300,000 to 500,000 homes for sale would help bring the market closer to normal conditions and allow consumers to make purchase decisions without feeling rushed.”

Prices for previously owned homes rose from last month and year-ago levels. From the NAR: “The median existing-home sales price for all housing types in February was $398,000, up 0.3% from one year ago ($396,800) – the 32nd consecutive month of year-over-year price increases.”

From Yun: “Because inventory remains limited, the median home price rose to a new record high for the month of March. That price growth has helped the typical homeowner accumulate $128,100 in housing wealth over the past six years.”

🏠 Homebuilder sentiment sinks. From the NAHB: “With oil prices higher in the U.S., 62% of builders reported suppliers have increased building material costs due to higher fuel prices, including gas and diesel. Energy costs make up approximately 4% of residential construction material input and service costs. With near-term economic risks elevated, 70% of builders reported challenges pricing homes given uncertainty about material costs.”

👎 Small business optimism falls. The NFIB’s Small Business Optimism Index declined to 95.8 in March from 98.8 in February. It’s the lowest print since April 2025. From the NFIB: “The 20% Small Business Deduction and other supportive small business tax provisions in the Working Families Tax Cut Act have had many positives for small business owners. However, the dramatic spike in oil prices has spooked consumers and owners alike. Small business owners are having to absorb those higher input costs and pass them along to their customers.”

Keep in mind that during times of perceived stress, soft survey data tends to be more exaggerated than actual hard data.

For more on this, read: What businesses do > what businesses say 🙊 and 4 sometimes-conflicting ways I’m thinking about the economy 😬😞😎🙃

😬 This is the stuff pros are worried about. From BofA’s April Global Fund Manager Survey: “Asked for the biggest 'tail risk', 44% of FMS investors said ‘geopolitical conflict,’ up sharply from 14% in February (37% last month).”

Here’s how the biggest “tail risk” has evolved over the years.

For more on risks, read: Three observations about uncertainty in the markets 😟 and Two times when uncertainty seemed low and confidence was high 🌈

🛠️ Industrial activity ticked lower. Industrial production activity in March fell 0.5% from prior month levels. Manufacturing output declined 0.1% compared to the prior month.

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Putting it all together 📋

Earnings look bullish: The long-term outlook for the stock market remains favorable, bolstered by expectations for years of earnings growth. And earnings are the most important driver of stock prices.

Demand is positive: Demand for goods and services remains positive, supported by healthy consumer and business balance sheets. Personal spending activity remains at record levels. Core capex orders, which are a leading indicator of business spending, have been on the rise.

Growth is cooling: While the economy remains healthy, growth has normalized from much hotter levels earlier in the cycle. The economy is less “coiled” these days as major tailwinds like job openings and excess savings have faded. Job creation is hovering at near-zero. It has become harder to argue that growth is destiny.

Actions speak louder than words: We are in an odd period, given that the hard economic data decoupled from the soft sentiment-oriented data. Consumer and business sentiment has been relatively poor, even as tangible consumer and business activity continues to grow and trend at record levels. From an investor’s perspective, what matters is that the hard economic data continues to hold up.

Stocks are not the economy: There’s a case to be made that the U.S. stock market could outperform the U.S. economy in the near term, thanks largely to positive operating leverage. Since the pandemic, companies have aggressively adjusted their cost structures. This came with strategic layoffs and investment in new equipment, including hardware powered by AI. These moves are resulting in positive operating leverage, which means a modest amount of sales growth — in the cooling economy — is translating to robust earnings growth.

Mind the ever-present risks: Of course, we should not get complacent. There will always be risks to worry about, such as U.S. political uncertainty, geopolitical turmoil, energy price volatility, and cyber attacks. There are also the dreaded unknowns. Any of these risks can flare up and spark short-term volatility in the markets.

Investing is never a smooth ride: There’s also the harsh reality that economic recessions and bear markets are developments that all long-term investors should expect as they build wealth in the markets. Always keep your stock market seat belts fastened.

Think long-term: For now, there’s no reason to believe there’ll be a challenge that the economy and the markets won’t overcome. The long game remains undefeated, and it’s a streak that long-term investors can expect to continue.

For more on how the macro story is evolving, check out the previous review of the macro crosscurrents. »

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Key insights about the stock market 📈

Here’s a roundup of some of TKer’s most talked-about paid and free newsletters about the stock market. All of the headlines are hyperlinked to the archived pieces.

10 truths about the stock market 📈

The stock market can be an intimidating place: It’s real money on the line, there’s an overwhelming amount of information, and people have lost fortunes in it very quickly. But it’s also a place where thoughtful investors have long accumulated a lot of wealth. The primary difference between those two outlooks is related to misconceptions about the stock market that can lead people to make poor investment decisions.

The makeup of the S&P 500 is constantly changing 🔀

Passive investing is a concept usually associated with buying and holding a fund that tracks an index. And no passive investment strategy has attracted as much attention as buying an S&P 500 index fund. However, the S&P 500 — an index of 500 of the largest U.S. companies — is anything but a static set of 500 stocks.

The key driver of stock prices: Earnings💰

For investors, anything you can ever learn about a company matters only if it also tells you something about earnings. That’s because long-term moves in a stock can ultimately be explained by the underlying company’s earnings, expectations for earnings, and uncertainty about those expectations for earnings. Over time, the relationship between stock prices and earnings has a very tight statistical relationship.

Stomach-churning stock market sell-offs are normal🎢

Investors should always be mentally prepared for some big sell-offs in the stock market. It’s part of the deal when you invest in an asset class that is sensitive to the constant flow of good and bad news. Since 1950, the S&P 500 has seen an average annual max drawdown (i.e., the biggest intra-year sell-off) of 14%.

How the stock market performed around recessions 📉📈

Every recession in history was different. And the range of stock performance around them varied greatly. There are two things worth noting. First, recessions have always been accompanied by a significant drawdown in stock prices. Second, the stock market bottomed and inflected upward long before recessions ended.

In the stock market, time pays ⏳

Since 1928, the S&P 500 has generated a positive total return more than 89% of the time over all five-year periods. Those are pretty good odds. When you extend the timeframe to 20 years, you’ll see that there’s never been a period where the S&P 500 didn’t generate a positive return.

What a strong dollar means for stocks 👑

While a strong dollar may be great news for Americans vacationing abroad and U.S. businesses importing goods from overseas, it’s a headwind for multinational U.S.-based corporations doing business in non-U.S. markets.

Stanley Druckenmiller's No. 1 piece of advice for novice investors 🧐

…you don't want to buy them when earnings are great, because what are they doing when their earnings are great? They go out and expand capacity. Three or four years later, there's overcapacity and they're losing money. What about when they're losing money? Well, then they’ve stopped building capacity. So three or four years later, capacity will have shrunk and their profit margins will be way up. So, you always have to sort of imagine the world the way it's going to be in 18 to 24 months as opposed to now. If you buy it now, you're buying into every single fad every single moment. Whereas if you envision the future, you're trying to imagine how that might be reflected differently in security prices.

Peter Lynch made a remarkably prescient market observation in 1994 🎯

Some event will come out of left field, and the market will go down, or the market will go up. Volatility will occur. Markets will continue to have these ups and downs. … Basic corporate profits have grown about 8% a year historically. So, corporate profits double about every nine years. The stock market ought to double about every nine years… The next 500 points, the next 600 points — I don’t know which way they’ll go… They’ll double again in eight or nine years after that. Because profits go up 8% a year, and stocks will follow. That's all there is to it.

Warren Buffett's 'fourth law of motion' 📉

Long ago, Sir Isaac Newton gave us three laws of motion, which were the work of genius. But Sir Isaac’s talents didn’t extend to investing: He lost a bundle in the South Sea Bubble, explaining later, “I can calculate the movement of the stars, but not the madness of men.” If he had not been traumatized by this loss, Sir Isaac might well have gone on to discover the Fourth Law of Motion: For investors as a whole, returns decrease as motion increases.

Most pros can’t beat the market 🥊

According to S&P Dow Jones Indices (SPDJI), 79% of U.S. large-cap equity fund managers underperformed the S&P 500 in 2025. As you stretch the time horizon, the numbers get even more dismal. Over three years, 67% underperformed. Over 5 years, 89% underperformed. And over 20 years, 93% underperformed. This 2025 performance was the 16th consecutive year in which the majority of fund managers in this category have lagged the index.

Proof that 'past performance is no guarantee of future results' 📊

Even if you are a fund manager who generated industry-leading returns in one year, history says it’s an almost insurmountable task to stay on top consistently in subsequent years. According to S&P Dow Jones Indices, just 4.21% of all U.S. equity funds in the top half of performance during the first year were able to remain in the top during the four subsequent years. Only 2.42% of U.S. large-cap funds remained in the top half

SPDJI’s report also considered fund performance relative to their benchmarks over the past three years. Of 738 U.S. large-cap equity funds tracked by SPDJI, 50.68% beat the S&P 500 in 2022. Just 5.08% beat the S&P in the two years ending 2023. And only 2.14% of the funds beat the index over the three years ending in 2024.

The odds are stacked against stock pickers 🎲

Picking stocks in an attempt to beat market averages is an incredibly challenging and sometimes money-losing effort. Most professional stock pickers aren’t able to do this consistently. One of the reasons for this is that most stocks don’t deliver above-average returns. According to S&P Dow Jones Indices, only 19% of the stocks in the S&P 500 outperformed the average stock’s return from 2001 to 2025. Over this period, the average return on an S&P 500 stock was 452%, while the median stock rose by just 59%.

That’s a big deal: Personal consumption expenditures account for about 68% of GDP.

The good news is that, while household financial strength may have worsened, it remains healthy enough to support continued spending.

Read more

The S&P 500 fell from its closing high of 6,978.60 on Jan. 27 to a closing low of 6,343.72 on Mar. 30, a 9% drawdown.

Sure, it’s no bear market. It’s not the average intra-year drawdown of 18% we’ve seen in midterm election years. It’s not even the average intra-year drawdown of 14% we’ve seen since 1980.

But this framing is incomplete. Price only tells half of the story.

Read more

I’ve been doing quite a bit of media. Also, I celebrated another trip around the sun on Thursday.

Instead of sending me birthday gifts, take some time and listen to one or more of the five podcasts linked below. (The secret is to listen at 1.3x speed.)

Podcasts are fun, but they can also be risky. Because the best podcasters are great at timing some curveball questions that force you to go off script a bit. I’ll always decline to answer questions that I have no business responding to. But sometimes I can’t help but engage and opine.

By the way, I’ve written about almost everything discussed. If you want related data, charts, quotes, and any other context, head to TKer.co and use the search function to find relevant articles!

Different angles on earnings and new ETFs that aren’t bulls—t 👀

Whether it’s software stocks, international markets, short-term volatility, the effect of high energy prices, or anything else related to stock market moves, there’s an earnings story to be told.

I joined IBKR’s Steve Sosnick and Ritholtz Wealth’s Michael Batnick on The Compound and Friends. We talked about AI’s effects across sectors, the boom in emerging market stocks, the massive pipeline of IPOs, the birth of QQQ dupes, and much more. Check it out on YouTube, Spotify, or Apple Podcasts!

The Markets Minister’s tips on talking to clients 🎙️

Raw financial news isn’t for everyone. In financial markets, short-term traders and long-term investors use information differently, and so it should be communicated to them differently.

I talked about this with Wealth Consulting Group’s Jimmy Lee and Talley Léger on The Bull of Wall Street podcast. We dug into why financial news seems so bearish, how investors can prepare for market volatility, what I’m watching in private credit, how stock market turnover explains why prices go higher, and why Tally has dubbed me the “Markets Minister.” Check it out on YouTube, Spotify, or Apple Podcasts!

From law firm grunt to markets newsletter entrepreneur 📝

I didn’t study finance or economics in school. But my first job out of school at Paul Weiss got me neck deep in the fascinating world of equity research.

My fellow veteran financial journalist Roben Farzad had me on Full Disclosure to talk about how I got to where I am today. We also explored why the post-financial crisis “new normal” ended, what I’m watching regarding crypto, and how reader feedback led to the birth of TKer. Check it out on YouTube, Spotify, Apple Podcasts, SoundCloud, and anywhere you get podcasts!

Talking fundamentals vs. technicals over a drink 🍻

Not all chart gurus are created equal. At the top of the top tier of market technicians are Carson Group’s Ryan Detrick and CappThesis’ Frank Cappelleri. I joined them and the brilliant market economist Sonu Varghese on the informal Facts vs Feelings: Social Hour.

We talked about how geopolitical headlines move markets, why the market is more resilient than its market leaders, and what diversification offers during times like these. Check it out on YouTube, Spotify, or Apple Podcasts!

Navigating the noise and playing the long game 🔭

Most of us are in the stock market because we’re building wealth for a better future.

With the long term in mind, Plancorp’s Peter Lazaroff and I talked about how earnings, valuations, economic data, and market narratives drive prices over time. Check out this episode of the aptly named The Long Term Investor on YouTube, Spotify, or Apple Podcasts!

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Related from TKer:

• 5 thoughts I had while chatting with smart finance podcasters 💬

• How to become one of Wall Street’s most accurate analysts in one step 🧮

• 10 truths about the stock market 📈

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Review of the macro crosscurrents 🔀

📈The stock market climbed last week, with the S&P 500 gaining 3.6% to end at 6,816.89. The index is now down 2.3% from its Jan. 27 closing high of 6,978.60 and down 0.4% year to date. For market insights, check out the Stock Market tab at TKer. »

There were several notable data points and macroeconomic developments since our last review:

⛽️ Gas and diesel prices surge. From AAA: “The national average for a gallon of regular gasoline went up 8 cents since last week to $4.16. The last time the national average reached that price was in early August of 2022. Crude oil prices remain high, even as they’ve fluctuated in recent days following the announcement of a 2-week ceasefire between the U.S. and Iran. The price for a barrel of crude dropped below $100 but then rose again, highlighting the volatility of oil markets and fluidity of geopolitical events.”

Here’s a look at the trajectory of gas and diesel prices, as tracked by the EIA.

For more on energy prices, read: Our love-hate relationship with rising oil prices in charts 💔🛢️📊

🎈Consumer price inflation rises. The Consumer Price Index (CPI) jumped 3.3% year-over-year in March, up from 2.4% the month prior. Adjusted for food and energy prices, core CPI was up 2.6%.

On a month-over-month basis, CPI jumped 0.9%, driven by a 10.9% surge in energy prices. Core CPI increased 0.2%. If you annualize the three-month and six-month figures — a reflection of the short-term trend in prices — core CPI climbed 2.9% and 2.3%, respectively.

🎈 Key inflation metric could be cooler. The personal consumption expenditures (PCE) price index in February was up 2.8% from a year ago. The core PCE price index — the Federal Reserve’s preferred measure of inflation — was up 3.0% during the month, down from January’s 3.1% rate. While it’s down from crisis levels four years ago, it remains above the Fed’s 2% target.

On a month-over-month basis, the core PCE price index was up 0.37%. If you annualize the rolling three-month and six-month figures — a reflection of the near-term trend in prices — the core PCE price index was up 4.4% and 3.4%, respectively.

For more discussion on inflation and monetary policy, read: The other side of the Fed’s inflation ‘mistake’ 🧐 and ‘How many times will the Fed cut rates?’ is not the right question for stock market investors 🔪

🎈 Inflation expectations worsen as gas prices surge. From the New York Fed’s March Survey of Consumer Expectations: “Gas price growth expectations surged to the highest level since March 2022. … Median inflation expectations increased by 0.4 percentage point to 3.4% at the one-year-ahead horizon, increased by 0.1 percentage point to 3.1% at the three-year-ahead horizon, and were unchanged at 3.0% at the five-year-ahead horizon in March.”

