Seek more context when you hear these popular words and phrases about markets đ
Plus a charted review of the macro crosscurrents đ
Words and phrases can help us communicate with each other quickly and efficiently.
But for some important matters, a single word or phrase can be a little too imprecise and ambiguous, leading some to make incorrect assumptions about whatâs being said.
This can be a big problem when discussing the markets and the economy, where language sometimes has multiple meanings.
Thereâs also the fact that people often leave out the time frame when theyâre talking about markets, which is why short-term traders and long-term investors often sound in conflict when they might actually agree.
Letâs discuss some of these words and phrases.
âThe economyâ
Some people say the economy is doing well. Some say itâs doing poorly.
But what economy are they talking about?
Thereâs the economy as measured by gross domestic product (GDP), which aggregates a bunch of financial measures of activity, like personal consumption, investment, government spending, and international trade.
Thereâs also the National Bureau of Economic Researchâs (NBER) definition, which includes non-financial metrics like employment gains.
Some say the economy goes into recession when GDP growth is negative for two consecutive quarters. But officially, itâs not a recession until the NBER determines weâve had a âsignificant decline in economic activity that is spread across the economy and that lasts more than a few months.â
Many people will tell you neither of those definitions is sufficient. Just because you have a job and youâre buying stuff doesnât mean you feel particularly good about the economy. Maybe you hate your job more than ever. Or despite all your spending, maybe youâre actually falling short of your hopes and dreams. Surveys of confidence and sentiment show people feel unusually crummy about their present situation and prospects despite GDP at record highs and unemployment at historic lows.
And then thereâs the stock market, which appears to reflect ebullience, with prices near all-time highs. Thatâs because stocks are driven by corporate earnings, which is to say the economy matters to the stock market to the extent itâs fueling earnings growth. The stock market doesnât care how poorly you feel about the economy as long as profits are going up.
Also, donât get me started on how politicians will spin the definition of the economy in ways to confirm their biased narratives.
For more, read: Itâs too ambiguous to just say âthe economyâ đ¤Śđťââď¸
âBullishâ and âbearishâ
To be bullish means you think a stock or the stock market is going up. To be bearish means the opposite.
For most of my life, I didnât think too much more than that.
That was until November 2021, when Morgan Stanley strategists published a 12-month target for the S&P 500 that implied a 6% decline. It was the call that prompted financial media to label Morgan Stanley strategist Mike Wilson a market bear. And to his credit, he got the marketâs direction right.
But is expecting a 6% decline within a year really bearish?
Since 1980, the S&P 500 has seen an average intra-year max drawdown of 14%, and in most of those years the market closed higher.
In down years, the S&P 500 fell by an average of 13%.
For you statistics nerds, a 6% decline is within one standard deviation of the marketâs average annual return.
So if youâre a long-term investor like me â someone who expects volatility in the short-term â then an occasional 6% decline is arguably bullish since sharper declines would still be within the boundaries of whatâs historically normal.
Now if you were expecting the market to be 6% lower five or 10 years from now, that would be a different, arguably more bearish story. History says the probability of positive returns is considerably higher as you extend the time horizon.
While I used to think âbullishâ and âbearishâ were simple adjectives, I increasingly view these terms as relative to the individual, especially over the long term.
If someone tells you theyâre bearish and their opinion matters to you, then you should also find out how much they expect prices to fall and over what time horizon.
If this bearish person tells you they expect the decline to occur within a year, ask them where they think prices are headed in the following year or over the next several years. Sometimes theyâll surprise you with an unexpectedly bullish response.
For more, read: My definition of âbearishâ is different from yours đ§¸
âBubbleâ
In my experience, no two people define bubbles precisely the same way.
However, everyone at least agrees that bubbles involve asset prices rising far past what most would argue is justifiable â before falling sharply.
With that in mind, letâs say weâre in a bubble. What are we to do with that information?
When some market pundits warn weâre in a market bubble, theyâre trying to tell you that you shouldnât have money in the market because they think youâre at risk of losing money.
But many other experts will stop short of suggesting that money invested now is doomed to turn into losses. Because itâs possible that prices go much higher, and when they eventually fall, they settle at a level thatâs higher than where we are today.
Consider when then Fed Chair Alan Greenspan uttered the phrase âirrational exuberanceâ in December 1996, when the S&P 500 was at 749. While he wasnât explicitly warning the market was in a bubble, he was at least suggesting that there were signs the market was overextended. And history credits him for predicting the dotcom bubble that eventually burst.
