The relationship makes sense. When uncertainty rises, companies release temporary workers, as permanent headcount can be expensive to let go of and equally costly to rehire when needed again. Recently, however, the leading relationship between the number of temporary workers and the total number of employees has changed. The graph below shows an odd divergence between headline payroll growth and the number of temporary workers. The number of total employees has been rising steadily since the COVID lows, albeit employee growth has stagnated lately. To the contrary, the number of temporary workers has been declining steadily since 2022. It now sits below the prior peaks leading into each recession. Moreover, consider that the economy has grown significantly since those prior recessions. Accordingly, the ratio of temporary workers to total employees is now at the level of the prior recession troughs.

This raises a question worth pondering: are temporary workers not as vital to today’s economy, or is it sending a concerning signal that the labor market will soon falter? Before coming to any conclusions, realize that many old rules of thumb that helped forecast the economy have failed to work since COVID. For instance, the Conference Board’s Leading Economic Indicators have fallen steadily since 2022 and sit well below their 2020 trough.

What To Watch Today

Earnings

Economy

Market Trading Update

Yesterday, we discussed the issues with recent market breadth. Part of that breadth problem is due to the surge in Semiconductor stocks, which for a small sector, has made an significant impact on the broader S&P 500 index.

The semiconductor rally crossed a line this week. SOXX, the iShares Semiconductor ETF, closed Wednesday at $506.87, a gain of roughly 242% from the April 2025 low of $148.31. Most of that move has been compressed into the last two months. Since mid-March alone, SOXX has tacked on another 57%. The chart is now textbook parabolic, and parabolic charts almost never end politely.

I get the bull case. AI capex is real, hyperscaler orders are real, and foundry utilization is real. Nvidia, Broadcom, and TSMC are delivering numbers that justify premium multiples. So far, so good. However, here is the problem with the current setup. SOXX is trading 62% above its 200-day moving average and 34% above its 50-day. Readings that stretched are the back end of a move, not the middle.

Notice in the chart above how the slope of the advance has steepened in each successive month. That is the signature of a momentum trade pulling in late buyers, not of fundamentals catching up to price. Look across the complex and the dispersion is striking. Micron is up nearly 1,000% off its April 2025 low. AMD is up roughly 450%. Nvidia, the index’s anchor, is up “only” 140%. The stocks that crashed hardest a year ago have rallied the most in the recovery, which is exactly how late-cycle chase trades behave.

If you have ridden this rally, congratulations. Now take some chips off the table. Trim, raise stops to the 50-DMA at roughly $377, and rebalance back to your strategic weight. You don’t have to sell everything to manage risk. You just can’t let an oversized position carry you over the next cliff.

If you are chasing it now, don’t. Buying parabolic moves isn’t investing. It’s gambling on the greater fool. Wait for the inevitable test of the 50-DMA, which would deliver a 25% pullback from current levels, and consider scaling in there if the fundamentals still fit your thesis. Patience is free. Performance chasing is expensive.

The semiconductor rally has likely fully priced in 2026 earnings. From here, you are paying for 2027 and 2028 growth in a sector where the cycle has not been repealed. Make no mistake, the rally has been spectacular. The exit will be too.

JOLTs & ADP

Heading into today’s BLS employment report, it’s worth reviewing this week’s JOLTS and ADP employment reports as well as the ISM manufacturing and services employment surveys.

ADP: Private sector employment rose by 109,000 jobs in April, the largest increase since January 2025 and above market expectations of 97,000. While improving, the data still points to what Fed Chair Powell describes as a “low-hire, low-fire” labor market. Employers have largely avoided layoffs but have reduced hiring. As the graph below shows, both ADP and BLS payroll data have been improving recently but remain well below their levels in 2023 and 2024.

JOLTs: Job openings fell by 56,000 to 6.866 million, while hires rose to 5.6 million – the biggest increase since May 2024. Total separations were little changed at 5.4 million, with quits at 3.2 million and layoffs at 1.9 million. As shown in the second graph, information job openings, while volatile, are at the lower end of its 8 year range. This is the sector to watch for signs that AI-related layoffs in tech are beginning to appear in the data.

ISM: The ISM Services Employment Index contracted for the second consecutive month, reading 48.0%. That was up from March’s 45.2% but below the 50 expansion threshold. The ISM Manufacturing Employment Index fell to 46.4%, down 2.3 points from March’s 48.7% and also pointing to contraction in the labor market.

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Diamondback’s strategy revolves around its DUC (drilled but uncompleted) well inventory. They have decided to work down its DUC inventories to maintain production at over 520,000 barrels of oil per day, which is 3% above its original 2026 guidance. The rigs already exist and are in place. Thus, the time for completion crews to bring oil to market is much shorter than the time required to drill new wells. To execute, Diamondback plans to run five completion crews consistently through the rest of the year and maintain its current rig count.

Because of our positioning, our preparation, and this price signal, we are bringing incremental barrels to the market immediately.

The bottom line: Diamondback’s fast production response can capitalize on high oil prices almost immediately without betting they will remain high for the next 4-6 months, which is how long it takes to see oil being produced from a new rig.