⛓️ Supply chain pressures are building. The New York Fed’s Global Supply Chain Pressure Index — a composite of various supply chain indicators — ticked higher in March. While it’s way down from its December 2021 supply chain crisis high, it has returned to its highest level since January 2023.

For more on the supply chain, read: We can stop calling it a supply chain crisis ⛓

💼 New unemployment insurance claims, total ongoing claims remain low. Initial claims for unemployment benefits rose to 219,000 during the week ending Apr. 4, up from 203,000 the week prior. This metric remains at levels historically associated with economic growth.

Insured unemployment, which captures those who continue to claim unemployment benefits, declined to 1.79 million during the week ending March 28.

For more on the labor market, read: The next couple of years for the job market could be tough 🫤

🤔 Recent private job growth has picked up, but remains lackluster. According to payroll processor ADP, private U.S. employers added 26,000 jobs in the four weeks ending March 21.

For more on the labor market, read: About that ugly jobs report 📉

👎 Consumer vibes are in the dumps. From the University of Michigan’s April Surveys of Consumers: “Consumer sentiment sank about 11% this month, extending a decline that began with the start of the Iran conflict, and is currently about 9% below a year ago. Demographic groups across age, income, and political party all posted setbacks in sentiment, as did every component of the index, reflecting the widespread nature of this month’s fall. One-year expected business conditions plunged about 20% and is now 6% below last April.”

More from the survey: “Assessments of personal finances declined about 11%, with consumers expressing a substantial increase in concerns over high prices and weaker asset values. Buying conditions for durables and vehicles worsened, again on the basis of high prices.“

For more on consumer sentiment, read: What consumers do > what consumers say 🙊

💳 Card spending data is holding up. From BofA: “Total card spending per HH was up 6.5% y/y in the week ending Apr 4, according to BAC aggregated credit & debit card data. Total card ex gas spending remained steady at a solid 5.7% y/y with a rise in entertainment, grocery & GM since last week. Also, y/y spending is being boosted by Good Friday timing mismatch (4/3/26 vs 4/18/25).“

Consumer spending data has looked a lot better than consumer sentiment readings. For more on this contradiction, read: We’re taking that vacation whether we like it or not 🛫 and Household finances are both ‘worse’ and ‘good’ 🌦️

🤑 Consumers were spending, even as incomes fell. According to BEA data, personal consumption expenditures increased 0.5% month-over-month in February to an annual rate of $21.65 trillion, an all-time high.

Adjusted for inflation, real personal consumption expenditures increased 0.1% from the prior month to another all-time high.

Spending climbed across categories.

Spending climbed despite incomes contracting.

🏠 Mortgage rates dip. According to Freddie Mac, the average 30-year fixed-rate mortgage declined to 6.37%, down from 6.46% last week.

As of Q4, there were 148.7 million housing units in the U.S., of which 87.8 million were owner-occupied and about 40% were mortgage-free. Of those carrying mortgage debt, almost all have fixed-rate mortgages, and most of those mortgages have rates that were locked in before rates surged from 2021 lows. All of this is to say: Most homeowners are not particularly sensitive to the small weekly movements in home prices or mortgage rates.

For more on mortgages and home prices, read: Why home prices and rents are creating all sorts of confusion about inflation 😖

🏭 Business investment activity rose to new record. Orders for nondefense capital goods excluding aircraft — a.k.a. core capex or business investment — climbed 0.7% to a record $79.53 billion in February.

Core capex orders are a leading indicator, meaning they foretell economic activity down the road.

👎 Services activity survey signals cooling growth. From ISM’s March U.S. Services PMI: “The Prices Index increased, as expected, amid higher oil and fuel costs, and the Supplier Deliveries Index indicated slower performance compared to February, also unsurprisingly with shipping issues and flight disruptions due to the Middle East conflict and winter weather. Continuing strength in business activity, new orders and backlog of orders are positive economic signals, so the Employment Index dropping to its lowest level since December 2023 (43.5%) was a surprise.”

Keep in mind that during times of perceived stress, soft survey data tends to be more exaggerated than actual hard data.

For more on this, read: What businesses do > what businesses say 🙊

📈 Near-term GDP growth estimates are tracking positively. The Atlanta Fed’s GDPNow model sees real GDP growth rising at a 1.3% rate in Q1.

For more on GDP and the economy, read: It’s too ambiguous to just say ‘the economy’ 🤦🏻‍♂️ and Economic data can often be both ‘worse’ and ‘good’ 🌦️

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Putting it all together 📋

Earnings look bullish: The long-term outlook for the stock market remains favorable, bolstered by expectations for years of earnings growth. And earnings are the most important driver of stock prices.

Demand is positive: Demand for goods and services remains positive, supported by healthy consumer and business balance sheets. Personal spending activity remains at record levels. Core capex orders, which are a leading indicator of business spending, have been on the rise.

Growth is cooling: While the economy remains healthy, growth has normalized from much hotter levels earlier in the cycle. The economy is less “coiled” these days as major tailwinds like job openings and excess savings have faded. Job creation is hovering at near-zero. It has become harder to argue that growth is destiny.

Actions speak louder than words: We are in an odd period, given that the hard economic data decoupled from the soft sentiment-oriented data. Consumer and business sentiment has been relatively poor, even as tangible consumer and business activity continues to grow and trend at record levels. From an investor’s perspective, what matters is that the hard economic data continues to hold up.

Stocks are not the economy: There’s a case to be made that the U.S. stock market could outperform the U.S. economy in the near term, thanks largely to positive operating leverage. Since the pandemic, companies have aggressively adjusted their cost structures. This came with strategic layoffs and investment in new equipment, including hardware powered by AI. These moves are resulting in positive operating leverage, which means a modest amount of sales growth — in the cooling economy — is translating to robust earnings growth.

Mind the ever-present risks: Of course, we should not get complacent. There will always be risks to worry about, such as U.S. political uncertainty, geopolitical turmoil, energy price volatility, and cyber attacks. There are also the dreaded unknowns. Any of these risks can flare up and spark short-term volatility in the markets.

Investing is never a smooth ride: There’s also the harsh reality that economic recessions and bear markets are developments that all long-term investors should expect as they build wealth in the markets. Always keep your stock market seat belts fastened.

Think long-term: For now, there’s no reason to believe there’ll be a challenge that the economy and the markets won’t overcome. The long game remains undefeated, and it’s a streak that long-term investors can expect to continue.

For more on how the macro story is evolving, check out the previous review of the macro crosscurrents. »

Subscribe now

Key insights about the stock market 📈

Here’s a roundup of some of TKer’s most talked-about paid and free newsletters about the stock market. All of the headlines are hyperlinked to the archived pieces.

10 truths about the stock market 📈

The stock market can be an intimidating place: It’s real money on the line, there’s an overwhelming amount of information, and people have lost fortunes in it very quickly. But it’s also a place where thoughtful investors have long accumulated a lot of wealth. The primary difference between those two outlooks is related to misconceptions about the stock market that can lead people to make poor investment decisions.

The makeup of the S&P 500 is constantly changing 🔀

Passive investing is a concept usually associated with buying and holding a fund that tracks an index. And no passive investment strategy has attracted as much attention as buying an S&P 500 index fund. However, the S&P 500 — an index of 500 of the largest U.S. companies — is anything but a static set of 500 stocks.

The key driver of stock prices: Earnings💰

For investors, anything you can ever learn about a company matters only if it also tells you something about earnings. That’s because long-term moves in a stock can ultimately be explained by the underlying company’s earnings, expectations for earnings, and uncertainty about those expectations for earnings. Over time, the relationship between stock prices and earnings has a very tight statistical relationship.

Stomach-churning stock market sell-offs are normal🎢

Investors should always be mentally prepared for some big sell-offs in the stock market. It’s part of the deal when you invest in an asset class that is sensitive to the constant flow of good and bad news. Since 1950, the S&P 500 has seen an average annual max drawdown (i.e., the biggest intra-year sell-off) of 14%.

How the stock market performed around recessions 📉📈

Every recession in history was different. And the range of stock performance around them varied greatly. There are two things worth noting. First, recessions have always been accompanied by a significant drawdown in stock prices. Second, the stock market bottomed and inflected upward long before recessions ended.

In the stock market, time pays ⏳

Since 1928, the S&P 500 has generated a positive total return more than 89% of the time over all five-year periods. Those are pretty good odds. When you extend the timeframe to 20 years, you’ll see that there’s never been a period where the S&P 500 didn’t generate a positive return.

What a strong dollar means for stocks 👑

While a strong dollar may be great news for Americans vacationing abroad and U.S. businesses importing goods from overseas, it’s a headwind for multinational U.S.-based corporations doing business in non-U.S. markets.

Stanley Druckenmiller's No. 1 piece of advice for novice investors 🧐

…you don't want to buy them when earnings are great, because what are they doing when their earnings are great? They go out and expand capacity. Three or four years later, there's overcapacity and they're losing money. What about when they're losing money? Well, then they’ve stopped building capacity. So three or four years later, capacity will have shrunk and their profit margins will be way up. So, you always have to sort of imagine the world the way it's going to be in 18 to 24 months as opposed to now. If you buy it now, you're buying into every single fad every single moment. Whereas if you envision the future, you're trying to imagine how that might be reflected differently in security prices.

Peter Lynch made a remarkably prescient market observation in 1994 🎯

Some event will come out of left field, and the market will go down, or the market will go up. Volatility will occur. Markets will continue to have these ups and downs. … Basic corporate profits have grown about 8% a year historically. So, corporate profits double about every nine years. The stock market ought to double about every nine years… The next 500 points, the next 600 points — I don’t know which way they’ll go… They’ll double again in eight or nine years after that. Because profits go up 8% a year, and stocks will follow. That's all there is to it.

Warren Buffett's 'fourth law of motion' 📉

Long ago, Sir Isaac Newton gave us three laws of motion, which were the work of genius. But Sir Isaac’s talents didn’t extend to investing: He lost a bundle in the South Sea Bubble, explaining later, “I can calculate the movement of the stars, but not the madness of men.” If he had not been traumatized by this loss, Sir Isaac might well have gone on to discover the Fourth Law of Motion: For investors as a whole, returns decrease as motion increases.

Most pros can’t beat the market 🥊

According to S&P Dow Jones Indices (SPDJI), 79% of U.S. large-cap equity fund managers underperformed the S&P 500 in 2025. As you stretch the time horizon, the numbers get even more dismal. Over three years, 67% underperformed. Over 5 years, 89% underperformed. And over 20 years, 93% underperformed. This 2025 performance was the 16th consecutive year in which the majority of fund managers in this category have lagged the index.

Proof that 'past performance is no guarantee of future results' 📊

Even if you are a fund manager who generated industry-leading returns in one year, history says it’s an almost insurmountable task to stay on top consistently in subsequent years. According to S&P Dow Jones Indices, just 4.21% of all U.S. equity funds in the top half of performance during the first year were able to remain in the top during the four subsequent years. Only 2.42% of U.S. large-cap funds remained in the top half

SPDJI’s report also considered fund performance relative to their benchmarks over the past three years. Of 738 U.S. large-cap equity funds tracked by SPDJI, 50.68% beat the S&P 500 in 2022. Just 5.08% beat the S&P in the two years ending 2023. And only 2.14% of the funds beat the index over the three years ending in 2024.

The odds are stacked against stock pickers 🎲

Picking stocks in an attempt to beat market averages is an incredibly challenging and sometimes money-losing effort. Most professional stock pickers aren’t able to do this consistently. One of the reasons for this is that most stocks don’t deliver above-average returns. According to S&P Dow Jones Indices, only 19% of the stocks in the S&P 500 outperformed the average stock’s return from 2001 to 2025. Over this period, the average return on an S&P 500 stock was 452%, while the median stock rose by just 59%.

In the U.S., the stock market is tilted toward larger companies with greater exposure to goods. Furthermore, the stock market is driven by the profitability of companies all along the value chain. Whereas the economy, as measured by GDP, is mostly about revenue from final goods and services.

Importantly, the companies that make up the U.S. stock market generate about 30% to 40% of their revenue outside the country.

Similarly, when you invest in another country’s stock market, you’re not always getting as much exposure to the local economy as you might assume.

Read more

Most drivers notice when the price of a gallon of gas goes up by a dollar. But those earning high income don’t feel the pinch quite like those earning low income.

“For low-income consumers, spending on essentials, including energy and food, is a larger share of both their total spending and their income,” Morgan Stanley economists wrote last month. “As of the most recent Consumer Expenditure Survey from 2024, energy spend made up 8.2% of total spending for the bottom 20% income cohort compared to 4.8% for the top. Limiting to just gasoline, gas made up 3.6% for the bottom cohort versus 2.6% for the top.”

Furthermore, fiscal policy affects consumers differently depending on their income level. It usually benefits those at the bottom — but that is not currently happening.

“[We] do not expect the lowest-income cohort (bottom 10-20%) to benefit much from the fiscal bill this year,” the economists added. “Much of this low-income cohort already does not pay federal income taxes because of other credits and deductions, and therefore cannot benefit from the new tax provisions. Meanwhile, some of the spending cuts in the fiscal bill start to ramp up this year, including cuts to SNAP benefits and Medicaid. This will hurt some consumers in that low-income group.”

As a result, the economists expect us to keep hearing about the “K-shaped” narrative, which explains how the economy is being bolstered by wealthier, higher-income folks as they do better while poorer, lower-income folks do worse.

Marginal propensities to consume 🛒

Investors sometimes take the K-shaped dynamic for granted, because revenue is revenue regardless of who’s spending. And if revenue is holding up and earnings are growing, what’s the big deal?

Well, it’s somewhat well-known that if you give two people checks for the same amount of money, the poorer person is likely to spend more of that check right away than the richer person.

Morgan Stanley’s Lisa Shalett discussed this in November: “Much has been made about higher-income cohorts driving a larger share of spending, given wealth effects. That said, on the margin, it remains the lower income cohorts that can impact annual growth of consumption the most, as their marginal propensity to spend an incremental dollar of earnings is more than six times more impactful than that of the wealthiest cohort. On this point, the 2026 outlook is increasingly fragile.“

An incremental dollar of earnings can improve a low-income person’s standard of living materially, whereas that same dollar may do little for someone whose living standards are already high.

So, the low-income person is more likely to spend that dollar instead of saving it. This is why economists often argue that fiscal policy favoring low-income folks can have a more immediate stimulative effect on the economy.

The big picture 🖼️

In the context of the stock market, we’ve mostly talked about the consumer as a monolith that has been in a healthy financial position.

Because while the retailer or the airline or the restaurant may talk about how customer mix and spending behavior are shifting between demographics, from a financial perspective, it doesn’t matter if it’s a high-income or low-income customer who’s spending. Spending is spending.

The economy is complicated. Familiarizing yourself with the many nuances of demographics can help you better understand how the economy functions, why it will behave in counterintuitive ways, and how policy can affect it.

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Related from TKer:

• Economic data can often be both ‘worse’ and ‘good’ 🌦️

• The economy may not be working for everyone right now, but it’s working for stock market investors 🎭

• If you only have time for one metric, make it this one 💰

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Watch 📺 and Listen🎧

I was on Full Disclosure with Roben Farzad. Roben is an absolute legend. We talked about how I got into writing about markets, my experience becoming an independent publisher, and why it’s so tough to beat the market. Check it out on YouTube or anywhere you get podcasts!