Hereâs the issue: After the dotcom bubble popped, the S&P 500 bottomed in 2002 at 776. Thatâs right. The S&Pâs post-bubble low was actually higher than where it was when Greenspan gave his speech.
So if someone tells you weâre in a bubble, you should at least ask if they think the market will be lower than where it is today once the dust settles.
For more on bubbles, read: How do I think of todayâs AI craze relative to past bubbles? đŤ§đ¤đđ and 2 market-crash facts that surprised me đ
âBeat expectationsâ or âmiss expectationsâ
After every earnings announcement and every economic data release, one of the first things you hear is whether the report beat or missed expectations.
Specifically, itâs in reference to some average estimate calculated by surveying analysts or economists who provide forecasts for those reports.
The implication is that if the report beats estimates, itâs good. If it misses, itâs bad.
However, there are all sorts of problems with this.
For starters, you could argue itâs not the report that beat or missed estimates. Rather, it was the analysts or economists who got it wrong.
But even if the reported results and estimates were bang in line with each other, you still lack critical information. Did the metric grow or decline? Did growth accelerate or decelerate? Did profits flip to losses?
There are also scenarios where a company can report accelerating growth that exceeds managementâs own targets but âmissâ some analystâs forecast. Who exactly failed here?
By the way, most large publicly traded companies have historically âbeatâ quarterly expectations. That is to say that âbetter-than-expectedâ is arguably expected. I mean, what are we even talking about at this point?
For more on analyst and economist forecasts, read: âBetter-than-expectedâ has lost its meaning đ¤ˇđťââď¸ and Two seemingly contradictory charts about economists and the economy đđ
âThis time is differentâ or âunprecedentedâ
In our efforts to understand what could happen in the future, investors, analysts, and lowly newsletter writers like me draw from history.
The past is rich with analogs that often repeat to some degree.
However, in markets, we all understand that weâll never relive all of the exact conditions of past episodes. And so thereâll always be some uncertainty when we draw from the lessons of the past.
But every once in a while, weâll hear a market prognosticator lead their counterargument to a historical pattern by asserting, âTHIS TIME IS DIFFERENT.â
Sometimes that person will provide the compelling evidence to argue their point, which is what you hope for in any argument.
But sometimes, youâll hear people throw around language like âthis time is differentâ and âunprecedentedâ like itâs some sort of rhetorical trump card that lazily invalidates any argument that draws from history.
The fact of the matter is this time is always different. We are by definition always living in unprecedented times.
And so this language is mostly meaningless unless you can back it with evidence about what often happens when certain conditions are met â and why it wonât happen this time around.
The big picture đźď¸
When weâre talking about inconsequential things, words and phrases can serve as a great shorthand to explain things ambiguously.
I like food. Iâm optimistic about his health prognosis. Your sister was prettier than I expected.
But if an ambiguous statement could inform something serious like an investment decision, you should always seek more context.
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Related from TKer:
Itâs too ambiguous to just say âthe economyâ đ¤Śđťââď¸
How do I think of todayâs AI craze relative to past bubbles? đŤ§đ¤đđ
âBetter-than-expectedâ has lost its meaning đ¤ˇđťââď¸
Two seemingly contradictory charts about economists and the economy đđ
Review of the macro crosscurrents đ
đThe stock market rallied to all-time highs, with the S&P 500 setting an intraday high of 7,793.68 on Wednesday and a closing high of 7,757.64 on Friday. The index is up 13.3% year-to-date. For market insights, check out the Stock Market tab at TKer. Âť
There were several notable data points and macroeconomic developments since our last review:
đź Jobs were lost. According to the BLSâs Employment Situation report, U.S. employers cut 23,000 jobs in July. The prior two monthsâ reports were revised lower by 103,000 jobs.
Total payroll employment declined to 158.86 million jobs in July.
The unemployment rate â that is, the number of workers who identify as unemployed as a percentage of the civilian labor force â declined to 4.1% during the month.
The labor force participation rate â that is, the number of employed and unemployed job seekers as a percentage of the civilian population â declined to 61.4% as 264,000 people left the labor force.
The labor market is in decent shape, but clearly isnât as hot as it was just a few years ago.
For more on the labor market, read: Things are looking up in the labor marketđ
đ¸ Wage growth is cooling. Average hourly earnings rose by 0.1% month-over-month in July. On a year-over-year basis, Julyâs wages were up 3.2%.