What To Watch Today

Earnings

Economy

Market Trading Update

Yesterday, we discussed the sharp upward revisions to earnings estimates that are buoying the stock market against the Iranian crisis backdrop. However, while the market is rallying, the underlying breadth remains a media concern. However, it deserves more analysis.

You have likely seen a lot of commentary discussing how new 52-week lows are climbing in the S&P 500. At the surface, such a reading has pointed to weakness beneath it, historically speaking. Goldman’s Ben Snider noted the same from a different angle, leaning into comparisons to the “Dot.com” bubble in 1999. Overall, the chorus has been rising, pointing to narrow breadth, Hindenburg setups, and distribution warnings. While we are certainly paying attention to all of these warning signs, the conclusion may also miss what’s actually happening on the tape.

As of midday yesterday, when I wrote this analysis, SPY traded near $732, up roughly 1.1% on the session and sitting at all-time highs. On May 1, the index logged 45 stocks at new 52-week highs against just 13 at new lows. The NYSE printed 578 new highs against 63 lows. By Monday, May 4th, 16 S&P names hit fresh lows even as the broader index held its ground. While that is most definitely a divergence worth noting, it is hardly the kind of internal breakdown that precedes a serious top, and the cumulative advance-decline line on the NYSE just made a new high alongside the index.

Here’s where it gets interesting. Look at the actual list. Lululemon. Tractor Supply. Clorox. Brown & Brown. Medtronic. Builders FirstSource. Consumer discretionary is getting squeezed. Staples are cracking, Healthcare is drifting, and Housing-adjacent names are rolling over. What do they all have in common? The consumer. What you don’t see is technology, semiconductors, financials, or industrials. The market’s actual leadership is intact. The losers are concentrated in a very specific cohort. The cohort with the thinnest pricing power and the most direct exposure to the oil shock, consumer stress, and sticky 3% inflation.

Here’s the problem with the dot-com comparison. In 1999, defensives bled as capital abandoned them to chase Cisco, Sun Microsystems, and JDS Uniphase. New lows in staples and healthcare were the tell that risk appetite had gone parabolic. Today, the mechanism is reversed. Defensives are bleeding because oil prices are elevated, 3% inflation remains sticky, and a stubborn dollar mechanically punishes companies that can’t pass costs through. That’s a margin story driven by macro, not a positioning story driven by mania.

Make no mistake, breadth deterioration matters when it spreads. If the new lows list starts pulling in cyclicals, semis, or banks, I’ll be the first one writing the warning piece. We’re not there yet. However, we have a sector rotation driven by the Iran conflict’s residual oil premium and a Fed that just signaled inflation will remain above target through year-end. That calls for trimming exposure to margin-pressured consumer and staples names. It does not call for selling the index.

We continue to suggest staying long on quality leadership, hedging duration, and keeping a bigger-than-usual cash bucket dry for the day the breadth picture actually cracks. The signal is real. The interpretation circulating on financial Twitter is not.

Ackman’s Pershing Square Trades At A Discount

Famed investor Bill Ackman recently brought his private fund, Pershing Square Holdings, to market. Trading under the symbol PSUS, the IPO underperformed Ackman’s expectations. PSUS is a closed-end fund, meaning it sells a fixed number of shares in a public offering. Shareholders can exit the fund only by selling their stakes to other investors at the current market price, regardless of the fund’s actual asset value.

When you buy or sell a mutual fund, you transact at the fund’s NAV. ETFs work similarly, with arbitrageurs ensuring the market price stays close to NAV. Closed-end funds have no such mechanism. They raise a fixed pool of capital in an IPO and trade like a stock from that point forward. The market price can drift from the NAV, and often does. In some cases, closed-end funds can trade at a significant discount to NAV indefinitely.

Prior to its IPO, Ackman’s PSUS traded around a 30% discount to NAV for years. Simply put, investors could buy $1.00 of Ackman’s portfolio for roughly $0.70. At its IPO last week, the discount improved to 16%. Ackman recently said on CNBC that “we look nothing like other closed-end funds,” arguing that the quality of the underlying portfolio, the permanent capital structure, and the absence of performance fees distinguish PSUS from typical closed-end funds. The market’s response on day one suggests investors aren’t fully buying his argument.

The graph below shows that at a current price of $42.98, PSUS trades at 12% discount to its $49 NAV.

Gold Bugs Faulty Thesis: M2 & Inflation

Gold bugs often claim that when more dollars are in circulation, each dollar buys less; prices rise, and gold, as a store of value, helps protect purchasing power from that decline. As a result, they believe that a rising money supply, in and of itself, is inherently inflationary.

The problem with the thesis of gold bugs is two-fold. First, it lacks critical context. Second, it fails to consider another key factor driving inflation: the velocity of money.

A recent note from Michael Oliver of Momentum Structural Analysis drove us to revisit this topic. He explains that the money supply (M2) has grown 45% since 2020. As a result, cash is eroding in real value “year by bloody year,” and that gold remains the essential alternative. It is a compelling narrative. But as we will show, the relationship between money supply growth and inflation is far more nuanced than many gold bugs suggest. Furthermore, having the proper context for M2’s growth is imperative.