I joined my long-time colleague and friend, Myles Udland, on Yahoo Finance. We talked about market volatility, the Magnificent 7’s pullback, earnings, and financial media. Check it out on YouTube!

I was also on Facts vs Feelings: Social Hour with Ryan Detrick, Sonu Varghese, and Frank Cappelleri. We talked about geopolitics, oil, monetary policy, the role of diversification in portfolios, and the evolution of the Predator movie franchise. Catch it on Spotify or YouTube!

Review of the macro crosscurrents 🔀

📈The stock market climbed last week, with the S&P 500 gaining 3.4% to end at 6,582.69. The index is now down 5.7% from its Jan. 27 closing high of 6,978.60 and down 3.8% year-to-date. For market insights, check out the Stock Market tab at TKer. »

There were several notable data points and macroeconomic developments since our last review:

💼 Jobs were created. According to the BLS’s Employment Situation report released on Friday, U.S. employers added 178,000 jobs in March. This metric has been noisy in recent months, going negative in five of the last ten months.

Total payroll employment rose to a record 158.6 million jobs in March.

The unemployment rate — that is, the number of workers who identify as unemployed as a percentage of the civilian labor force — declined to 4.3% in March.

The labor market clearly isn’t as hot as it used to be.

For more on the labor market, read: About that ugly Feb. jobs report 📉 and We’re at an economic tipping point ⚖️

💸 Wage growth cooled. Average hourly earnings rose by 0.2% month-over-month in February. On a year-over-year basis, February’s wages were up 3.5%, the lowest level since May 2021.

💰 Job switchers still get better pay. According to ADP, annual pay in March for people who changed jobs was up 6.6% from a year ago. That better-pay gap has been cooling a bit in recent months. For those who stayed at their job, pay was up 4.5%, about what it’s been for the past year.

For more on why policymakers are watching wage growth, read: Revisiting the key chart to watch amid the Fed’s war on inflation 📈

💼 Job openings fall. According to the BLS’s Job Openings and Labor Turnover Survey, employers had 6.88 million job openings in February, down from 7.24 million in January.

During the month, there were 7.57 million unemployed people — meaning there were 0.91 job openings per unemployed person. This remains one of the most straightforward indicators of labor demand. However, this metric has returned to prepandemic levels.

For more on job openings, read: Were there really twice as many job openings as unemployed people? 🤨 and Revisiting the key chart to watch amid the Fed’s war on inflation 📈

👍 Layoffs remain depressed, hiring remains firm. Employers laid off 1.72 million people in February. While challenging for the people affected, this figure represents just 1.1% of total employment. This metric remains slightly below prepandemic levels.

For more on layoffs, read: Mathematical context can totally change the story 🧮

Hiring activity remains well above layoff activity. During the month, employers hired 4.85 million people.

That said, the hiring rate — the number of hires as a percentage of the employed workforce — has been trending lower, which could be a sign of trouble to come in the labor market.

For more on why this metric matters, read: The hiring situation 🧩

🤔 People are quitting less. In February, 2.97 million workers quit their jobs. This represents 1.9% of the workforce. The rate continues to trend below prepandemic levels.

A low quits rate could mean a number of things: more people are satisfied with their job, workers have fewer outside job opportunities, wage growth is cooling, or productivity will improve as fewer people are entering new, unfamiliar roles.

For more on this dynamic, read: The crummy labor market is yielding a ‘tenure dividend’ for corporations 💰

💼 New unemployment insurance claims, total ongoing claims remain low. Initial claims for unemployment benefits ticked down to 202,000 during the week ending Mar. 28, down from 211,000 the week prior. This metric remains at levels historically associated with economic growth.

Insured unemployment, which captures those who continue to claim unemployment benefits, declined to 1.84 million during the week ending March 21.

For more on the labor market, read: The next couple of years for the job market could be tough 🫤

🛍️ Retail shopping activity rose. Retail sales in February increased 0.6% to a record $738.4 billion.

Most retail categories grew.

💳 Card spending data is holding up. From BofA: “Total card spending per HH was up 4.7% y/y in the week ending Mar 28, according to BAC aggregated credit & debit card data. Total card ex gas spending remains steady at a solid 3.7% y/y with a rise in home improvement & furniture since last week. Higher income HHs continue to show higher growth than other income cohorts in total ex gas spending as of week ending Mar 28.“

Consumer spending data has looked a lot better than consumer sentiment readings. For more on this contradiction, read: We’re taking that vacation whether we like it or not 🛫 and Household finances are both ‘worse’ and ‘good’ 🌦️

⛽️ Gas and diesel prices surge. From AAA: “The national average for a gallon of regular exceeded $4/gallon this week for the first time since August 2022. Today’s average of $4.08 is ten cents higher than last week and $1.08 higher than a month ago. Crude oil prices have been surging, surpassing $100/barrel, as the conflict in the Middle East continues and the Strait of Hormuz remains closed. In 2022, gas prices remained elevated from March through August, peaking in June when the national average reached a record of $5/gallon for one week.”

Here’s a look at the trajectory of gas and diesel prices, as tracked by the EIA.

For more on energy prices, read: Our love-hate relationship with rising oil prices in charts 💔🛢️📊

👎 Consumer vibes improve slightly, but remain in the dumps. The Conference Board’s Consumer Confidence Index climbed 0.8 points in March. From the report: “Consumer confidence ticked up again in March, as a modest improvement in consumers’ views of current conditions outweighed a slight downshift in expectations for the future. … Nonetheless, the Index has been on a general downward trend since 2021.”

More from the report: “Among demographic groups, confidence on a six-month moving average basis continued to moderate in March for consumers under age 35 and 55 and over, and virtually unchanged after a multi-month decline for those aged 35 to 54. Respondents under 35 remain the most optimistic and those 55 and over the least. On a six-month moving average basis, Generation Z remained the most confident among all generations, but their optimism slipped in March along with the Silent Generation, Baby Boomers, and Generation X.”

For more on consumer sentiment, read: What consumers do > what consumers say 🙊 and The economy may not be working for everyone right now, but it’s at least working for stock market investors 🎭

🏠 Home prices grew. According to the S&P CoreLogic Case-Shiller index, home prices were up 0.9% year-over-year in January and climbed 0.2% month-over-month. From S&P Dow Jones Indices’ Nicholas Godec: “Price levels remain elevated, but the rate of appreciation has slowed materially. Splitting the year into two halves sharpens the picture. The National Index rose 2.2% over the first six months of the period, then fell 1.3% over the most recent six — a swing that explains why annual gains have compressed to under 1% despite prices remaining historically elevated.”

🏠 Mortgage rates rise. According to Freddie Mac, the average 30-year fixed-rate mortgage rose to 6.46%, up from 6.38% last week.

As of Q4, there were 148.7 million housing units in the U.S., of which 87.8 million were owner-occupied and about 40% were mortgage-free. Of those carrying mortgage debt, almost all have fixed-rate mortgages, and most of those mortgages have rates that were locked in before rates surged from 2021 lows. All of this is to say: Most homeowners are not particularly sensitive to the small weekly movements in home prices or mortgage rates.

For more on mortgages and home prices, read: Why home prices and rents are creating all sorts of confusion about inflation 😖

🤷 Manufacturing activity surveys signal growth, but also caution. From S&P Global’s March U.S. Manufacturing PMI: “Faster growth of output in March points to encouraging resilience for US manufacturing in the face of the outbreak of war in the Middle East. Business confidence regarding output in the year ahead has also so far held up well. This sustained resilience in part reflects reduced concerns over government policies such as tariffs, but also indicates that producers anticipate only a short-term and modest impact from the war, which is clearly uncertain. It remains early days in terms of the impact of the conflict, and a sharp rise in prices and delivery delays has cast a cloud over the outlook, threatening to drive inflation higher, dampen demand and throttle supply chains. Factory input costs have already jumped higher on the back of surging oil prices and supplier delays have become more widespread than at any time since October 2022, linked to the war exacerbating existing shipping, haulage and port delays.”

Similarly, the ISM March Manufacturing survey also signaled growth. “This month also marks the first report with panelists citing the Iran war as a new impact to their business, along with ongoing uncertainty with U.S. economic policy, despite the recent Supreme Court ruling striking down International Emergency Economic Powers Act (IEEPA) tariffs. In March, 64% of comments overall were negative. Among the negative comments, about 20% cited tariffs and about 40 percent the war in the Middle East.“

👎 Services activity survey signals contraction. From S&P Global’s March U.S. Services PMI: “The service sector has slipped into contraction for the first time since January 2023, dragging the overall economy down to a near-stalled 0.5% annualized rate of growth in March. Worst hit is consumer-facing service sectors where, barring the pandemic lockdowns, the downturn reported in March was among the steepest recorded since data were first available in 2009. However, financial services and tech, both of which performed strongly last year, have shown some signs of weaker performance amid financial market volatility and concerns over higher interest rates, which have deterred investment. Key to the deteriorating growth trend is a pull-back in spending amid worsening affordability, with costs and selling prices surging higher in March amid spiking energy prices.”

Keep in mind that during times of perceived stress, soft survey data tends to be more exaggerated than actual hard data.

For more on this, read: What businesses do > what businesses say 🙊

📈 Near-term GDP growth estimates are tracking positively. The Atlanta Fed’s GDPNow model sees real GDP growth rising at a 1.6% rate in Q1.

For more on GDP and the economy, read: It’s too ambiguous to just say ‘the economy’ 🤦🏻‍♂️ and Economic data can often be both ‘worse’ and ‘good’ 🌦️

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Putting it all together 📋

Earnings look bullish: The long-term outlook for the stock market remains favorable, bolstered by expectations for years of earnings growth. And earnings are the most important driver of stock prices.

Demand is positive: Demand for goods and services remains positive, supported by healthy consumer and business balance sheets. Personal spending activity remains at record levels. Core capex orders, which are a leading indicator of business spending, have been on the rise.

Growth is cooling: While the economy remains healthy, growth has normalized from much hotter levels earlier in the cycle. The economy is less “coiled” these days as major tailwinds like job openings and excess savings have faded. Job creation is hovering at near-zero. It has become harder to argue that growth is destiny.

Actions speak louder than words: We are in an odd period, given that the hard economic data decoupled from the soft sentiment-oriented data. Consumer and business sentiment has been relatively poor, even as tangible consumer and business activity continues to grow and trend at record levels. From an investor’s perspective, what matters is that the hard economic data continues to hold up.

Stocks are not the economy: There’s a case to be made that the U.S. stock market could outperform the U.S. economy in the near term, thanks largely to positive operating leverage. Since the pandemic, companies have aggressively adjusted their cost structures. This came with strategic layoffs and investment in new equipment, including hardware powered by AI. These moves are resulting in positive operating leverage, which means a modest amount of sales growth — in the cooling economy — is translating to robust earnings growth.

Mind the ever-present risks: Of course, we should not get complacent. There will always be risks to worry about, such as U.S. political uncertainty, geopolitical turmoil, energy price volatility, and cyber attacks. There are also the dreaded unknowns. Any of these risks can flare up and spark short-term volatility in the markets.

Investing is never a smooth ride: There’s also the harsh reality that economic recessions and bear markets are developments that all long-term investors should expect as they build wealth in the markets. Always keep your stock market seat belts fastened.

Think long-term: For now, there’s no reason to believe there’ll be a challenge that the economy and the markets won’t overcome. The long game remains undefeated, and it’s a streak that long-term investors can expect to continue.

For more on how the macro story is evolving, check out the previous review of the macro crosscurrents. »

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Key insights about the stock market 📈

Here’s a roundup of some of TKer’s most talked-about paid and free newsletters about the stock market. All of the headlines are hyperlinked to the archived pieces.

10 truths about the stock market 📈

The stock market can be an intimidating place: It’s real money on the line, there’s an overwhelming amount of information, and people have lost fortunes in it very quickly. But it’s also a place where thoughtful investors have long accumulated a lot of wealth. The primary difference between those two outlooks is related to misconceptions about the stock market that can lead people to make poor investment decisions.

The makeup of the S&P 500 is constantly changing 🔀

Passive investing is a concept usually associated with buying and holding a fund that tracks an index. And no passive investment strategy has attracted as much attention as buying an S&P 500 index fund. However, the S&P 500 — an index of 500 of the largest U.S. companies — is anything but a static set of 500 stocks.

The key driver of stock prices: Earnings💰

For investors, anything you can ever learn about a company matters only if it also tells you something about earnings. That’s because long-term moves in a stock can ultimately be explained by the underlying company’s earnings, expectations for earnings, and uncertainty about those expectations for earnings. Over time, the relationship between stock prices and earnings has a very tight statistical relationship.

Stomach-churning stock market sell-offs are normal🎢

Investors should always be mentally prepared for some big sell-offs in the stock market. It’s part of the deal when you invest in an asset class that is sensitive to the constant flow of good and bad news. Since 1950, the S&P 500 has seen an average annual max drawdown (i.e., the biggest intra-year sell-off) of 14%.

How the stock market performed around recessions 📉📈

Every recession in history was different. And the range of stock performance around them varied greatly. There are two things worth noting. First, recessions have always been accompanied by a significant drawdown in stock prices. Second, the stock market bottomed and inflected upward long before recessions ended.

In the stock market, time pays ⏳

Since 1928, the S&P 500 has generated a positive total return more than 89% of the time over all five-year periods. Those are pretty good odds. When you extend the timeframe to 20 years, you’ll see that there’s never been a period where the S&P 500 didn’t generate a positive return.

What a strong dollar means for stocks 👑

While a strong dollar may be great news for Americans vacationing abroad and U.S. businesses importing goods from overseas, it’s a headwind for multinational U.S.-based corporations doing business in non-U.S. markets.

Stanley Druckenmiller's No. 1 piece of advice for novice investors 🧐

…you don't want to buy them when earnings are great, because what are they doing when their earnings are great? They go out and expand capacity. Three or four years later, there's overcapacity and they're losing money. What about when they're losing money? Well, then they’ve stopped building capacity. So three or four years later, capacity will have shrunk and their profit margins will be way up. So, you always have to sort of imagine the world the way it's going to be in 18 to 24 months as opposed to now. If you buy it now, you're buying into every single fad every single moment. Whereas if you envision the future, you're trying to imagine how that might be reflected differently in security prices.

Peter Lynch made a remarkably prescient market observation in 1994 🎯

Some event will come out of left field, and the market will go down, or the market will go up. Volatility will occur. Markets will continue to have these ups and downs. … Basic corporate profits have grown about 8% a year historically. So, corporate profits double about every nine years. The stock market ought to double about every nine years… The next 500 points, the next 600 points — I don’t know which way they’ll go… They’ll double again in eight or nine years after that. Because profits go up 8% a year, and stocks will follow. That's all there is to it.

Warren Buffett's 'fourth law of motion' 📉

Long ago, Sir Isaac Newton gave us three laws of motion, which were the work of genius. But Sir Isaac’s talents didn’t extend to investing: He lost a bundle in the South Sea Bubble, explaining later, “I can calculate the movement of the stars, but not the madness of men.” If he had not been traumatized by this loss, Sir Isaac might well have gone on to discover the Fourth Law of Motion: For investors as a whole, returns decrease as motion increases.