đ° Job switchers still get better pay. According to ADP, annual pay in July for people who changed jobs was up 7% from a year ago. That better-pay gap has been widening a bit in recent months. For those who stayed at their job, pay was up 4.4%, about what itâs been for the past year.
For more on why policymakers are watching wage growth, read: Revisiting the key chart to watch amid the Fedâs war on inflation đ
đź Job openings decline. According to the BLSâs Job Openings and Labor Turnover Survey, employers had 7.359 million job openings in June, down from 7.537 million in May.
During the month, there were 7.09 million unemployed people â meaning there were 1.04 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? đ¤¨
đ Layoffs remain depressed, hiring remains firm. Employers laid off 1.77 million people in June. 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 đ§Ž
Hiring activity remains well above layoff activity. During the month, employers hired 5.35 million people.
That said, the hiring rate â the number of hires as a percentage of the employed workforce â is relatively low, which could be a sign of trouble to come in the labor market.
For more on why this metric matters, read: The hiring situation đ§Š
đ¤ People are quitting less. In June, 3.23 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 âtenure dividendâ for corporations đ°
đŞ Labor productivity increases modestly. From the BLS: âNonfarm business sector labor productivity increased 1.4% in the second quarter of 2026 ⌠as output increased 1.7% and hours worked increased 0.3%. âŚFrom the same quarter a year ago, nonfarm business sector labor productivity increased 2.2% in the second quarter of 2026.â
For more, read: Promising signs for productivity âď¸ and The crummy labor market is yielding a âtenure dividendâ for corporations đ°
đź New unemployment insurance claims, total ongoing claims remain low. Initial claims for unemployment benefits rose to 199,000 during the week ending Aug. 1, up from 198,000 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 1.801 million during the week ending July 25.
For more on the labor market, read: Why mass tech layoffs have little effect on total employment đž
đ Inflation expectations cool marginally. From the New York Fedâs July Survey of Consumer Expectations: âMedian inflation expectations at the one-year-ahead horizon decreased by 0.1 percentage point to 3.6% in July. The three-year and five-year-ahead horizons were unchanged at 3.3% and 3.0%.â
â˝ď¸ Gas prices remain above $4. From AAA: âThe national average for a gallon of regular gasoline fell three cents this past week to $4.06. Crude oil prices are down in the $70 per barrel range amid optimism that the Strait of Hormuz will resume normal operations. Currently, half of states are paying below $4 per gallon on average. Gas prices typically start going down this time of year, as many schools and universities begin fall semesters, and fewer people are taking road trips compared to earlier in the summer.â
Hereâs a longer-term 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 đđ˘ď¸đ
đł Card spending data is holding up. From BofA: âTotal card spending per HH was up 4.7% y/y in the week ending Aug 1, according to BAC aggregated credit & debit card data. Many categories saw moderate increases in y/y spending growth relative to the prior week. The K remains âclosedâ: ex-gas spending growth is running at the same y/y rate among higher- and lower-income HHs.â
Consumer spending data has looked a lot better than consumer sentiment readings. For more on this contradiction, read: Weâre taking that vacation whether we like it or not đŤ and Household finances are both âworseâ and âgoodâ đŚď¸
đ Mortgage rates tick higher. According to Freddie Mac, the average 30-year fixed-rate mortgage rose to 6.69%, up from 6.66% last week. From Freddie Mac: âWhile mortgage rates continue to influence affordability, the housing market is showing signs of adjustment, with listing prices modestly below year-ago levels and for-sale inventory improving from the limited supply seen in recent years.â
As of Q2, there were 149.5 million housing units in the U.S., of which 87.0 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 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 đ
đ¨ Construction spending ticked lower. Construction spending decreased 0.1% to an annual rate of $2.17 trillion in June.
đ Manufacturing activity surveys signal growth, but also challenges. From S&P Globalâs July U.S. Manufacturing PMI: âAlthough the headline PMI held steady in July, beneath the survey we see some warning signs about the future growth trajectory. Production rose at a markedly slower rate in July, linked to a third month of weakened growth of new business, in turn reflecting reduced inventory building after the especially strong precautionary stock accumulation reported in the second quarter. Further pressure came from increased supply chain delays, falling exports, and further pushback on high prices from customers.â
Similarly, the ISM July Manufacturing PMI signaled cooling growth.
