2025 Week 21

1. From Bear to Bull in Record Time

The S&P 500 has surged over 19% in the last 27 trading days, marking one of the strongest short-term rallies in market history. Historically, such rallies have signaled the beginning of powerful bull markets—seen previously in 1974, 1982, 2009, and 2020. One year after similar rebounds, the S&P 500 delivered an average gain of 41%, and 140% over five years.

Key Takeaway: Historical precedent suggests this surge could mark the early stage of a long-term bull market.

2. Volatility’s Historic Collapse

The $VIX has declined 62% over the past six weeks—its steepest drop ever. Closing at 17.24 last Friday, the index is now well below its long-term average. This dramatic collapse reflects rapidly improving investor sentiment, especially after easing trade tensions and resilient economic data.

Key Takeaway: Market volatility has sharply reversed, reinforcing the risk-on mood among investors.

3. Recession Concerns Fade

Sentiment has shifted decisively. A recent poll shows only 37% of respondents now expect a U.S. recession in 2025—down from 67% in early April. This optimism is driven by easing tariffs, tightening credit spreads, and continued strength in labor and earnings data. The Trump administration’s tariff rollback—from an effective rate of 145% on China to 30%—has also played a key role.

Key Takeaway: Improved market and policy conditions have significantly reduced recession fears.

4. Disconnect Between Sentiment and Spending

Despite consumer confidence plunging to its second-lowest level ever at 50.8, retail sales remain strong. April saw a 4.8% YoY increase, or 2.4% adjusted for inflation. While inflation expectations and job market fears weigh on sentiment, spending behavior continues to show resilience.

Key Takeaway: Consumer actions paint a more optimistic picture than survey-based sentiment suggests.

5. Health Care Underperforms Sharply

Health care stocks are lagging, with the sector underperforming the S&P 500 by a wide margin. UnitedHealth has been the biggest drag, with its shares down 58% amid DOJ investigations into potential Medicare fraud. Despite record revenues, legal risks and regulatory uncertainty continue to weigh on the sector.

Key Takeaway: Health care faces headwinds as regulatory risks and weak relative performance persist.

6. Wages Outpace Inflation Again

For the 24th consecutive month, real wages (adjusted for inflation) have grown year-over-year. This follows a previous streak of 25 straight months of negative growth. With inflation moderating and wages rising, American households are slowly regaining purchasing power.

Key Takeaway: Rising real wages offer a positive signal for consumer health and economic stability.

7. NASDAQ Returns to Bull Territory

On Monday, the NASDAQ officially entered a bull market, rising over 20% from its April 8 low. It now sits less than 5% from its all-time high recorded in December 2024. This turnaround highlights the strength of investor confidence, particularly in growth and tech stocks.

Key Takeaway: The NASDAQ’s rapid recovery confirms renewed risk appetite in equity markets.

Next week, eyes will be on Q1 corporate earnings and the latest data on industrial production and housing starts.

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