Most pros can’t beat the market 🥊

According to S&P Dow Jones Indices (SPDJI), 79% of U.S. large-cap equity fund managers underperformed the S&P 500 in 2025. As you stretch the time horizon, the numbers get even more dismal. Over three years, 67% underperformed. Over 5 years, 89% underperformed. And over 20 years, 93% underperformed. This 2025 performance was the 16th consecutive year in which the majority of fund managers in this category have lagged the index.

Proof that 'past performance is no guarantee of future results' 📊

Even if you are a fund manager who generated industry-leading returns in one year, history says it’s an almost insurmountable task to stay on top consistently in subsequent years. According to S&P Dow Jones Indices, just 4.21% of all U.S. equity funds in the top half of performance during the first year were able to remain in the top during the four subsequent years. Only 2.42% of U.S. large-cap funds remained in the top half

SPDJI’s report also considered fund performance relative to their benchmarks over the past three years. Of 738 U.S. large-cap equity funds tracked by SPDJI, 50.68% beat the S&P 500 in 2022. Just 5.08% beat the S&P in the two years ending 2023. And only 2.14% of the funds beat the index over the three years ending in 2024.

The odds are stacked against stock pickers 🎲

Picking stocks in an attempt to beat market averages is an incredibly challenging and sometimes money-losing effort. Most professional stock pickers aren’t able to do this consistently. One of the reasons for this is that most stocks don’t deliver above-average returns. According to S&P Dow Jones Indices, only 19% of the stocks in the S&P 500 outperformed the average stock’s return from 2001 to 2025. Over this period, the average return on an S&P 500 stock was 452%, while the median stock rose by just 59%.

But TKer Stock Market Truth No. 5 says, “Earnings drive stock prices.” What gives?

Before you unsubscribe from TKer, let’s talk through this with some eye-opening charts.

Read more

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In fall 2011, global stock markets tumbled amid increasing concerns over sovereign debt levels. Debt crises gripped Greece, Ireland, Portugal, and Spain. S&P even stripped the U.S. of its pristine AAA sovereign credit rating.

The S&P 500 fell 19% from its July 7 closing high of 1,353 to its Oct. 3 closing low of 1,099.

It was the kind of move you’d think would have Wall Street strategists tripping over each other as they cut their targets for the market.

But on Sept. 11, when the S&P was at 1,154, then-BofA strategist David Bianco raised his 12-month forecast on the S&P to 1,450 from 1,400. This implied a very bullish 26% return. In his note, he also suggested the market could surge 15% from Sept. to January.

At the time, his calls were widely criticized as delusional optimism. I even wrote that he was the “gutsiest strategist in the world right now.” (Three days later, BofA and Bianco parted ways. He later joined Deutsche Bank as their top equity strategist. Today, he’s CIO at DWS.)

Well, Bianco nailed both calls.

The S&P surged 15% from September to the end of January. And it hit 1,450 on Sept. 13, 2012 — 12 months and two days after he set his 12-month target.

I was reminded of this episode this week because Barclays’ Venu Krishna raised his year-end target for the S&P 500 to 7,650 from 7,400. This, despite the market pulling back amid heightened uncertainty and elevated energy prices stemming from the conflict in Iran.

“Our baseline is that concerns over AI disruption, private credit, and geopolitics reflect real and material risks, but ones that will nonetheless fall short of derailing the current growth cycle at this point in time,” he said.

A key driver of his updated call is his expectation for S&P 500 earnings to grow to $321 per share this year, up from his initial estimate of $305.

If you only have time for one metric, it should be earnings. They’re the most important long-term driver of stock prices. And according to FactSet, earnings estimates have been drifting higher.

As Schwab’s Kevin Gordon often says, we have to distinguish between front-page risk and bottom-line risk. Stories on the front page may spark market volatility. But those stories matter to the stock market only to the degree they affect the bottom line, or earnings.

And so far, the earnings narrative continues to be bullish.

Let’s not forget about 2025 🗓️

It’s not breaking news that the stock market behaves unpredictably and sometimes counterintuitively.

Going into 2025, Wall Street strategists had year-end S&P 500 targets ranging from 6,400 to 7,100.

As the Trump administration rolled out its aggressive trade policy, markets tanked, and strategists slashed their targets. Almost all strategists had revised targets below 6,400.

But to many people’s surprise, the S&P eventually recovered losses and closed the year at 6,845, an impressive 16% gain. That closing price was actually higher than most strategists’ targets at the beginning of the year.

Despite the policy headwinds, earnings growth persisted, helping prices climb to new record highs.

Zooming out 🔭

To be clear, this is not me suggesting you should lean on a Wall Street strategist’s one-year target for the stock market. I would never do that.

I’m also not suggesting that markets are sure to recover and rise above everyone’s targets. Things could get worse, and 2026 could be a crappy year.

All I’m saying is that good stock market analysis sometimes yields contrarian findings, even when front-page news and recent price performance point in the opposite direction.

The stock market will do unexpected things, especially over short periods like one year. So don’t be too surprised if we ultimately get better-than-expected results despite what appears to be worsening market conditions.

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Related from TKer:

• Wall Street’s 2026 outlook for stocks 🔭

• ‘The thing I really want to emphasize is that nobody knows’ 🤷🏻‍♂️

• Our love-hate relationship with rising oil prices in charts 💔🛢️📊

• 10 truths about the stock market 📈

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Watch 📺

I was on . We talked about geopolitics, international stocks, the Magnificent 7, and more! Watch it at The Pinpoint Press or on YouTube!

I was also on Facts vs Feelings: Social Hour with Ryan Detrick, Sonu Varghese, and Frank Cappelleri. We talked about geopolitics, oil, monetary policy, the role of diversification in portfolios, and the evolution of the Predator movie franchise. Catch it on YouTube!

Review of the macro crosscurrents 🔀

There were several notable data points and macroeconomic developments since our last review:

💼 New unemployment insurance claims, total ongoing claims remain low. Initial claims for unemployment benefits ticked up to 210,000 during the week ending Mar. 21, up from 205,000 the week prior. This metric remains at levels historically associated with economic growth.

Insured unemployment, which captures those who continue to claim unemployment benefits, declined to 1.82 million during the week ending March 14.

For more on the labor market, read: The next couple of years for the job market could be tough 🫤

👎 Recent job private job growth has been lackluster. According to payroll processor ADP, private U.S. employers added 10,000 jobs in the four weeks ending March 7.

For more on the labor market, read: About that ugly jobs report 📉

⛽️ Gas prices surge. From AAA: “he national average for a gallon of regular gasoline is up 10 cents from last week and one dollar since last month. The line graph below shows the steep rise from $2.98 on February 26 to $3.98 today. Crude oil prices remain high as the Iran conflict nears the 4-week mark. The national average could reach $4/gallon in the coming days for the first time since August 2022. Gasoline demand is also on the rise as spring break season continues, another factor in rising pump prices.”

For more on energy prices, read: Our love-hate relationship with rising oil prices in charts 💔🛢️📊

👎 Consumer vibes remain poor. From the University of Michigan’s March Surveys of Consumers: “Consumer sentiment fell back 6% this month to its lowest level since December 2025. Declines were seen across age and political party. Consumers with middle and higher incomes and stock wealth, buffeted by both escalating gas prices and volatile financial markets in the wake of the Iran conflict, exhibited particularly large drops in sentiment.”

More from the report: “Overall, the short-run economic outlook plunged 14%, and year-ahead expected personal finances sank 10%, while declines in long-run expectations were more subdued. These patterns suggest that, at this time, consumers may not expect recent negative developments to persist far into the future. These views are subject to change, however, if the Iran conflict becomes protracted or if higher energy prices pass through to overall inflation. Interviews for this release were collected between February 17 and March 23, with about two-thirds completed after the start of the US military conflict in Iran.“

For more on consumer sentiment, read: What consumers do > what consumers say 🙊 and The economy may not be working for everyone right now, but it’s at least working for stock market investors 🎭

💳 Card spending data is holding up. From JPMorgan: “As of 17 Mar 2026, our Chase Consumer Card spending data (unadjusted) was 6.1% above the same day last year. Based on the Chase Consumer Card data through 17 Mar 2026, our estimate of the US Census February control measure of retail sales m/m is 0.63%.”

From BofA: “Total card spending per HH was up 4.4% y/y in the week ending Mar 21, according to BAC aggregated credit and debit card data. Total card ex gas spending has slowed but remains solid at 3.6% y/y with a rise in transit & dept. stores since last week. Lower income HHs are driving the slowdown in y/y ex gas card spending while higher income HH spending remains largely stable.“

Consumer spending data has looked a lot better than consumer sentiment readings. For more on this contradiction, read: We’re taking that vacation whether we like it or not 🛫 and Household finances are both ‘worse’ and ‘good’ 🌦️

🏠 Mortgage rates rise. According to Freddie Mac, the average 30-year fixed-rate mortgage rose to 6.38%, up from 6.22% last week: “The housing market continues to show gradual improvements compared to a year ago amid recent rate volatility. Purchase and refinance applications are up year-over-year, and rates remain lower than last year when they averaged 6.65%.”

As of Q4, there were 148.7 million housing units in the U.S., of which 87.8 million were owner-occupied and about 40% were mortgage-free. Of those carrying mortgage debt, almost all have fixed-rate mortgages, and most of those mortgages have rates that were locked in before rates surged from 2021 lows. All of this is to say: Most homeowners are not particularly sensitive to the small weekly movements in home prices or mortgage rates.

For more on mortgages and home prices, read: Why home prices and rents are creating all sorts of confusion about inflation 😖

💪 Labor productivity increases. From the BLS: “Nonfarm business sector labor productivity increased 1.8% in the fourth quarter of 2025 … as output increased 1.5% and hours worked decreased 0.2%. … From fourth-quarter 2024 to fourth-quarter 2025, nonfarm business sector labor productivity increased 2.5%. Annual average productivity increased 2.1% from 2024 to 2025.”

For more, read: Promising signs for productivity ⚙️ and The crummy labor market is yielding a ‘tenure dividend’ for corporations 💰

🔨 Construction spending ticked lower. Construction spending declined 0.5% to an annual rate of $2.19 trillion in January.

While we’re on the subject of construction, the Big Tech hyperscalers have committed a fortune to building massive datacenters to support AI. For more on this, read: Struggling to make sense of Big Tech’s $600 billion bet on AI? Here’s a metric to watch 📋

👎 Activity surveys signal growth, but also deterioration. From S&P Global’s March U.S. Flash PMI: “The flash PMI survey data for March signal an unwelcome combination of slower growth and rising inflation following the outbreak of war in the Middle East. Companies are reporting a hit to demand from the additional uncertainty and cost of living impact generated by the conflict. Travel, transport and tourism related issues are compounded by financial market jitters and affordability constraints, notably including concern over the impact of higher interest rates, surging energy prices and supply chain delays. Companies are meanwhile building safety stocks amid concerns that the war may lead to more protracted supply issues and price rises while trimming headcounts to reduce overheads.”

Keep in mind that during times of perceived stress, soft survey data tends to be more exaggerated than actual hard data.

For more on this, read: What businesses do > what businesses say 🙊

📈 Near-term GDP growth estimates are tracking positively. The Atlanta Fed’s GDPNow model sees real GDP growth rising at a 2.0% rate in Q1.

For more on GDP and the economy, read: It’s too ambiguous to just say ‘the economy’ 🤦🏻‍♂️ and Economic data can often be both ‘worse’ and ‘good’ 🌦️

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Putting it all together 📋

Earnings look bullish: The long-term outlook for the stock market remains favorable, bolstered by expectations for years of earnings growth. And earnings are the most important driver of stock prices.

Demand is positive: Demand for goods and services remains positive, supported by healthy consumer and business balance sheets. Personal spending activity remains at record levels. Core capex orders, which are a leading indicator of business spending, have been on the rise.

Growth is cooling: While the economy remains healthy, growth has normalized from much hotter levels earlier in the cycle. The economy is less “coiled” these days as major tailwinds like job openings and excess savings have faded. Job creation is hovering at near-zero. It has become harder to argue that growth is destiny.

Actions speak louder than words: We are in an odd period, given that the hard economic data decoupled from the soft sentiment-oriented data. Consumer and business sentiment has been relatively poor, even as tangible consumer and business activity continues to grow and trend at record levels. From an investor’s perspective, what matters is that the hard economic data continues to hold up.

Stocks are not the economy: There’s a case to be made that the U.S. stock market could outperform the U.S. economy in the near term, thanks largely to positive operating leverage. Since the pandemic, companies have aggressively adjusted their cost structures. This came with strategic layoffs and investment in new equipment, including hardware powered by AI. These moves are resulting in positive operating leverage, which means a modest amount of sales growth — in the cooling economy — is translating to robust earnings growth.

Mind the ever-present risks: Of course, we should not get complacent. There will always be risks to worry about, such as U.S. political uncertainty, geopolitical turmoil, energy price volatility, and cyber attacks. There are also the dreaded unknowns. Any of these risks can flare up and spark short-term volatility in the markets.

Investing is never a smooth ride: There’s also the harsh reality that economic recessions and bear markets are developments that all long-term investors should expect as they build wealth in the markets. Always keep your stock market seat belts fastened.

Think long-term: For now, there’s no reason to believe there’ll be a challenge that the economy and the markets won’t overcome. The long game remains undefeated, and it’s a streak that long-term investors can expect to continue.

For more on how the macro story is evolving, check out the previous review of the macro crosscurrents. »

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Key insights about the stock market 📈

Here’s a roundup of some of TKer’s most talked-about paid and free newsletters about the stock market. All of the headlines are hyperlinked to the archived pieces.

10 truths about the stock market 📈

The stock market can be an intimidating place: It’s real money on the line, there’s an overwhelming amount of information, and people have lost fortunes in it very quickly. But it’s also a place where thoughtful investors have long accumulated a lot of wealth. The primary difference between those two outlooks is related to misconceptions about the stock market that can lead people to make poor investment decisions.

The makeup of the S&P 500 is constantly changing 🔀

Passive investing is a concept usually associated with buying and holding a fund that tracks an index. And no passive investment strategy has attracted as much attention as buying an S&P 500 index fund. However, the S&P 500 — an index of 500 of the largest U.S. companies — is anything but a static set of 500 stocks.

The key driver of stock prices: Earnings💰

For investors, anything you can ever learn about a company matters only if it also tells you something about earnings. That’s because long-term moves in a stock can ultimately be explained by the underlying company’s earnings, expectations for earnings, and uncertainty about those expectations for earnings. Over time, the relationship between stock prices and earnings has a very tight statistical relationship.

Stomach-churning stock market sell-offs are normal🎢

Investors should always be mentally prepared for some big sell-offs in the stock market. It’s part of the deal when you invest in an asset class that is sensitive to the constant flow of good and bad news. Since 1950, the S&P 500 has seen an average annual max drawdown (i.e., the biggest intra-year sell-off) of 14%.

How the stock market performed around recessions 📉📈

Every recession in history was different. And the range of stock performance around them varied greatly. There are two things worth noting. First, recessions have always been accompanied by a significant drawdown in stock prices. Second, the stock market bottomed and inflected upward long before recessions ended.

In the stock market, time pays ⏳

Since 1928, the S&P 500 has generated a positive total return more than 89% of the time over all five-year periods. Those are pretty good odds. When you extend the timeframe to 20 years, you’ll see that there’s never been a period where the S&P 500 didn’t generate a positive return.

What a strong dollar means for stocks 👑

While a strong dollar may be great news for Americans vacationing abroad and U.S. businesses importing goods from overseas, it’s a headwind for multinational U.S.-based corporations doing business in non-U.S. markets.