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Low ETF fees, consistent outperformance relative to active managers, and instant diversification have led to passive strategies gaining popularity over active ones. The graph below shows that, at year-end 2025, indexed funds accounted for 52% of all long-term US fund assets. BlackRock, Vanguard, and State Street, the three largest ETF issuers, are now the largest shareholders in 88% of S&P 500 companies. This isn’t a market anymore. As Nicoletos bluntly puts it,

A market in which a tiny group of price-insensitive intermediaries owns everything is no longer a market that prices things. It just rebalances.

Meanwhile, AI, the primary driver of recent market returns, isn’t equally rewarding to all companies. It’s splitting the corporate world into AI winners and losers. For instance, hyperscalers will spend over $700 billion on capex in 2026, likely generating significant profits down the road. To wit, he notes that Nvidia accounted for 20% of the S&P’s 2025 return on its own. While some companies benefit, others, such as software companies, are grossly underperforming as the market anticipates weaker earnings due to AI-related competition. The technology-sector ETFs and the broad-market ETFs own both AI winners and losers. That’s the trap he sees:

Mechanical buyers do not look at price, do not read earnings, and cannot tell the difference between Nvidia and a commoditized software vendor. They buy both, in proportion to whatever weights they have been given. In the future, it means owning the AI winners and the AI losers in the same vehicle, dragged down by every name the index cannot rotate out of. The same robot that bought stocks without thinking will, on the way down, sell stocks without thinking

It’s a trap, but he sees an opportunity for active investors. To wit:

The allocators who will win in the next decade will not be those who buy the average. They will be those who build a deliberate basket of AI infrastructure, AI native software, disruption-resistant compounders, and adjacent winners, and who avoid the long tail of names the index has no choice but to hold.

There is much more to his paper than we shared. But to sum it up, there is now an opportunity for disciplined, concentrated stock picking that hasn’t been around for many years. Below, we provide a counterpoint to his thesis.

What To Watch Today

Earnings

Economy

Market Trading Update

Yesterday, we discussed how Gamma affects the market. Last weekend, we discussed the Q1 earnings season, which has been stellar on most fronts. In this coming weekend’s report, we will do a deeper dive into forward estimates, but I will give you a bit of a preview here.

The Q1 2026 earnings season is delivering a result Wall Street rarely sees. With roughly two-thirds of the S&P 500 reported, blended earnings growth has climbed to 27.1% year-over-year, more than double the 13.2% consensus modeled at quarter-end. 84% of companies have beaten EPS; the average surprise is 20.7% (nearly three times the 5-year norm), and the net margin of 14.7% is the highest reading in over 15 years.

That’s the surface. The more interesting story is why analysts were so wrong heading in. The 2026 EPS estimate index cratered to 0.96 last summer during the Iran shock, then turned vertical. By May, it’s broken above 1.06. In a normal year, analysts walk estimates down from 1.00 to roughly 0.92 by year-end. We’re looking at a 14-point swing versus the historical pattern. Morgan Stanley calls it “fairly unprecedented,” which is analyst-speak for something they don’t have a clean comparison for.

Three things are driving the upside. First, the AI capex cycle is finally landing on income statements. Communication Services is reporting +53%, Tech +50%, Consumer Discretionary +39%. The Mag 7 alone moved from a 22.4% expected growth rate at quarter-end to a 61% blended print today. Four of the top five contributors to S&P 500 earnings growth are Alphabet, NVIDIA, Amazon, and Meta. Second, margins are at a record. Revenue grew 11.1%. Earnings grew 27%. The gap is operating leverage. Companies that cut headcount in 2023 and held the line through 2025 are now monetizing every incremental dollar at a higher margin. Third, breadth is finally improving. Median S&P 500 company growth is in the double digits for the first time in four years. All eleven sectors are tracking positive growth.

Here’s where I have to put the brakes on. The current reading on long-term S&P 500 earnings growth estimates sits near 19%, the highest print since 2000. The chart’s prior peaks tell a story. The “New Economy” peaked in 2000. The “Tax Cuts” peaked in 2018. The “COVID” rebound peaked in 2021. Each was followed by a meaningful equity drawdown and a sharp downward revision cycle within twelve to twenty-four months. The S&P fell 49%, 19%, and 25%, respectively. Forecasts above the long-term trend channel have a poor history.

“When everybody is revising higher, the marginal trade is no longer to buy the beats. It’s to fade the next miss.”

The setup that worries me isn’t that earnings are bad. It’s that they’re so good the bar has been raised to a level that historically marks a peak, not a launching pad. The Q1 print benefited from easy comps. Q2 won’t. The 27% growth rate could halve on math alone when July prints lap stronger 2025 results. Markets don’t always distinguish between “growth slowing” and “earnings missing.” They tend to react to the headline first and sort it out later.

Bottom line: stay long, but stay hedged. Trim into strength, reduce concentration in names that have done the most work, and keep dry powder for the first material disappointment. The asymmetry has shifted.

