May 17, 2025
The Correction Begins
Be patient for the bounce
If History repeats, we shall see a deeper correction for stocks and crypto. A U.S. Credit downgrade has only happened twice in history, and each time the stockmarket got crushed. These corrections are less about company earnings and more about the governments ability to issue new debt. Interest rates will either rise or fall drasticaly. I bet they rise introducing rate risk.
- Today the stockmarket is up 23% in less than 2 months. we are due for a correction and this is the catalyst.
- This shall pass, maybe it takes a couple weeks or months, we don't know.
Load up on the Correction, the market has a lot of positives 👇🏽
- Stocks have recovered 50% of their recent losses, which is historically significant. In the last 14 declines of more than 20%, 21 out of 22 times, the market did not retest the lows after recovering half the decline.
- The percentage of SPX stocks above 200 avg has exceeded 50%, which is historically significant.
- The # of NYSE stocks hitting New 30-day highs hit a 2-year high on May 12th
- The U.S. economy is experiencing "rolling recessions," where certain sectors (like housing) are weak, but the overall economy is not in a broad-based recession.
- Major recessions usually require a significant shock, such as a spike in oil prices or a financial crisis, which is not present currently.
- Inflation is still cooling.
- The high yield spread, a key recession signal, is elevated but not at levels that typically precede a systemic downturn.
Profit Margins are still rising.
- U.S. companies have demonstrated a strong ability to manage costs and expand margins through productivity and automation, even when experts predicted
- S&P 500 Profit Margins are expected to grow from 11.8% in 2024. to 12.8% in 2025
Don't focus on daily news, think about all the positives in 6-9 months
- Tax cuts
- Rate cuts
- Deregulation
- ISMs recovering