Stanley Druckenmiller's No. 1 piece of advice for novice investors 🧐

…you don't want to buy them when earnings are great, because what are they doing when their earnings are great? They go out and expand capacity. Three or four years later, there's overcapacity and they're losing money. What about when they're losing money? Well, then they’ve stopped building capacity. So three or four years later, capacity will have shrunk and their profit margins will be way up. So, you always have to sort of imagine the world the way it's going to be in 18 to 24 months as opposed to now. If you buy it now, you're buying into every single fad every single moment. Whereas if you envision the future, you're trying to imagine how that might be reflected differently in security prices.

Peter Lynch made a remarkably prescient market observation in 1994 🎯

Some event will come out of left field, and the market will go down, or the market will go up. Volatility will occur. Markets will continue to have these ups and downs. … Basic corporate profits have grown about 8% a year historically. So, corporate profits double about every nine years. The stock market ought to double about every nine years… The next 500 points, the next 600 points — I don’t know which way they’ll go… They’ll double again in eight or nine years after that. Because profits go up 8% a year, and stocks will follow. That's all there is to it.

Warren Buffett's 'fourth law of motion' 📉

Long ago, Sir Isaac Newton gave us three laws of motion, which were the work of genius. But Sir Isaac’s talents didn’t extend to investing: He lost a bundle in the South Sea Bubble, explaining later, “I can calculate the movement of the stars, but not the madness of men.” If he had not been traumatized by this loss, Sir Isaac might well have gone on to discover the Fourth Law of Motion: For investors as a whole, returns decrease as motion increases.

Most pros can’t beat the market 🥊

According to S&P Dow Jones Indices (SPDJI), 79% of U.S. large-cap equity fund managers underperformed the S&P 500 in 2025. As you stretch the time horizon, the numbers get even more dismal. Over three years, 67% underperformed. Over 5 years, 89% underperformed. And over 20 years, 93% underperformed. This 2025 performance was the 16th consecutive year in which the majority of fund managers in this category have lagged the index.

Proof that 'past performance is no guarantee of future results' 📊

Even if you are a fund manager who generated industry-leading returns in one year, history says it’s an almost insurmountable task to stay on top consistently in subsequent years. According to S&P Dow Jones Indices, just 4.21% of all U.S. equity funds in the top half of performance during the first year were able to remain in the top during the four subsequent years. Only 2.42% of U.S. large-cap funds remained in the top half

SPDJI’s report also considered fund performance relative to their benchmarks over the past three years. Of 738 U.S. large-cap equity funds tracked by SPDJI, 50.68% beat the S&P 500 in 2022. Just 5.08% beat the S&P in the two years ending 2023. And only 2.14% of the funds beat the index over the three years ending in 2024.

The odds are stacked against stock pickers 🎲

Picking stocks in an attempt to beat market averages is an incredibly challenging and sometimes money-losing effort. Most professional stock pickers aren’t able to do this consistently. One of the reasons for this is that most stocks don’t deliver above-average returns. According to S&P Dow Jones Indices, only 19% of the stocks in the S&P 500 outperformed the average stock’s return from 2001 to 2025. Over this period, the average return on an S&P 500 stock was 452%, while the median stock rose by just 59%.

That’s not pleasant for the many investors with lots of exposure to diversified large-cap index funds tracking the S&P.

But you could be doing a lot worse. You could be way overweight the ”Magnificent 7” — Nvidia, Apple, Alphabet, Microsoft, Amazon, Meta Platforms, and Tesla — which continue to underperform the S&P.

Read more

I consume a lot of financial news.

I have subscriptions to The Wall Street Journal, The Financial Times, and The New York Times. I have Bloomberg Radio and TV on in the mornings and CNBC on in the afternoons. I constantly refresh the Yahoo Finance homepage. I subscribe to dozens of daily newsletters. And when the markets close, I listen to business podcasts and watch video clips on YouTube, Instagram, and TikTok.

I do not recommend this behavior for most long-term investors.

Why?

For starters, news is a business incentivized to address your interests as a reader and not necessarily your needs as an investor. And your interests and your needs aren’t always in line.

In markets news specifically, there’s also a time horizon mismatch between news providers and investors.

Read more

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I’ve been doing a lot of reading, listening, and watching over the past three weeks. And I can confidently say that no one knows where things are headed in the next couple of weeks and months.

Federal Reserve Chair Jerome Powell was asked last week how higher energy prices from the conflict in Iran would affect the economy.

“The thing I really want to emphasize is that nobody knows,” Powell said. “The economic effect could be bigger. They could be smaller. They could be much smaller or much bigger. We just don’t know.“

The experts with the highest conviction in their forecasts seem to be commodities analysts who are convinced oil prices are headed higher. But even they struggle to understand why prices aren’t higher already.

With the stock market, it’s usually the case that people don’t know how prices will behave in the near term. But I think this is especially the case right now.

For starters, many market participants didn’t see the attack on Iran coming. According to BofA’s Global Fund Manager Survey, just 14% of market pros cited geopolitical conflict as their top “tail risk” in February. In March, that jumped to 37%.

According to TKer Stock Market Truth No. 8: “The most destabilizing risks are the ones people aren’t talking about.” That’s because these risks aren’t priced into the market. And when they materialize, traders and investors inevitably scramble to price them in, often with incomplete information. The added uncertainty alone is enough to drive prices lower.

The bigger problem is that we remain in the throes of this risk event — the Iran war — which has an unclear timeline. It’s an event that directly affects the supply and price of oil, which in turn affects almost every corner of the global economy. The longer this goes, the more painful it becomes and the harder it is to unwind.

This unclear timeline makes it impossible for anyone to estimate costs in their financial models. A swift resolution to the conflict could mean costs are lower than expected. A protracted conflict could mean costs are higher than expected. Like Powell said, “They could be much smaller or much bigger. We just don’t know.”

Until we’re able to see an endgame, we’re almost certain to keep getting a mix of positive and negative headlines that whipsaw the markets, some reflecting seemingly optimistic developments that prove to be false hopes. One moment, we’re told the war is ending. Later, we’re told the conflict is escalating. One day, we hear about a coordinated effort to release strategic energy reserves. The next day, we learn that another major source of energy has been disrupted. And so on.

That gets you a stock market chart that looks like this:

“Markets are reacting to political comments about the length of the Gulf war,” UBS economist Paul Donovan said. “With uncertainty about U.S. objectives, it is hard for investors to assess how much more fighting is required to achieve the ‘end goal.’”

The stock market has experienced many rollercoaster moments 🎢

Erratic market behavior in response to a flurry of conflicting headlines is not new. You don’t have to go too far into history to find past episodes where risk events seemingly came out of nowhere, causing markets to swing violently in response to a rotation of positive and negative developments.

The slide below is from a presentation I gave to Columbia Journalism School students in 2022. It lists stock market news story headlines during the seven trading days following news of the Omicron variant of COVID-19 in November 2021.

We saw similar whipsaw behavior in March 2023 after Silicon Valley Bank failed, and everyone was scrambling to understand what it would mean. Here’s a roundup of headlines from that episode:

“The first draft of history is typically emotional, rarely accurate, and often conflicted,” Barry Ritholtz said at the time.

Zooming out 🔭

Based on the little I know about President Trump and the Iranian government, a swift resolution to the conflict appears unlikely in the near term.

From a markets perspective, I think we’ll know the worst is behind us only far in hindsight.

This doesn’t mean prices necessarily go much lower from here. It’s certainly possible that the stock market has bottomed in anticipation of some de-escalation in the future. It is typically the behavior of the stock market to bottom before everything else.

But I don’t know.

However, I am convinced we will continue to get more headlines that quickly send prices changing directions.

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Related from TKer:

• If you know where things are heading, then you probably don’t know what you’re talking about 🤡

• One of the most misunderstood moments in market cycles ⏱️

• Stocks usually look past geopolitical events 🫣

• Our love-hate relationship with rising oil prices 💔🛢️📊

• 10 truths about the stock market 📈

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Watch 📺

I spoke with Mike Larson at the 2026 Money Show in Las Vegas. We talked about AI capex, household finances, and much more! Check it out on YouTube!

Review of the macro crosscurrents 🔀

There were several notable data points and macroeconomic developments since our last review:

🏛️ Fed holds rates. On Wednesday, the Federal Reserve kept its benchmark interest rate target range at 3.5% to 3.75%.

From the Fed’s policy statement: “Available indicators suggest that economic activity has been expanding at a solid pace. Job gains have remained low, and the unemployment rate has been little changed in recent months. Inflation remains somewhat elevated.”

From Fed Chair Powell’s press conference: “The implications of developments in the Middle East for the U.S. economy are uncertain. We will remain attentive to risks to both sides of our dual mandate.“

The FOMC also raised its projections for GDP growth, while also increasing its expectations for inflation in the near-term. The so-called dot plot continues to signal one rate cut in 2026 and one more in 2027.

For more on what Fed policy could mean for markets, read: About Fed rate cuts and stocks ⚖️

💼 New unemployment insurance claims, total ongoing claims remain low. Initial claims for unemployment benefits declined to 205,000 during the week ending Mar. 14, down from 213,000 the week prior. This metric remains at levels historically associated with economic growth.

Insured unemployment, which captures those who continue to claim unemployment benefits, declined to 1.86 million during the week ending March 7.

For more on the labor market, read: The next couple of years for the job market could be tough 🫤

👎 Recent job private job growth has been lackluster. According to payroll processor ADP, private U.S. employers added 9,000 jobs in the four weeks ending Feb 28.

For more on the labor market, read: About that ugly jobs report 📉

⛽️ Gas prices surge. From AAA: “With the Spring equinox ushering in warmer weather and more time on the road, gas prices are trending upward alongside seasonal demand. Last week’s announcement by the White House to release 172 million barrels of oil from its strategic reserves over four months has no immediate relief on the oil market as the price of a barrel of crude continues to climb.”

For more on energy prices, read: Our love-hate relationship with rising oil prices in charts 💔🛢️📊

💳 Card spending data is holding up. From JPMorgan: “As of 13 Mar 2026, our Chase Consumer Card spending data (unadjusted) was 6.4% above the same day last year. Based on the Chase Consumer Card data through 13 Mar 2026, our estimate of the US Census February control measure of retail sales m/m is 0.61%.”

From BofA: “Total card spending per HH was up 4.9% y/y in the week ending Mar 14, according to BAC aggregated credit & debit card data. Y/y gas spending rose to 14.4% due to higher gas prices, with lower income gas spending growth outpacing higher income. Total card spending ex gas was up a solid 4.3% y/y, with a notable rise in airlines, electronics & transit spending growth.“

More color from BofA: “This rise in gasoline spending could potentially dampen consumers’ ability to spend on ‘nice-to-have’ or discretionary categories. But the ‘good news’ so far is that discretionary spending growth remains solid – in the week to March 14 it was up 5.3%. This strong momentum could be, in our view, due to relatively robust overall wage growth and higher 2026 tax refunds.” - BofA“

Consumer spending data has looked a lot better than consumer sentiment readings. For more on this contradiction, read: We’re taking that vacation whether we like it or not 🛫 and Household finances are both ‘worse’ and ‘good’ 🌦️

🛠️ Industrial activity ticked higher. Industrial production activity in February increased 0.2% from prior month levels. Manufacturing output rose 0.2%.

🏭 Business investment activity rose to new record. Orders for nondefense capital goods excluding aircraft — a.k.a. core capex or business investment — climbed marginally from its December peak to $79.32 billion in January.

Core capex orders are a leading indicator, meaning they foretell economic activity down the road.

🏠 Mortgage rates rise. According to Freddie Mac, the average 30-year fixed-rate mortgage rose to 6.22%, up from 6.11% last week: “The 30-year fixed-rate mortgage edged up this week to 6.22% but remains nearly half a percentage point lower than the same time last year. Potential homebuyers are poised for a more affordable spring homebuying season than last with the market experiencing improvements in purchase applications and pending home sales.”

As of Q4, there were 148.7 million housing units in the U.S., of which 87.8 million were owner-occupied and about 40% were mortgage-free. Of those carrying mortgage debt, almost all have fixed-rate mortgages, and most of those mortgages have rates that were locked in before rates surged from 2021 lows. All of this is to say: Most homeowners are not particularly sensitive to the small weekly movements in home prices or mortgage rates.

For more on mortgages and home prices, read: Why home prices and rents are creating all sorts of confusion about inflation 😖

🏠 Homebuilder sentiment ticked higher. From the NAHB: “While the Freddie Mac 30-year fixed rate mortgage averaged 6.05% in February, the lowest since August 2022, downpayment hurdles and uncertainty from the conflict with Iran and the price of oil will be headwinds going forward. The administration’s executive orders issued last week to reduce regulatory burdens associated with home building are a positive step toward increasing attainable housing supply.”

🏘️ New home sales fall. Sales of newly built homes fell 17.6% in January to an annualized rate of 587,000 units.

New home sales figures come with a large margin of error. For more on this, read: Mathematical context can totally change the story 🧮

😬 This is the stuff pros are worried about. From BofA’s March Global Fund Manager Survey: “Asked for the biggest ‘tail risk,’ 37% of FMS investors said geopolitical conflict, up sharply from 14% a month ago. Last month, the biggest tail risk per FMS investors was “AI bubble” (now just 10%).”

Here’s how the biggest “tail risk” has evolved over the years.

For more on risks, read: Three observations about uncertainty in the markets 😟 and Two times when uncertainty seemed low and confidence was high 🌈

📈 Near-term GDP growth estimates are tracking positively. The Atlanta Fed’s GDPNow model sees real GDP growth rising at a 2.3% rate in Q1.

For more on GDP and the economy, read: It’s too ambiguous to just say ‘the economy’ 🤦🏻‍♂️ and Economic data can often be both ‘worse’ and ‘good’ 🌦️

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Putting it all together 📋

Earnings look bullish: The long-term outlook for the stock market remains favorable, bolstered by expectations for years of earnings growth. And earnings are the most important driver of stock prices.

Demand is positive: Demand for goods and services remains positive, supported by healthy consumer and business balance sheets. Personal spending activity remains at record levels. Core capex orders, which are a leading indicator of business spending, have been on the rise.

Growth is cooling: While the economy remains healthy, growth has normalized from much hotter levels earlier in the cycle. The economy is less “coiled” these days as major tailwinds like job openings and excess savings have faded. Job creation is hovering at near-zero. It has become harder to argue that growth is destiny.

Actions speak louder than words: We are in an odd period, given that the hard economic data decoupled from the soft sentiment-oriented data. Consumer and business sentiment has been relatively poor, even as tangible consumer and business activity continues to grow and trend at record levels. From an investor’s perspective, what matters is that the hard economic data continues to hold up.

Stocks are not the economy: There’s a case to be made that the U.S. stock market could outperform the U.S. economy in the near term, thanks largely to positive operating leverage. Since the pandemic, companies have aggressively adjusted their cost structures. This came with strategic layoffs and investment in new equipment, including hardware powered by AI. These moves are resulting in positive operating leverage, which means a modest amount of sales growth — in the cooling economy — is translating to robust earnings growth.

Mind the ever-present risks: Of course, we should not get complacent. There will always be risks to worry about, such as U.S. political uncertainty, geopolitical turmoil, energy price volatility, and cyber attacks. There are also the dreaded unknowns. Any of these risks can flare up and spark short-term volatility in the markets.

Investing is never a smooth ride: There’s also the harsh reality that economic recessions and bear markets are developments that all long-term investors should expect as they build wealth in the markets. Always keep your stock market seat belts fastened.