𤡠Services activity surveys signal growth, but also caution. From S&P Globalâs July U.S. Services PMI: âThe PMI points to GDP rising at an annualized rate of 2.3%, following a 1.5% increase indicated for the second quarter. Business optimism has meanwhile climbed to its highest since last November. Some caution is needed in interpreting these improvements, as the stronger performance partly reflected temporary factors. We note that the biggest improvement in demand in July was reported among consumer-facing service providers, spending on which surged at a rate not seen for over four years linked to the FIFA World Cup and US Independence Day events.â
Meanwhile, the ISMâs July Services PMI signaled 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 đ
đ Business investment activity ticks lower. Orders for nondefense capital goods excluding aircraft â a.k.a. core capex or business investment â rose 1.2% to a record $85.4 billion in June.
Core capex orders are a leading indicator, meaning they foretell economic activity down the road.
đ Near-term GDP growth estimates are tracking positively. The Atlanta Fedâs GDPNow model sees real GDP growth rising at a 5.8% rate in Q3.
For more on GDP and the economy, read: Itâs too ambiguous to just say âthe economyâ đ¤Śđťââď¸ and Economic data can often be both âworseâ and âgoodâ đŚď¸
Putting it all together đ
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 trending higher.
Growth rates have cooled: While the economy remains healthy, growth has normalized from much hotter levels earlier in the cycle. The economy is less âcoiledâ these days as major tailwinds like job openings and excess savings have faded. Job creation, while positive, is not as hot as it used to be. 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 investorâs perspective, what matters is that the hard economic data continues to hold up.
Stocks are not the economy: Thereâs 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 â in the cooling economy â 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: Thereâs 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, thereâs no reason to believe thereâll be a challenge that the economy and the markets wonât overcome. The long game remains undefeated, and itâs 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. Âť
Key insights about the stock market đ
Hereâs a roundup of some of TKerâs 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 đ
The stock market can be an intimidating place: Itâs real money on the line, thereâs an overwhelming amount of information, and people have lost fortunes in it very quickly. But itâs 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 đ
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 â an index of 500 of the largest U.S. companies â is anything but a static set of 500 stocks.
The key driver of stock prices: Earningsđ°
For investors, anything you can ever learn about a company matters only if it also tells you something about earnings. Thatâs because long-term moves in a stock can ultimately be explained by the underlying companyâs 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 normalđ˘
Investors should always be mentally prepared for some big sell-offs in the stock market. Itâs 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 đđ
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 âł
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, youâll see that thereâs never been a period where the S&P 500 didnât generate a positive return.
What a strong dollar means for stocks đ
While a strong dollar may be great news for Americans vacationing abroad and U.S. businesses importing goods from overseas, itâs a headwind for multinational U.S.-based corporations doing business in non-U.S. markets.
Stanley Druckenmillerâs No. 1 piece of advice for novice investors đ§
âŚyou donât 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, thereâs overcapacity and theyâre losing money. What about when theyâre losing money? Well, then theyâve 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 itâs going to be in 18 to 24 months as opposed to now. If you buy it now, youâre buying into every single fad every single moment. Whereas if you envision the future, youâre trying to imagine how that might be reflected differently in security prices.
Peter Lynch made a remarkably prescient market observation in 1994 đŻ
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 â I donât know which way theyâll go⌠Theyâll double again in eight or nine years after that. Because profits go up 8% a year, and stocks will follow. Thatâs all there is to it.
Warren Buffettâs âfourth law of motionâ đ
Long ago, Sir Isaac Newton gave us three laws of motion, which were the work of genius. But Sir Isaacâs talents didnât extend to investing: He lost a bundle in the South Sea Bubble, explaining later, âI can calculate the movement of the stars, but not the madness of men.â 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 canât beat the market đĽ
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 âpast performance is no guarantee of future resultsâ đ
Even if you are a fund manager who generated industry-leading returns in one year, history says itâs an almost insurmountable task to stay on top consistently in subsequent years. According to S&P Dow Jones Indices, of the 334 large-cap equity funds in the top half of performance in 2021, 58.7% remained at the top half in 2022. However, just 6.9% remained on top through 2023. Only 4.5% stayed on top in the five consecutive years through 2025.
Itâs much more dismal when you raise the bar. Of the 164 large-cap equity funds in the top quartile in 2021, just 20.1% remained in that category in 2022. That percentage fell to literally 0.0% in 2023.
The odds are stacked against stock pickers đ˛
Picking stocks in an attempt to beat market averages is an incredibly challenging and sometimes money-losing effort. Most professional stock pickers arenât able to do this consistently. One of the reasons for this is that most stocks donât deliver above-average returns. According to S&P Dow Jones Indices, only 19% of the stocks in the S&P 500 outperformed the average stockâs 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%.