Counterpoint: Passive Is Here To Stay

Nicoletos makes a compelling case, but the conclusion to abandon passive strategies and embrace active stock picking deserves scrutiny. The following bullets share a few important counterpoints to his thesis:

• Timing: Arguments for active management’s imminent comeback are not new. With each January forecast of what the year holds, there are always analysts predicting that this will be the year of the stock picker. They have consistently been proven wrong. As shown below, the S&P Indices Versus Active Index (SPIVA) indicates that the overwhelming majority of active managers underperform across multiple time horizons. Not shown, but in 2025, 79% of active investment strategies underperformed the market.

• High dispersion: Recently, the performance spread or dispersion between winners and losers has been wide. While that does present an opportunity for active investors, most active managers have failed to identify those winners and losers in advance. While high dispersion creates the ability to outperform major indexes, it also creates an equal opportunity to be wrong.

• Cost of being wrong: His paper undersells the performance risks. Fees, taxes, and behavioral mistakes resulting from active trading can harm returns in ways that are easy to underestimate but hard to recover from. The “deliberate basket” of AI winners that Nicoletos describes sounds great in theory. But executing it consistently, over a decade, against a low-cost index is another matter entirely.

There is no way to know whether active or passive strategies will be better in the future. The primary reason is that it’s not just about the strategy, but about the infinite ways investors can execute them. We believe it is most important for investors is to select a strategy that properly addresses their risk tolerance and return goals. One that will help them meet their future goals, regardless of how it performs versus an index.

Rig Counts Cast Doubts On High Future Oil Prices

The number of US oil rigs in operation provides a good indication of what oil drillers think of future oil prices. As we share below, the rig count has remained steady despite the price of crude oil nearly doubling since the Iranian conflict started. This is an indication, that those putting money to work do not think higher oil prices will remain at current levels. To wit, future oil prices, a year out have risen by 10-15%, far less than the cash price for crude oil.

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The impact on liquidity from changing TGA balances was most noticeable in 2020. With significant amounts of crisis-related debt issuance, the Treasury built the TGA to nearly $1.8 trillion in mid-2020, then spent it down rapidly, injecting hundreds of billions into the system. Markets surged, and economic activity picked up. That event was an anomaly, but it showed how large shifts in the TGA can impact the economy and markets. Most often, the Treasury increases its TGA ahead of potential debt-ceiling dates. Once those dates have elapsed, the Treasury rapidly runs down the TGA balances.

As we share below, the TGA is now at its highest level since 2020. Bear in mind that part of the recent increase is due to tax revenue from April 15th. That said, the balances were already high before the boost. From an investor’s perspective, it’s not important why they are doing it; what matters is understanding that when they reverse course, the economy and markets will benefit from a shot of liquidity.

What To Watch Today

Earnings

Economy

Market Trading Update

Yesterday, we discussed the market’s technical backdrop, which remains bullish. Today, I want to discuss why the market trades differently than in the past.

Active traders run into the same problem every cycle. A breakout that should have run for three days reverses on the second print. A pullback that “should” hold the 50-day rips through it on heavy volume. The setup looked identical, but the tape behaved nothing alike. Most of us blame noise or our own discipline. The real culprit is usually dealer gamma.

Options dealers sit on the other side of every contract that gets bought or sold. To stay neutral on direction, they hedge in the underlying. The size and direction of that hedging flow depend on whether dealers are net long gamma or net short gamma. That single distinction reshapes the tape’s entire character.

When dealers are long gamma, they sell rallies and buy dips to stay neutral. That dampens moves in both directions. The S&P grinds higher in tight ranges, intraday reversals are common, and “buy the dip” works as if it were a law of physics. That’s the regime that frustrated bears for most of 2024. When dealers flip to short gamma, the hedging flow reverses. They buy strength and sell weakness, amplifying every move the market tries to make. Stops get run. Breakouts hold. What looked like a 1% wobble becomes a 3% drawdown by the close. February 2018, March 2020, and August 2024 unwind all fit this profile.

The implication is simple, even if it’s rarely applied. Position sizing, stop placement, and even your time of day for execution should shift with the regime. A 1.5% stop is generous on a positive gamma tape and useless on a negative gamma tape. Mean reversion works in one regime and gets you killed in the other.

Most retail traders have never heard of the gamma flip level. SpotGamma, GammaLabs, and the volatility desks at Nomura and Goldman publish gamma exposure estimates regularly, and the data isn’t hidden behind a Bloomberg terminal anymore. You don’t need to model it yourself. You just need to know which side of the flip the market is sitting on and adjust accordingly.

That’s the difference between trading the tape and getting traded by it.

Breadth Is Not As Bad As It Seems

The SimpleVisor absolute-relative analysis continues to indicate poor breadth despite record highs. But is it as bad as it seems?

Making a case for bad breadth, the first graph below shows that the technology sector, led by chipmakers, has become very overbought on both a relative and an absolute basis. At the same time, all of the other sectors are either at fair value or oversold relative to the S&P 500. Another sign of poor breadth appears in the factor analysis shown in the second graphic. The large gap between the equal-weighted S&P 500 (RSP) and S&P 500 growth (IVW) indicates that a few companies are outperforming the vast majority of stocks.