Think long-term: For now, there’s no reason to believe there’ll be a challenge that the economy and the markets won’t overcome. The long game remains undefeated, and it’s a streak that long-term investors can expect to continue.

For more on how the macro story is evolving, check out the previous review of the macro crosscurrents. »

Subscribe now

Key insights about the stock market 📈

Here’s a roundup of some of TKer’s most talked-about paid and free newsletters about the stock market. All of the headlines are hyperlinked to the archived pieces.

10 truths about the stock market 📈

The stock market can be an intimidating place: It’s real money on the line, there’s an overwhelming amount of information, and people have lost fortunes in it very quickly. But it’s also a place where thoughtful investors have long accumulated a lot of wealth. The primary difference between those two outlooks is related to misconceptions about the stock market that can lead people to make poor investment decisions.

The makeup of the S&P 500 is constantly changing 🔀

Passive investing is a concept usually associated with buying and holding a fund that tracks an index. And no passive investment strategy has attracted as much attention as buying an S&P 500 index fund. However, the S&P 500 — an index of 500 of the largest U.S. companies — is anything but a static set of 500 stocks.

The key driver of stock prices: Earnings💰

For investors, anything you can ever learn about a company matters only if it also tells you something about earnings. That’s because long-term moves in a stock can ultimately be explained by the underlying company’s earnings, expectations for earnings, and uncertainty about those expectations for earnings. Over time, the relationship between stock prices and earnings has a very tight statistical relationship.

Stomach-churning stock market sell-offs are normal🎢

Investors should always be mentally prepared for some big sell-offs in the stock market. It’s part of the deal when you invest in an asset class that is sensitive to the constant flow of good and bad news. Since 1950, the S&P 500 has seen an average annual max drawdown (i.e., the biggest intra-year sell-off) of 14%.

How the stock market performed around recessions 📉📈

Every recession in history was different. And the range of stock performance around them varied greatly. There are two things worth noting. First, recessions have always been accompanied by a significant drawdown in stock prices. Second, the stock market bottomed and inflected upward long before recessions ended.

In the stock market, time pays ⏳

Since 1928, the S&P 500 has generated a positive total return more than 89% of the time over all five-year periods. Those are pretty good odds. When you extend the timeframe to 20 years, you’ll see that there’s never been a period where the S&P 500 didn’t generate a positive return.

What a strong dollar means for stocks 👑

While a strong dollar may be great news for Americans vacationing abroad and U.S. businesses importing goods from overseas, it’s a headwind for multinational U.S.-based corporations doing business in non-U.S. markets.

Stanley Druckenmiller's No. 1 piece of advice for novice investors 🧐

…you don't want to buy them when earnings are great, because what are they doing when their earnings are great? They go out and expand capacity. Three or four years later, there's overcapacity and they're losing money. What about when they're losing money? Well, then they’ve stopped building capacity. So three or four years later, capacity will have shrunk and their profit margins will be way up. So, you always have to sort of imagine the world the way it's going to be in 18 to 24 months as opposed to now. If you buy it now, you're buying into every single fad every single moment. Whereas if you envision the future, you're trying to imagine how that might be reflected differently in security prices.

Peter Lynch made a remarkably prescient market observation in 1994 🎯

Some event will come out of left field, and the market will go down, or the market will go up. Volatility will occur. Markets will continue to have these ups and downs. … Basic corporate profits have grown about 8% a year historically. So, corporate profits double about every nine years. The stock market ought to double about every nine years… The next 500 points, the next 600 points — I don’t know which way they’ll go… They’ll double again in eight or nine years after that. Because profits go up 8% a year, and stocks will follow. That's all there is to it.

Warren Buffett's 'fourth law of motion' 📉

Long ago, Sir Isaac Newton gave us three laws of motion, which were the work of genius. But Sir Isaac’s talents didn’t extend to investing: He lost a bundle in the South Sea Bubble, explaining later, “I can calculate the movement of the stars, but not the madness of men.” If he had not been traumatized by this loss, Sir Isaac might well have gone on to discover the Fourth Law of Motion: For investors as a whole, returns decrease as motion increases.

Most pros can’t beat the market 🥊

According to S&P Dow Jones Indices (SPDJI), 79% of U.S. large-cap equity fund managers underperformed the S&P 500 in 2025. As you stretch the time horizon, the numbers get even more dismal. Over three years, 67% underperformed. Over 5 years, 89% underperformed. And over 20 years, 93% underperformed. This 2025 performance was the 16th consecutive year in which the majority of fund managers in this category have lagged the index.

Proof that 'past performance is no guarantee of future results' 📊

Even if you are a fund manager who generated industry-leading returns in one year, history says it’s an almost insurmountable task to stay on top consistently in subsequent years. According to S&P Dow Jones Indices, just 4.21% of all U.S. equity funds in the top half of performance during the first year were able to remain in the top during the four subsequent years. Only 2.42% of U.S. large-cap funds remained in the top half

SPDJI’s report also considered fund performance relative to their benchmarks over the past three years. Of 738 U.S. large-cap equity funds tracked by SPDJI, 50.68% beat the S&P 500 in 2022. Just 5.08% beat the S&P in the two years ending 2023. And only 2.14% of the funds beat the index over the three years ending in 2024.

The odds are stacked against stock pickers 🎲

Picking stocks in an attempt to beat market averages is an incredibly challenging and sometimes money-losing effort. Most professional stock pickers aren’t able to do this consistently. One of the reasons for this is that most stocks don’t deliver above-average returns. According to S&P Dow Jones Indices, only 19% of the stocks in the S&P 500 outperformed the average stock’s return from 2001 to 2025. Over this period, the average return on an S&P 500 stock was 452%, while the median stock rose by just 59%.

But I also know that everyone is very busy. Most of you can’t monitor every development affecting your portfolio. Even paid TKer subscribers don’t open every email, and the ones who do rarely read every line. (Don’t worry. I’m not offended.)

Here’s the issue: It’s easy to get drawn in by a variable like layoffs or oil prices — especially when they make front-page headlines — and jump to an incorrect conclusion.

So what are investors to do if they want to get a handle on things quickly?

TKer’s regular readers won’t be surprised to hear that there is one metric that can serve as a north star for stock market investors.

Read more

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I got mixed feedback from subscribers after I sent this brief note last Sunday night.

Some appreciated the stats that reminded them that volatility is always to be expected. Others noted that the recent pullback was far from nerve-racking and that the note was unnecessary.

I often say that I’m a long-term optimist, but a short-term cautious optimist. This is because while I’m bullish about being invested in the stock market, I’m well aware that the economy often goes into recession and stocks often go into extended downturns. This is just part of the deal.

And believe it or not, I consider myself a relatively anxious person. When the VIX jumps and stock prices drop, my first thought is always, “How much lower could prices go, and should I take some risk off?” I’ve been this way for as long as I can remember.

But with experience and education, I’ve come to understand that it’s okay to have emotional reactions — just don’t start trading on them.

The best defense against making a mistake with your investments is education. This means understanding that long-term investing comes with frequent single-digit pullbacks, many 10%+ corrections, and occasional 20%+ bear markets. Furthermore, it means understanding that it’s difficult to trade these moves in a way that’s more profitable than just buying and holding.

Indeed, managing expectations is a critical aspect of managing your money. It’s why I say that you should always keep your stock market seat belts fastened.

So, what does all of this mean in today’s context?

Well, we can’t rule out the possibility that we’ve seen the worst of the geopolitical and oil-related stock market pullback.

But we also have to accept that it could get much worse.

Since 1980, the S&P 500 has experienced an average intra-year max drawdown (i.e., a decline from its high) of 14.2%. In midterm election years, that stat climbs to 18%. We’re currently down 5% from the high.

To make matters worse, the recent spike in energy prices is coming as many economic metrics have cooled. Five of the last nine monthly employment reports showed job losses. Household finances, while generally healthy, have been deteriorating for five years. Real personal consumption continues to grow, but the growth rate has flattened out.

The Iran war and spike in gas prices are already weighing on sentiment. From the University of Michigan’s March Surveys of Consumers: “Consumer sentiment dipped about 2%, reaching its lowest reading of the year. Interviews completed prior to the military action in Iran showed an improvement in sentiment from last month, but lower readings seen during the nine days thereafter completely erased those initial gains. Gasoline prices have exerted the most immediate impact felt by consumers, though the magnitude of pass-through to other prices remains highly uncertain. A broad swath of consumers across incomes, age, and political affiliation all reported declines in expectations for their personal finances, down 7.5% nationally.“

All of this is to say that it has become harder to argue that growth is destiny. I’m not saying that we’re doomed for a recession. But the risk is arguably elevated. And historically, the median S&P 500 price decline around recessions is 24%.

Let’s take a deep breath 😮‍💨

If you’re exposed to the stock market and these stats make you nervous, then you and I are in the same boat.

The question is how you’ll behave when the market volatility picks up. Because if you can’t stomach volatility, then maybe you shouldn’t be in the market.

All of the historical data teaches us that big sell-offs are what investing is all about. And the path to long-term riches is riddled with stomach-churning volatility.

And to be clear, just because things could get worse before they get better doesn’t mean they will.

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Related from TKer:

• It’s OK to have emotions — just don’t let them near your stock portfolio 📉

• Stocks usually look past geopolitical events, but they shouldn’t be ignored 🫣

• BofA: ‘Q: Is it better to sell early or late? A: Neither.’ ⏰

• Keep your stock market seat belts fastened 🎢

• Our love-hate relationship with rising oil prices in charts 💔🛢️📊

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Mark your calendar 🗓️🍻

I’ll be on “Facts Vs Feelings: Social Hour” with Carson Group’s Ryan Detrick and Sonu Varghese. I’ll be joined by CappThesis’ Frank Cappelleri. The live program will air on YouTube on Friday, March 27, at 3 pm ET.

👯 I’ve been friends with J.C. Parets for 15 years. Maybe more. And for that entire period, we’ve had major fundamental — or technical — disagreements about what moves markets. He’s a CMT. I’m a CFA. We are oddly matched.

On Friday, I caught up with J.C. and the Stock Market TV crew. We reflected on how financial market news and commentary have evolved over the years. I even talked a little about how I got into this business. Check it out on YouTube! Our convo starts at the 30-minute mark. (LINK)

Review of the macro crosscurrents 🔀

There were several notable data points and macroeconomic developments since our last review:

Note: Much of the monthly economic data below is derived from surveys conducted before the recent spike in energy prices. The weekly economic data is more current.

⛽️ Gas prices jump. From AAA: “Spring Break season is here as the national average for a gallon of regular gasoline jumped nearly 35 cents since last week. Current prices are similar to the spring of 2024. Gasoline demand increases this time of year as the weather warms up and more drivers hit the road. Crude oil prices play a major role in what drivers pay at the pump, and prices have surpassed the $100/barrel mark multiple times in recent days. To help offset rising prices, the U.S. announced it will release 172 million barrels of oil from its strategic reserves over four months. The move is part of a broader effort by the International Energy Agency to release a total of 400 million barrels of oil, the largest emergency release in its history.”

For more on energy prices, read: Our love-hate relationship with rising oil prices in charts 💔🛢️📊

🎈Consumer price inflation appears to cool. The Consumer Price Index (CPI) rose 2.4% year over year in February, unchanged from the prior month. Adjusted for food and energy prices, core CPI was up 2.5%

On a month-over-month basis, CPI was up 0.3%, and core CPI increased 0.2%. If you annualize the three-month trend in the monthly figures — a reflection of the short-term trend in prices — core CPI climbed 3.0%.

🎈 Fed’s preferred inflation measure could be cooler. The personal consumption expenditures (PCE) price index in January was up 2.8% from a year ago. The core PCE price index — the Federal Reserve’s preferred measure of inflation — was up 3.1% during the month, up from December’s 3.9% rate.

On a month-over-month basis, the core PCE price index was up 0.36%. If you annualize the rolling three-month and six-month figures — a reflection of the near-term trend in prices — the core PCE price index was up 3.7% and 3.1%, respectively.

While inflation rates remain above the Federal Reserve’s 2% target, they are down considerably from peak levels just a few years ago.

For more on the Fed’s impact on markets, read: There’s a more important force than the Fed driving the stock market 💪

🎈 Inflation expectations were mostly unchanged. From the New York Fed’s February Survey of Consumer Expectations: “Median inflation expectations in February declined by 0.1 percentage point at the one-year-ahead horizon to 3.0% and remained steady at the three-year and five-year-ahead horizons at 3.0%.”

💼 New unemployment insurance claims, total ongoing claims remain low. Initial claims for unemployment benefits declined to 213,000 during the week ending Mar. 7, down from 214,000 the week prior. This metric remains at levels historically associated with economic growth.

Insured unemployment, which captures those who continue to claim unemployment benefits, declined to 1.85 million during the week ending Feb. 28.

For more on the labor market, read: The next couple of years for the job market could be tough 🫤

💼 Job openings tick up. According to the BLS’s Job Openings and Labor Turnover Survey, employers had 6.95 million job openings in January, up from 6.55 million in December. This metric is near its lowest point since December 2020.

During the month, there were 7.37 million unemployed people — meaning there were 0.94 job openings per unemployed person. This remains one of the most straightforward indicators of labor demand. This metric has returned to prepandemic levels.

For more on job openings, read: Were there really twice as many job openings as unemployed people? 🤨 and Revisiting the key chart to watch amid the Fed’s war on inflation 📈

👍 Layoffs remain depressed, hiring remains firm. Employers laid off 1.63 million people in January. While challenging for the people affected, this figure represents just 1.0% of total employment. This metric remains slightly below prepandemic levels.

For more on layoffs, read: Mathematical context can totally change the story 🧮

Hiring activity remains well above layoff activity. During the month, employers hired 5.29 million people.

That said, the hiring rate — the number of hires as a percentage of the employed workforce — has been trending lower, which could be a sign of trouble to come in the labor market.

For more on why this metric matters, read: The hiring situation 🧩

🤔 People are quitting less. In January, 3.14 million workers quit their jobs. This represents 2.0% of the workforce. The rate continues to trend below prepandemic levels.

A low quits rate could mean a number of things: more people are satisfied with their job, workers have fewer outside job opportunities, wage growth is cooling, or productivity will improve as fewer people are entering new, unfamiliar roles.

For more on this dynamic, read: The crummy labor market is yielding a ‘tenure dividend’ for corporations 💰

💳 Card spending data is holding up. From JPMorgan: “As of 06 Mar 2026, our Chase Consumer Card spending data (unadjusted) was 6.0% above the same day last year. Based on the Chase Consumer Card data through 06 Mar 2026, our estimate of the US Census February control measure of retail sales m/m is 0.56%.”

From BofA: “Spending growth was very strong in February, according to Bank of America internal credit and debit card data. The year-over-year (YoY) growth rate rose to 3.2%, the highest in over three years. And on a seasonally-adjusted basis, card spending rose a strong 0.9% month-over-month (MoM).“

Consumer spending data has looked a lot better than consumer sentiment readings. For more on this contradiction, read: We’re taking that vacation whether we like it or not 🛫 and Household finances are both ‘worse’ and ‘good’ 🌦️

🛍️ Consumer spending ticks higher. According to BEA data, personal consumption expenditures increased 0.4% month-over-month in January to an annual rate of $21.54 trillion, an all-time high.

Adjusted for inflation, real personal consumption expenditures increased 0.1% from the prior month to another all-time high.

