I took no pleasure in that 📈😬
Plus a charted 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. »
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As much as I enjoy the intellectual exercise of researching and writing about financial markets, I find the act of investing can be very unpleasant.
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!
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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 🤦🏻♂️
BofA: ‘Q: Is it better to sell early or late? A: Neither.’ ⏰
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 🔀
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.
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. »
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%.
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