Despite the evidence of poor breadth, note that the absolute scores are overbought for all but one sector. The rally is being supported by most stocks, but the chipmakers, specifically those producing CPUs, not GPUs, are leading the way. Without those stocks, the market would still be rallying and potentially near or at record highs. Specific chipmakers, such as Broadcom, Micron, and Intel, have grossly outperformed the market. Going forward, it’s quite possible that they correct on a relative basis (underperform) while other technology stocks and sectors drive the market higher.

We can see if that thesis occurs via the Momentum factor ETF. The second graphic shows that it is the most overbought factor on both a relative and an absolute basis. The third graphic, breaking down the factor’s stocks, shows that outperforming chipmakers, AMD, AVGO, MU, and LRCX, comprise half of the factor’s top ten holdings. The SOX semiconductor index, including the big CPU chipmakers, is up 35% over the last 20 trading days. At the same time, the three largest stocks by market cap, MSFT, AAPL, and NVDA, have flat to negative relative scores.

Market Correction Risk: Why Summer Of 2026 Looks Risky

Collapsing breadth. Stretched positioning. The worst seasonal window of the year. The worst year of the political cycle. And a war that won’t end. Market correction risk is stacking up.

The S&P 500 hit a fresh record high last week. The median stock in the index is sitting 13% below its 52-week peak. That divergence is not a footnote or a curiosity. It’s the loudest warning the market has flashed since the dot-com era, and it’s arriving at the worst possible moment on the calendar. Market correction risk is climbing, and this summer it’s stacked on top of three other forces that almost never converge at the same time.

After three decades of watching market cycles play out, I’ve learned that the dangerous moments are those in which everything looks fine on the surface and rotten underneath. That’s exactly where we are right now. The market correction risk we’re staring at into the summer isn’t driven by a single bearish data point. It’s driven by four of them showing up together, and ignoring any of them would be a costly mistake.

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Some of this NVDA to CPU rotation is due to positioning. NVDA entered 2026 as the most-owned, most-crowded, and most-hedged name on the Street. And crowded trades exhaust themselves long before fundamentals roll over. When relative performance flips, the marginal dollar chases laggards rather than leaders, and CPU names with depressed valuations become the obvious release valve.

The more durable thesis is the one we laid out on April 21st. The shift from LLM training to agentic AI applications creates incremental demand for CPUs. In theory, this shifts who captures the next dollar of AI capex. Hyperscalers building out agentic infrastructure cannot do it on Nvidia silicon alone. That math benefits the CPU complex on the margin, even if Nvidia retains its 75% gross margin moat at the high end of the GPU stack. The NVDA to CPU rotation reflects the market beginning to discount that mix shift in real time.

Here is the catch. AMD reports earnings tomorrow, and NVDA reports later this month. Neither has confirmed the thesis with numbers yet. If AMD guides cautiously on data-center momentum, or NVDA delivers another beat-and-raise quarter with strong Blackwell commentary, a large portion of this rotation could reverse in a matter of days. The NVDA to CPU rotation is a longer-term thesis worth respecting, but not a trade worth chasing into earnings.

What To Watch Today

Earnings

Economy

Market Trading Update

me high of 7,220 on Friday following Apple’s blowout earnings (+3%). From the March low of ~6,300, the index has rallied roughly 15% in five weeks, which blew through BofA’s 7,168–7,206 target we flagged as resistance just two weeks ago. Both the Nasdaq and S&P 500 posted consecutive record closes; breadth was solid in the equal-weight index; the Russell 2000 outperformed; and Q1 earnings are beating across the board.

The technical picture is unanimously bullish but increasingly stretched. According to Investing.com, 12 of 12 moving average signals are at a “Strong Buy.” The 14-day RSI sits at 71.18, touching the 70 overbought threshold, and momentum is extended and rising, but closing in on a “sell signal.”. The 50-DMA has surged to ~6,821, while the 200-DMA stands at ~6,728, now 5.2% below the index. VIX is also at its lowest since January. The nuance, however, is that overbought does not mean overvalued. RSI can remain above 70 for weeks during a strong trend, and 12 of 12 buy signals means momentum is confirmed, not exhausted. But the higher it climbs, the sharper the eventual mean-reversion pullback.

The most striking feature is that the S&P 500 is hitting records while oil sits above $105, gasoline has surged 42–44% to $4.30 per gallon, and consumer sentiment hit its lowest on record. The Iran conflict remains unresolved, with Trump saying Friday that “no one knows the status of talks aside from himself.” PCE came in line, and Q1 GDP was resilient, but AI investment is carrying the load while private consumption slows. The market is pricing in a resolution: strong earnings growth, expanding multiples, and a ceasefire narrative gaining ground. But the consumer is flashing red, and the war premium hasn’t unwound. The longer oil stays above $100, the more the economic damage compounds beneath the surface. As we noted on Friday:

“The market is not pricing oil at $90 in 2027; it is pricing it at roughly $70. That is either a generational good hedging opportunity for any business that buys energy, or a generational mistake that gets corrected violently. Below is the updated three-scenario framework. The structure from March holds; the probability weights and price targets have shifted to reflect the new reality.”