👎 Small business optimism ticks lower. The NFIB’s Small Business Optimism Index declined to 98.8 in February from 99.3 in January. From the NFIB: “Although optimism declined slightly, small businesses report feeling more certain in February as they look toward the coming months. High sales and increased profits made February a more positive month for many owners, but competition from large businesses is putting stress on Main Street firms as they navigate the current economic climate.”

Keep in mind that during times of perceived stress, soft survey data tends to be more exaggerated than actual hard data.

For more on this, read: What businesses do > what businesses say 🙊 and 4 sometimes-conflicting ways I’m thinking about the economy 😬😞😎🙃

🏚 Home sales ticked higher. Sales of previously owned homes climbed 1.7% in February to an annualized rate of 4.09 million units. From NAR chief economist Lawrence Yun: “Housing affordability is improving, and consumers are responding. Still, there is a long way to go to return to pre-pandemic levels of transaction activity. There are more than 6 million more jobs than in 2019, yet home sales per year are down by one million.”

Prices for previously owned homes rose from last month and year-ago levels. From the NAR: “The median existing-home sales price for all housing types in February was $398,000, up 0.3% from one year ago ($396,800) – the 32nd consecutive month of year-over-year price increases.”

From Yun: “Inventory is growing, but sluggishly. If demand picks up notably in the coming months and outpaces supply growth, home prices will inevitably rise. That is why increasing supply is so important to help limit home price growth, improve housing affordability, and boost transactions.”

🔨 New home construction starts rise. Housing starts rose 7.2%% in January to an annualized rate of 1.49 million units, according to the Census Bureau. Building permits declined 5.4% to an annualized rate of 1.38 million units.

🏠 Mortgage rates rise. According to Freddie Mac, the average 30-year fixed-rate mortgage rose to 6.11%, up from 6.00% last week: “Despite the modest uptick, buyers are responding to rates in this range, with existing-home sales increasing 1.7% in February. Purchase applications also increased this week, a welcome sign as buyers enter spring homebuying season with rates down more than half a percentage point compared to the same time last year.”

As of Q4, there were 148.7 million housing units in the U.S., of which 87.8 million were owner-occupied and about 40% were mortgage-free. Of those carrying mortgage debt, almost all have fixed-rate mortgages, and most of those mortgages have rates that were locked in before rates surged from 2021 lows. All of this is to say: Most homeowners are not particularly sensitive to the small weekly movements in home prices or mortgage rates.

For more on mortgages and home prices, read: Why home prices and rents are creating all sorts of confusion about inflation 😖

🏭 Business investment activity holds at record levels. Orders for nondefense capital goods excluding aircraft — a.k.a. core capex or business investment — declined marginally from its December peak to $79.27 billion in January.

Core capex orders are a leading indicator, meaning they foretell economic activity down the road.

📈 Near-term GDP growth estimates are tracking positively. The Atlanta Fed’s GDPNow model sees real GDP growth rising at a 2.7% rate in Q1.

For more on GDP and the economy, read: It’s too ambiguous to just say ‘the economy’ 🤦🏻‍♂️ and Economic data can often be both ‘worse’ and ‘good’ 🌦️

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Putting it all together 📋

Earnings look bullish: The long-term outlook for the stock market remains favorable, bolstered by expectations for years of earnings growth. And earnings are the most important driver of stock prices.

Demand is positive: Demand for goods and services remains positive, supported by healthy consumer and business balance sheets. Job creation has cooled, hovering at near-zero. But the Federal Reserve — having resolved the inflation crisis — shifted its focus toward supporting the labor market.

Growth is cooling: While the economy remains healthy, growth has normalized from much hotter levels earlier in the cycle. The economy is less “coiled” these days as major tailwinds like excess job openings and core capex orders have faded. It has become harder to argue that growth is destiny.

Actions speak louder than words: We are in an odd period, given that the hard economic data decoupled from the soft sentiment-oriented data. Consumer and business sentiment has been relatively poor, even as tangible consumer and business activity continues to grow and trend at record levels. From an investor’s perspective, what matters is that the hard economic data continues to hold up.

Stocks are not the economy: There’s a case to be made that the U.S. stock market could outperform the U.S. economy in the near term, thanks largely to positive operating leverage. Since the pandemic, companies have aggressively adjusted their cost structures. This came with strategic layoffs and investment in new equipment, including hardware powered by AI. These moves are resulting in positive operating leverage, which means a modest amount of sales growth — in the cooling economy — is translating to robust earnings growth.

Mind the ever-present risks: Of course, we should not get complacent. There will always be risks to worry about, such as U.S. political uncertainty, geopolitical turmoil, energy price volatility, and cyber attacks. There are also the dreaded unknowns. Any of these risks can flare up and spark short-term volatility in the markets.

Investing is never a smooth ride: There’s also the harsh reality that economic recessions and bear markets are developments that all long-term investors should expect as they build wealth in the markets. Always keep your stock market seat belts fastened.

Think long-term: For now, there’s no reason to believe there’ll be a challenge that the economy and the markets won’t overcome. The long game remains undefeated, and it’s a streak that long-term investors can expect to continue.

For more on how the macro story is evolving, check out the previous review of the macro crosscurrents. »

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Key insights about the stock market 📈

Here’s a roundup of some of TKer’s most talked-about paid and free newsletters about the stock market. All of the headlines are hyperlinked to the archived pieces.

10 truths about the stock market 📈

The stock market can be an intimidating place: It’s real money on the line, there’s an overwhelming amount of information, and people have lost fortunes in it very quickly. But it’s also a place where thoughtful investors have long accumulated a lot of wealth. The primary difference between those two outlooks is related to misconceptions about the stock market that can lead people to make poor investment decisions.

The makeup of the S&P 500 is constantly changing 🔀

Passive investing is a concept usually associated with buying and holding a fund that tracks an index. And no passive investment strategy has attracted as much attention as buying an S&P 500 index fund. However, the S&P 500 — an index of 500 of the largest U.S. companies — is anything but a static set of 500 stocks.

The key driver of stock prices: Earnings💰

For investors, anything you can ever learn about a company matters only if it also tells you something about earnings. That’s because long-term moves in a stock can ultimately be explained by the underlying company’s earnings, expectations for earnings, and uncertainty about those expectations for earnings. Over time, the relationship between stock prices and earnings has a very tight statistical relationship.

Stomach-churning stock market sell-offs are normal🎢

Investors should always be mentally prepared for some big sell-offs in the stock market. It’s part of the deal when you invest in an asset class that is sensitive to the constant flow of good and bad news. Since 1950, the S&P 500 has seen an average annual max drawdown (i.e., the biggest intra-year sell-off) of 14%.

How the stock market performed around recessions 📉📈

Every recession in history was different. And the range of stock performance around them varied greatly. There are two things worth noting. First, recessions have always been accompanied by a significant drawdown in stock prices. Second, the stock market bottomed and inflected upward long before recessions ended.

In the stock market, time pays ⏳

Since 1928, the S&P 500 has generated a positive total return more than 89% of the time over all five-year periods. Those are pretty good odds. When you extend the timeframe to 20 years, you’ll see that there’s never been a period where the S&P 500 didn’t generate a positive return.

What a strong dollar means for stocks 👑

While a strong dollar may be great news for Americans vacationing abroad and U.S. businesses importing goods from overseas, it’s a headwind for multinational U.S.-based corporations doing business in non-U.S. markets.

Stanley Druckenmiller's No. 1 piece of advice for novice investors 🧐

…you don't want to buy them when earnings are great, because what are they doing when their earnings are great? They go out and expand capacity. Three or four years later, there's overcapacity and they're losing money. What about when they're losing money? Well, then they’ve stopped building capacity. So three or four years later, capacity will have shrunk and their profit margins will be way up. So, you always have to sort of imagine the world the way it's going to be in 18 to 24 months as opposed to now. If you buy it now, you're buying into every single fad every single moment. Whereas if you envision the future, you're trying to imagine how that might be reflected differently in security prices.

Peter Lynch made a remarkably prescient market observation in 1994 🎯

Some event will come out of left field, and the market will go down, or the market will go up. Volatility will occur. Markets will continue to have these ups and downs. … Basic corporate profits have grown about 8% a year historically. So, corporate profits double about every nine years. The stock market ought to double about every nine years… The next 500 points, the next 600 points — I don’t know which way they’ll go… They’ll double again in eight or nine years after that. Because profits go up 8% a year, and stocks will follow. That's all there is to it.

Warren Buffett's 'fourth law of motion' 📉

Long ago, Sir Isaac Newton gave us three laws of motion, which were the work of genius. But Sir Isaac’s talents didn’t extend to investing: He lost a bundle in the South Sea Bubble, explaining later, “I can calculate the movement of the stars, but not the madness of men.” If he had not been traumatized by this loss, Sir Isaac might well have gone on to discover the Fourth Law of Motion: For investors as a whole, returns decrease as motion increases.

Most pros can’t beat the market 🥊

According to S&P Dow Jones Indices (SPDJI), 79% of U.S. large-cap equity fund managers underperformed the S&P 500 in 2025. As you stretch the time horizon, the numbers get even more dismal. Over three years, 67% underperformed. Over 5 years, 89% underperformed. And over 20 years, 93% underperformed. This 2025 performance was the 16th consecutive year in which the majority of fund managers in this category have lagged the index.

Proof that 'past performance is no guarantee of future results' 📊

Even if you are a fund manager who generated industry-leading returns in one year, history says it’s an almost insurmountable task to stay on top consistently in subsequent years. According to S&P Dow Jones Indices, just 4.21% of all U.S. equity funds in the top half of performance during the first year were able to remain in the top during the four subsequent years. Only 2.42% of U.S. large-cap funds remained in the top half

SPDJI’s report also considered fund performance relative to their benchmarks over the past three years. Of 738 U.S. large-cap equity funds tracked by SPDJI, 50.68% beat the S&P 500 in 2022. Just 5.08% beat the S&P in the two years ending 2023. And only 2.14% of the funds beat the index over the three years ending in 2024.

The odds are stacked against stock pickers 🎲

Picking stocks in an attempt to beat market averages is an incredibly challenging and sometimes money-losing effort. Most professional stock pickers aren’t able to do this consistently. One of the reasons for this is that most stocks don’t deliver above-average returns. According to S&P Dow Jones Indices, only 19% of the stocks in the S&P 500 outperformed the average stock’s return from 2001 to 2025. Over this period, the average return on an S&P 500 stock was 452%, while the median stock rose by just 59%.

On Monday, prices for WTI crude — the benchmark for oil sold in the U.S. — and Brent crude — the benchmark for oil sold in Europe — both briefly spiked to nearly $120 a barrel, the highest levels in years, before somewhat receding over the week.

It’s not rocket science to conclude that higher crude prices are bad news for consumers as they mean higher prices for refined oil products, including gasoline, diesel, jet fuel, and heating oil. As of Friday, the national average price of regular unleaded gasoline was $3.63 a gallon, up from $2.94 a month ago, according to data from AAA.

And this isn’t just about higher prices at the pump. Oil is used to make plastic, rubber, fertilizer, synthetic fiber, and many other goods. Businesses use a lot of energy to manufacture and transport products of all kinds across the country and the world, which means the prices of those goods may rise to offset rising costs.

It doesn’t help that these higher costs are coming as many economic metrics have cooled significantly since the last time we saw crude prices this high.

“Underlying income and consumption have been slowing to begin with; we’re layering an energy shock on top of this,” Renaissance Macro’s Neil Dutta wrote on Friday.

The big question right now is how long oil prices will remain elevated. Even if they do return to the lower levels seen earlier this year, do Middle East tensions threaten future price spikes? Heightened uncertainty about energy prices, even when lower, makes it challenging for businesses to plan ahead.

I don’t know the answers to these timeline-related questions. Experts have presented a wide range of scenarios. While the stock market has tended to look past geopolitical events, the trajectory of wars isn’t uniform or predictable.

I do know that our relationship with energy has changed over the years.

In fact, President Trump reminded us of this when he recently said, “[W]hen oil prices go up, we make a lot of money.”

So, while many of us hate rising oil prices, some love them.

Below are eight charts that help us better understand how oil prices affect the economy and the businesses underlying the stock market.

Read more

On Sept. 20, 2010, the National Bureau of Economic Research (NBER) announced that the Great Recession was not only over, but it had also actually ended in June 2009.

In other words, the U.S. economy was more than a year into its recovery when the NBER dated the cycle.

If you had asked me about that call in late 2010, I would’ve told you the NBER got it wrong, and the recession was ongoing. But I would’ve been wrong.

My economic crisis was just getting started 📉

Read more

I was packing for my trip to Miami for FutureProof Citywide when I got a whole bunch of notifications on my phone.

Oil prices are surging, Asian markets are tumbling, and U.S. futures are pointing to a rough day of trading on Monday.

I’ve written a bit about geopolitics, oil prices, and market volatility. (Click those hyperlinks!) I’ll have more to say soon.

But in the meantime, let me share a passage from the last post I wrote for Business Insider back in February 2016 (Link):

Every major sell-off in history has been accompanied by a mix of economic concerns, monetary policy shifts, geopolitical tensions, or some other source of consternation that might make a rational person demand a higher premium for putting their capital at risk. The details are different each time. But structurally, it’s generally the same story: it’s risky out there.

Amid all this, one pattern has stood the test of time: stocks will go down a lot, but then they’ll go up a lot more.

This is not to totally downplay what’s going on in markets today. However, it’s funny how markets often rhyme.

On that note, I point you to a newsletter I sent out almost exactly a year ago. It’s got some timely stats. I’ve reprinted it below for your convenience.

Sam

I’m nervous, too! 🤮

MAR 10, 2025

Earlier today, I checked the balances on my rollover IRA and self-employed 401(K) plans.

I wish I hadn’t done that!

Sure, I follow the swings in the stock market literally every day. And I know history (and TKer Stock Market Truth No. 2) tells us big sell-offs are normal.

But what’s also normal is your stomach dropping after you see the dollar-denominated short-term paper losses in your portfolio, which you’ve been funding regularly for two decades.

Fortunately (thanks to TKer’s paid subscribers), I spend all day looking at the data. And even if I don’t have the precise stats off the top of my head, I know that:

• One-day declines of 1%-2% happen frequently.

• One-day sell-offs of more than 3% aren’t that unusual.

• Almost half of all days are down days.

• Extended pullbacks of 5% or greater happen multiple times an average year.

• The average year sees a max drawdown of 14%.

• Bear markets happen.

• AND IMPORTANTLY, timing the market is incredibly difficult to do in a way that beats holding through the volatility.

Yes, this sell-off can get worse. Also yes, it’s possible the market inflects upward from here.

But in the context of a thoughtful investment strategy that aims to capitalize on the long-term return opportunity offered by the stock market, trading in and out of short-term volatility risks doing irreversible damage to your upside. Or as Howard Marks once eloquently wrote:

Reducing market exposure through ill-conceived selling — and thus failing to participate fully in the markets’ positive long-term trend — is a cardinal sin in investing. That’s even more true of selling without reason things that have fallen, turning negative fluctuations into permanent losses and missing out on the miracle of long-term compounding.

As all the historical data teaches us, this big sell-off is what stock market investing is all about. The path to long-term riches in the stock market is riddled with stomach-churning volatility.

It’s why smart people agree that time in the market beats timing the market.

That said, it’s OK to have emotions. Just don’t let them near your stock portfolio.

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More from TKer:

• It's OK to have emotions — just don't let them near your stock portfolio 📉

• BofA: 'Q: Is it better to sell early or late? A: Neither.' ⏰

• Why the stock market gets so much negative news coverage 📺

• Smart people agree that the best investing wisdom shares a common theme 🧐

• In the stock market, time pays ⏳

• Stomach-churning stock market sell-offs are normal🎢

• 10 truths about the stock market 📈

📉The stock market fell last week, with the S&P 500 shedding 2.0% to end at 6,740.02. The index is now down 3.4% from its Jan. 27 closing high of 6,978.60 and down 1.5% year-to-date. For more on the stock market, read: 2026 could be crappy for the stock market, and that would be normal 📉

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One of my favorite research reports is UBS’s “Global Investment Returns Yearbook.”

The 310-page encyclopedic review of historical financial market data is authored by Professors Paul Marsh, Mike Staunton, and Elroy Dimson, who have been updating the compendium annually since 2000. It builds off of work they published in the popular “Triumph of the Optimists.”

The authors do a nice job of applying analytical rigor to data often taken at face value. Last year, I wrote about how they challenged the assumptions that stock market returns were mean-reverting. Read more here.

On a Tuesday media call, Dimson discussed the ups and downs of past experiences with emerging world-changing technologies and the bubbles that often accompanied them.

“New technologies have transformed the world, but they’re typically disruptive,” he said. “Rail disrupted canals. Rail was disrupted by trucking and by air. People were very worried about an AI bubble. … The current concern has switched over to FOBO — fear of becoming obsolete — due to AI. And that’s what new technologies do. They disrupt.”

These disruptive technologies don’t follow the same paths, which should have investors thinking carefully before going all-in on the AI hyperscalers or avoiding them outright.

“Some technologies have been good, long-term investments,” Dimson added. “Others have not. It would not have been wise in hindsight to have invested in canals in Britain in the late 18th and early 19th centuries. They were disrupted by rail, and they lost a great deal of money. So some technologies have been great. Others have not.”

At this point, it’s hard to imagine something interrupting the current trajectory of AI. But trains were once hard to imagine, too.

Industries will go extinct, and new ones will emerge 📉📈

One of my favorite visuals from the report is the one below showing U.S. stock market industry weightings in 1900 versus the present.

It reminds us that the stock market’s long-term growth has come with massive changes beneath the surface.

“Of the U.S. firms listed in 1900, some 80% of their value was in industries that are small or extinct today, including railroads, textiles, iron, coal, and steel,” the authors wrote. “Meanwhile, 70% of today’s companies in the U.S. come from industries that were small or non-existent in 1900. Technology and healthcare were almost totally absent from stock markets in 1900.”

That’s the markets and the economy for you. Industries rise and fall. Jobs come and go. And yet the markets and the economy always manage to come out on top.

A surprising outcome of the railway bubble 🚂

I often cite rail as a great example of a once-dominant industry that contracted as a share of the stock market even as the overall market rose.

But the authors pointed out something that surprised me: Declining industries can still offer attractive long-term returns.

“Investors often associate new technologies with ‘bubbles’ and periods of subsequent under-performance,” they wrote. “However … railroads, despite being a declining industry over the period of the study (falling from 63% of the U.S. market in 1900 to less than 1% today), actually outperformed both the U.S. stock market and their newer technology competitors since 1900.” [Dimson said trucking was added to the chart in 1926, and airlines were added in 1932]

“So there is money to be made in declining industries,” Dimson said. “We should not ever write them off.”

The UBS authors also noted that the tech industry responsible for the dotcom bubble went on to outperform the market even after that bubble burst.

“New technology does not mean you’re going to have a bubble for sure,” Dimson said on the media call. “And even if there is a bubble, that can still be a good long-term investment, as we’ve seen with technology.”

The big picture 🖼️

It would be consistent with history if AI leads to massive changes in the makeup of the stock market. In the process, today’s leaders could become tomorrow’s laggards.

And all of this could happen even as the overall market continues to move higher.

Furthermore, it’s possible that stocks and sectors that appear to be in a bubble continue to generate strong returns in the years to come.

And perhaps industries being most disrupted by AI will continue in some form. After all, we still rely on canals and railways.

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Related from TKer:

• Mean reversion in the stock market is an ‘optical illusion’ 😵‍💫

• What happened after 1965 when 10 dominant stocks fell behind ☎️🚗🛢️

• We’re learning more about who’s winning and losing in the AI revolution 🤖

• What comes after the bubble could be electrifying ⚡️

• How do I think of today’s AI craze relative to past bubbles? 🫧🤖🚂🚗

• The next couple of years for the job market could be tough 🫤

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Review of the macro crosscurrents 🔀

There were several notable data points and macroeconomic developments since our last review:

💼 Jobs were lost. According to the BLS’s Employment Situation report released on Friday, U.S. employers shed 92,000 jobs in February. This metric has been negative in five of the last nine months.

Total payroll employment declined to 158.5 million jobs in February, down marginally from a record high.

The unemployment rate — that is, the number of workers who identify as unemployed as a percentage of the civilian labor force — rose to 4.4% in February, near the highest level since October 2021.

The labor market clearly isn’t as hot as it used to be.

For more on the labor market, read: About that ugly jobs report 📉 and We’re at an economic tipping point ⚖️

💸 Wage growth picks up. Average hourly earnings rose by 0.4% month-over-month in February. On a year-over-year basis, February’s wages were up 3.8%.

💰 Job switchers still get better pay. According to ADP, annual pay in February for people who changed jobs was up 6.3% from a year ago. That better-pay gap has been cooling a bit in recent months. For those who stayed at their job, pay was up 4.5%, about what it’s been for the past year.

For more on why policymakers are watching wage growth, read: Revisiting the key chart to watch amid the Fed’s war on inflation 📈

💼 New unemployment insurance claims, total ongoing claims remain low. Initial claims for unemployment benefits stood at 213,000 during the week ending Feb. 28, unchanged from the week prior. This metric remains at levels historically associated with economic growth.

Insured unemployment, which captures those who continue to claim unemployment benefits, ticked up to 1.868 million during the week ending Feb. 21.

For more on the labor market, read: The next couple of years for the job market could be tough 🫤

💪 Labor productivity increases. From the BLS: “Nonfarm business sector labor productivity increased 2.8 percent in the fourth quarter of 2025 … as output increased 2.6% and hours worked decreased 0.2%. (All quarterly percent changes in this release are seasonally adjusted annualized rates.) From fourth quarter 2024 to fourth quarter 2025, nonfarm business sector labor productivity increased 2.8%.”

For more, read: Promising signs for productivity ⚙️ and The crummy labor market is yielding a ‘tenure dividend’ for corporations 💰

👎 Consumer vibes remain in the dumps. The Conference Board’s Consumer Confidence Index increased 2.2 points in February to 91.2, but continues to trend poorly. From the firm: “The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—decreased by 1.8 points to 120.0 in February. The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—rose by 4.8 points to 72.0. The cutoff for preliminary results was February 17, 2026.“

More from the report: “Among demographic groups, confidence on a six-month moving average basis ticked upward in February for consumers under age 35, which continued to be the most optimistic group. Confidence edged down for respondents 35 and older. Relatedly, on a six-month moving average basis, confidence among Generation Z rose, consistent with soundings from the under-age 35 group, but fell among other generations. By income, confidence on a six-month moving average basis continued to dip for most brackets. Consumer confidence by political affiliation revived among Republican and Independent voters in February after a dip in January, while Democrats were less optimistic.”

Relatively weak consumer sentiment readings appear to contradict relatively strong consumer spending data. For more on this contradiction, read: What consumers do > what consumers say 🙊 and We’re taking that vacation whether we like it or not 🛫

⛽️ Gas prices jump. From AAA: “The national average for a gallon of regular gasoline jumped nearly 27 cents since last week to $3.25. The conflict in the Middle East has sent crude oil prices higher to the mid $70/barrel range. The recent increase puts the national average at the same price as it was in early April of 2025. Springtime typically sees higher gas prices as gasoline demand rises and summer-blend gasoline production begins. The last time the national average made a similar weekly jump was back in March of 2022 during the start of the Russia/Ukraine conflict.”

For more on energy prices, read: Higher oil prices meant something different in the past 🛢️

🛍️ Retail shopping activity declines. Retail sales in January declined 0.2% to $733.5 billion.

Results were mixed across retail categories.

💳 Card spending data is holding up. From JPMorgan: “As of 27 Feb 2026, our Chase Consumer Card spending data (unadjusted) was 3.1% above the same day last year. Based on the Chase Consumer Card data through 27 Feb 2026, our estimate of the US Census February control measure of retail sales m/m is 0.53%.“

From BofA: “Total card spending per HH was up 1.8% y/y in the week ending Feb 28, according to BAC aggregated credit and debit card data. The late‑Feb y/y spending slowdown was driven by the Northeast, where spending fell sharply amid the second snowstorm. In the week ending Feb 28, y/y spending growth declined the most in transit since the previous week.“

Consumer spending data has looked a lot better than consumer sentiment readings. For more on this contradiction, read: We’re taking that vacation whether we like it or not 🛫 and Household finances are both ‘worse’ and ‘good’ 🌦️

🏠 Mortgage rates hold. According to Freddie Mac, the average 30-year fixed-rate mortgage rose to 6.00%, almost flat compared to 5.98% last week: “Mortgage rates held steady at 6% this week, hovering near their lowest level since 2022. In fact, rates are down nearly a full percentage point from this time in 2024, spurring activity from buyers, sellers and owners. As a result, refinance activity is up, and purchase applications are ahead of last year’s pace.”

As of Q4, there were 148.7 million housing units in the U.S., of which 87.8 million were owner-occupied and about 40% were mortgage-free. Of those carrying mortgage debt, almost all have fixed-rate mortgages, and most of those mortgages have rates that were locked in before rates surged from 2021 lows. All of this is to say: Most homeowners are not particularly sensitive to the small weekly movements in home prices or mortgage rates.

For more on mortgages and home prices, read: Why home prices and rents are creating all sorts of confusion about inflation 😖

🏭 Business investment activity rises. Orders for nondefense capital goods excluding aircraft — a.k.a. core capex or business investment — increased 0.8% to a record-high $79.24 billion in December.

Core capex orders are a leading indicator, meaning they foretell economic activity down the road.

🔨 Construction spending ticked higher. Construction spending increased 0.3% to an annual rate of $2.168 trillion in December.

While we’re on the subject of construction, the Big Tech hyperscalers have committed a fortune to building massive datacenters to support AI. For more on this, read: Struggling to make sense of Big Tech’s $600 billion bet on AI? Here’s a metric to watch 📋

🤷 Manufacturing activity surveys signal growth, but also caution. From S&P Global’s February U.S. Manufacturing PMI: “February saw US manufacturers report the weakest expansion since last July, in a further sign that the overall pace of economic growth has moderated in recent months. Production growth slowed in response to a near-stalling of orders from customers, with exports falling especially sharply. Factory payroll growth was also barely changed, as concern over order book health caused a growing reticence to add to workforce numbers.”

Similarly, the ISM’s February Manufacturing PMI signaled cooling growth.

🤷 Services activity surveys signal growth, but also caution. From S&P Global’s February U.S. Services PMI: “Slowing demand growth from customers both at home and across export markets has been compounded by adverse weather in many states, resulting in the smallest rise in service sector activity for ten months.”

Meanwhile, the ISM’s February Services PMI signaled accelerating growth.

Keep in mind that during times of perceived stress, soft survey data tends to be more exaggerated than actual hard data.

For more on this, read: What businesses do > what businesses say 🙊

📈 Near-term GDP growth estimates are tracking positively. The Atlanta Fed’s GDPNow model sees real GDP growth rising at a 2.1% rate in Q1.

For more on GDP and the economy, read: It’s too ambiguous to just say ‘the economy’ 🤦🏻‍♂️ and Economic data can often be both ‘worse’ and ‘good’ 🌦️

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Putting it all together 📋

Earnings look bullish: The long-term outlook for the stock market remains favorable, bolstered by expectations for years of earnings growth. And earnings are the most important driver of stock prices.

Demand is positive: Demand for goods and services remains positive, supported by healthy consumer and business balance sheets. Job creation, although cooling, appears to be modestly positive, and the Federal Reserve — having resolved the inflation crisis — shifted its focus toward supporting the labor market.

But growth is cooling: While the economy remains healthy, growth has normalized from much hotter levels earlier in the cycle. The economy is less “coiled” these days as major tailwinds like excess job openings and core capex orders have faded. It has become harder to argue that growth is destiny.

Actions speak louder than words: We are in an odd period, given that the hard economic data decoupled from the soft sentiment-oriented data. Consumer and business sentiment has been relatively poor, even as tangible consumer and business activity continues to grow and trend at record levels. From an investor’s perspective, what matters is that the hard economic data continues to hold up.

Stocks are not the economy: There’s a case to be made that the U.S. stock market could outperform the U.S. economy in the near term, thanks largely to positive operating leverage. Since the pandemic, companies have aggressively adjusted their cost structures. This came with strategic layoffs and investment in new equipment, including hardware powered by AI. These moves are resulting in positive operating leverage, which means a modest amount of sales growth — in the cooling economy — is translating to robust earnings growth.

Mind the ever-present risks: Of course, we should not get complacent. There will always be risks to worry about, such as U.S. political uncertainty, geopolitical turmoil, energy price volatility, and cyber attacks. There are also the dreaded unknowns. Any of these risks can flare up and spark short-term volatility in the markets.

Investing is never a smooth ride: There’s also the harsh reality that economic recessions and bear markets are developments that all long-term investors should expect as they build wealth in the markets. Always keep your stock market seat belts fastened.

Think long-term: For now, there’s no reason to believe there’ll be a challenge that the economy and the markets won’t overcome. The long game remains undefeated, and it’s a streak that long-term investors can expect to continue.

For more on how the macro story is evolving, check out the previous review of the macro crosscurrents. »

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Key insights about the stock market 📈

Here’s a roundup of some of TKer’s most talked-about paid and free newsletters about the stock market. All of the headlines are hyperlinked to the archived pieces.

10 truths about the stock market 📈

The stock market can be an intimidating place: It’s real money on the line, there’s an overwhelming amount of information, and people have lost fortunes in it very quickly. But it’s also a place where thoughtful investors have long accumulated a lot of wealth. The primary difference between those two outlooks is related to misconceptions about the stock market that can lead people to make poor investment decisions.

The makeup of the S&P 500 is constantly changing 🔀

Passive investing is a concept usually associated with buying and holding a fund that tracks an index. And no passive investment strategy has attracted as much attention as buying an S&P 500 index fund. However, the S&P 500 — an index of 500 of the largest U.S. companies — is anything but a static set of 500 stocks.

The key driver of stock prices: Earnings💰

For investors, anything you can ever learn about a company matters only if it also tells you something about earnings. That’s because long-term moves in a stock can ultimately be explained by the underlying company’s earnings, expectations for earnings, and uncertainty about those expectations for earnings. Over time, the relationship between stock prices and earnings has a very tight statistical relationship.

Stomach-churning stock market sell-offs are normal🎢

Investors should always be mentally prepared for some big sell-offs in the stock market. It’s part of the deal when you invest in an asset class that is sensitive to the constant flow of good and bad news. Since 1950, the S&P 500 has seen an average annual max drawdown (i.e., the biggest intra-year sell-off) of 14%.

How the stock market performed around recessions 📉📈

Every recession in history was different. And the range of stock performance around them varied greatly. There are two things worth noting. First, recessions have always been accompanied by a significant drawdown in stock prices. Second, the stock market bottomed and inflected upward long before recessions ended.