Time is the most important factor in the market. We are in the rare position of holding a technically perfect tape, new highs, broad breadth, all MAs flashing buy, VIX at 17, while the fundamental backdrop includes a war, $105 oil, record-low consumer sentiment, and a Fed on hold. The technicals say stay long. The fundamentals say this market is priced for perfection with zero margin for error. Both can be true. Trail stops, take partial profits, and use any pullback to the 50-DMA (~7,158) or the 7,000 level to add. The March lows at 6,300 feel like ancient history; they’re not. That was five weeks ago. Stay humble. Trade accordingly.

The Week Ahead

The labor market takes center stage this week. JOLTS openings tomorrow (expected 7M vs. 6.882M prior), ADP employment on Wednesday, and Friday’s nonfarm payrolls report frame the action. Wall Street is bracing for a sharp slowdown, with consensus calling for just 73K jobs added in April. That estimate sits well below March’s 178K print. The unemployment rate is expected to hold at 4.3%. If the data cooperate with expectations, it would mark the weakest two-month stretch of job creation in some time and reinforce the cooling narrative the Fed has been watching closely.

Tomorrow also brings the ISM Services PMI, expected to ease to 53.7 from 54.0. Given that services represent roughly 80% of GDP, any stumble would be a louder warning than the headline payroll number. Thursday’s Q1 unit labor costs are expected to moderate to 3.0% from 4.4%, an important input into the Fed’s inflation math. Friday’s preliminary Michigan Consumer Sentiment reading is expected to tick up to 50 from 49.8, though the absolute level remains historically depressed.

Finally, the Fed speaker calendar is relentless. Bowman, Barr, Musalem, Goolsbee, Hammack, Williams, Cook, Daly, and Waller all hit the wires this week. Some speeches may offer hints on the policy path, and any dovish tilt against a soft NFP could light a fuse under both stocks and bonds.

A Robot Economy: Who Gets Rich, Who Gets Left Behind

The real question I want to explore in today’s post is what happens to the people who don’t own the robots? Let’s dig in.

I spent the past week reading through a detailed account of what’s happening inside Figure’s robotics facility in San Jose, and I want to be direct: the humanoid robots economy is no longer a thought experiment. Figure’s latest robot ran for 67 consecutive hours of fully autonomous work, kitchen tasks, package handling, and logistics, without a single error. That’s not a demo reel, that’s a product. When you factor in a projected lease cost of roughly $10 a day, it’s a product priced to replace the single largest input cost on every corporate income statement in America: human labor.

The optimists call what’s coming the “age of abundance.” Cheaper goods, freed-up time, robots building robots until supply constraints essentially disappear. That would be incredible, and you should not dismiss that vision. Furthermore, I think it’s directionally correct over a long enough horizon. But after 35 years of watching economic cycles play out, I’ve learned that the gap between a macro promise and the lived experience of actual households is where the real story lives.

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Alphabet earned its premium with proof. Q1 revenue grew 22% year-over-year, and Google Cloud accelerated to 63% growth, exceeding $20 billion for the first time. More importantly, Cloud backlog nearly doubled quarter-over-quarter to over $460 billion. That is the receipt that matters. Alphabet bumped 2026 capex to a $180-$190 billion range and flagged 2027 as significantly higher, and investors didn’t blink. When the revenue line is showing up that fast, the AI spending number takes care of itself.

Amazon told a similar story on the fundamentals but received a cooler reaction. AWS reaccelerated to 28% growth, its fastest pace in 15 quarters, and management noted customer commitments already cover a substantial portion of the planned spend. The catch is the size of the bill: Q1 capex came in at roughly $43 billion, and Amazon is on track for a $200 billion full-year pace.

Microsoft and Meta are where the bifurcation is most pronounced. Microsoft beat across the board with Azure printing 40% in constant currency and AI annualized revenue hitting $37 billion. Yet management guided full-year capex to roughly $190 billion and warned capacity will remain “constrained” through 2026. The market is asking the right question: when does “constrained” stop being a bullish demand signal and start being a depreciation problem? Meta got the harshest verdict of the four, and we’ll dig into why below.

What To Watch Today

Earnings

Economy

Market Trading Update

Yesterday, we discussed the most crowded trades in the market currently. However, we are now receiving many questions about the lingering effects of high oil prices amid the Iran crisis.

When we framed the oil shock through three scenarios in mid-March, Brent was retracing from its $119.50 panic high, and the burden of proof had shifted to the bulls. Six weeks later, two things have happened that I did not expect — and they tell most of the story heading into May.

First, the conflict has not been resolved. President Trump rejected Tehran’s reopening proposal yesterday and reaffirmed the naval blockade until a nuclear agreement is reached. Brent printed $114 intraday Thursday — its highest since June 2022 — on reports that CENTCOM is briefing the White House on a new wave of strikes. Front-month settled at $118.03 yesterday, then opened today at $111.84 before sliding to roughly $110. The Strait remains effectively closed, and the IEA continues to call this an unprecedented supply shock.

Second, equities don’t care. The S&P 500 remains at or near record levels, the VIX is at 18, and gold is above $4,600. The defensive rotation we discussed in March has been completely unwound. This is despite $110 Brent, an active naval blockade, and an index trading at 22× forward earnings near record highs. That is not a normal coincidence.

What explains it? Look at the futures curve. Front-month Brent is around $108–110, but the December 2026 contract is pricing roughly $80, and the back end falls into the $60s by late 2027. That is the steepest backwardation in modern oil history. The futures market is making a clean bet: this shock is severe but short-lived. Equities are trading the futures view that by year-end, oil normalizes and the earnings drag is contained. The cash market is trading reality: barrels can’t get out of the Gulf today.

Pay attention to that slope. The market is not pricing oil at $90 in 2027; it is pricing it at roughly $70. That is either a generational good hedging opportunity for any business that buys energy, or a generational mistake that gets corrected violently. Below is the updated three-scenario framework. The structure from March holds; the probability weights and price targets have shifted to reflect the new reality.

Watch the back end of the curve. If Brent in December 2026 breaks above $90, the equity bid for oil-shock complacency disappears.

Trade accordingly.

Meta’s Capex Bill Comes Without A Third-Party Cloud Business

Meta’s headline numbers looked great. Revenue rose 33% to $56.31 billion, the fastest growth quarter since 2021. The problem was everything underneath. Meta lifted 2026 capex guidance to $125-$145 billion, up from $115-$135 billion just a quarter ago, and tagged 2027 spending as “significantly higher” still. Multi-year infrastructure commitments rose by $107 billion in the quarter alone. Adding to the skepticism, an $8 billion tax benefit flattered headline EPS by over $3, making the operating beat look far less impressive against an accelerating spend curve.

The deeper issue is that Meta is the only one of the four hyperscalers without a third-party cloud business to point to as proof of ROI. Alphabet has Google Cloud at 63% growth. Amazon has AWS at 28%. Microsoft has Azure at 40%. Meta has Reels and Instagram ads. Those are excellent businesses, but they are not infrastructure businesses, and the capex bill Zuckerberg is committing to is an infrastructure-business-sized bill. Investors are being asked to fund a hyperscaler buildout against an advertising payoff that, however strong, doesn’t have a contracted backlog like Google’s $460 billion to lean on.

The lesson is that the AI spending debate has matured. The market is no longer arguing about whether the capex is too large in aggregate. It is sorting which companies have shown the receipts and which haven’t. Meta hasn’t yet, and yesterday it paid the price.

New Thematic Model Alert

Let’s travel back in time to revisit one of the primary market narratives before the Iran conflict began in late February: the resurgence of international stocks amid a stretch of superior price performance outside the US, driven by a weakening USD index in 2025. The narrative became: “Investors are shedding US stocks in anticipation of a further weakening in the USD, driving a comeback in international stocks.” While we’ve disputed the arguments in favor of this narrative (and a continued USD weakening in general), we’ve received enough interest from clients and subscribers alike to launch an International Thematic Model.

Our International Thematic Model takes a value-oriented approach to investing outside the US. The model allocates roughly 80% across 16 value-oriented stocks, with the remaining 20% split equally between two broad international indices, the iShares MSCI Developed Markets ETF (EFA) and the iShares MSCI Emerging Markets ETF (EEM). The graphs below show that the new model diversifies exposure across both countries and industries.

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As seen at the end of the statement, in the graphic below, there were four dissenting votes, the most since 1992. Stephen Miran voted to cut rates by 0.25%, as he has in the last few meetings. More interestingly, three voters, Beth Hammack, Neel Kashkari, and Lori Logan, agreed with no change to the Fed Funds rate but dissented on the vote because they did not support what they viewed as an easing bias in the statement. They took offense at the following sentence:

The Committee is attentive to the risks to both sides of its dual mandate.

Given that the three dissenters have recently voiced inflationary concerns, their dissents represent a new hawkish bias toward potentially raising rates. With Powell lingering at the Fed and the three hawkish dissents, Warsh will have trouble forming a consensus to cut rates. To wit, the Fed Funds futures markets now price in a 88% chance the Fed doesn’t change rates by the end of January 2027 and a slight 12% chance of a rate hike. Given the widely differing opinions of FOMC voting members, Fed meetings are likely to become less predictable, which may lead to more volatility in the stock and bond markets. That said, a resolution of the Iranian conflict and lower oil prices could bring a consensus back to the Fed.

What To Watch Today

Earnings

Economy

Market Trading Update

Yesterday, we discussed the preview of last night’s earnings bonanza and Powell’s last Fed meeting(noted above). Tonight, we will continue the earnings parade with Apple (AAPL), Ely Lilly (LLY), and Caterpillar (CAT), among many others. However, the most dangerous place in any market is wherever the crowd has agreed to stand. When positioning gets one-sided, the unwinds are violent and unforgiving. Silver’s collapse last fall is the cleanest recent example. The setup looked unstoppable, until it didn’t.

The April Bank of America Global Fund Manager Survey, drawn from 193 managers running $563 billion, gives us the cleanest read on where consensus has piled in. “Long oil” and “long global semiconductors” now share the top spot as the most crowded trades, each cited by 24% of respondents. “Long gold,” which dominated this list for most of 2025, has slipped to 15%. “Long Magnificent 7,” once the consensus trade with 54% of managers crowded into it back in December, has collapsed to just 9%.

That last shift is the real story under the surface. The trade everyone was selling each other on six months ago is barely on the radar today. Capital didn’t disappear. It rotated into oil and semiconductors, leaving big technology names in its wake.

The hedge fund positioning data confirms the rotation. Morgan Stanley’s prime brokerage data shows that hedge funds have aggressively bought Energy over the last two weeks. Net exposure to the sector is at twelve-month highs, with funds the most overweight Energy relative to its Russell 3000 weight in any month over the past year. That reading sits in the 98th percentile.

Here’s the problem with all this. Oil is not gold, and gold is a passive store of value and a sentiment hedge. Furthermore, oil sits at the heart of the inflation and growth transmission channel and a 10% move in crude doesn’t wash out. It shows up in CPI prints, gasoline retail data, and earnings guidance for half the consumer-facing economy. Crowding into oil right as it becomes the consensus geopolitical hedge is the opposite of a hedge. It’s a leveraged macro bet wearing a defensive costume.

Semiconductors carry the same risk in a different jacket, and the moves of the past month make caution explicit. The Philadelphia Semiconductor Index (SOX) has logged 18 straight green sessions, the longest winning streak in its 32-year history. SOX is up roughly 38% in the past month and 148% over twelve months, hitting a record 10,564 on April 24th. The iShares Semiconductor ETF (SOXX) gained 27.7% in April, its largest monthly return since BlackRock launched the fund in July 2001.

The flow data confirms the chase. SOXX pulled in $2.05 billion in April alone, more than double its previous monthly record. The VanEck Semiconductor ETF (SMH) absorbed another $3.4 billion. Combined, the two funds raised $5.45 billion in a single month, a record for the category. Names below the megacap line have gone vertical: Astera Labs +79%, Marvell +53%, Intel +51%, all in April alone. The AI capex story is real. The earnings are there. But when retail sentiment for SOXX screens “extremely bullish” on every monitoring tool while Michael Burry quietly loads $330 puts on the same fund, the setup for a violent mean reversion is textbook. The trade is no longer asymmetric. It’s late.

So, where is the next trade? The most likely answer is the trade everyone just left. The Magnificent 7 still owns the earnings story. FactSet’s bottom-up estimates put 2026 Mag 7 earnings growth at 22.8%, compared with 12.1% for the other 493 names in the S&P 500. Forward quarters run even wider, with Mag 7 EPS growth accelerating from 14.9% in Q4 2025 to 19.7% by Q3 2026.

That fundamental gap is the gravitational pull. When only 9% of managers cite the group as crowded, when relative valuations have compressed against the broader index, and when the earnings engine still runs more than two times the rest of the market, the rotation back becomes a question of timing rather than direction. Money chases earnings growth eventually. The unwinds now building in oil and semiconductors will provide the cash. The earnings will pull it home. The crowd is rarely wrong about direction. It’s almost always wrong about timing.

Revisiting Hedges

The end date on the graph below is early April. We look back in time to show what the market looked like when we added hedges to our core portfolios. Going into the hedging decision, the S&P 500 had traded below its 200-day moving average for almost two weeks. Further, prior to adding the hedges, it had rallied back to the 200-day moving average. As the graph highlights, amid tariff concerns in April 2025, the market behaved similarly, with the price rejecting the 200-day moving average and falling sharply. Our concern was a similar rejection of the key moving average, followed by a replay of that event. Furthermore, amid the ongoing conflict in Iran, there were geopolitical concerns and oil-related economic risks to consider. A cease-fire was agreed upon days later, and the market zoomed to record highs. We removed the hedges right after the agreement was announced, when the S&P 500 was trading decently above its 200-day moving average.

Looking back at the hedge trades can be instructive.

• The hedges were relatively small, thus not nearly enough to shield our portfolios from losses or inhibit gains. We certainly had lots of room to sell or add more hedges if needed.

• Our concern was broad-based selling, or systematic risk, not losses due to the idiosyncratic, or company-specific risk of any of our holdings. Thus, the hedges allowed us to reduce risk on the margin and keep our portfolio intact.

• The hedges were not put on in anticipation of a full-blown bear market, but were intended to shield our portfolios from geopolitical volatility.

• We are better off that the hedges didn’t work. Yes, we took a slight loss on the hedges, but our portfolios fully participated in the upside over the last few weeks.

BDCs: Not All Yield Is Created Equal

Gated funds, collateral fraud, and auto-sector defaults are giving investors in private credit funds and their stock-market equivalents, business development corporations (BDCs), a headache.

We have discussed the recent woes of private credit funds (HERE, HERE, HERE), yet we haven’t addressed BDCs. The similarities and differences between private credit funds and BDCs are important. For instance, the bad press about the widespread gating of private credit funds. While BDCs own similar assets, they trade on a stock exchange. Thus, investors who want to sell don’t have to rely on a fund manager’s whim; they can sell their shares in seconds.

The poor sentiment toward private credit funds has dragged down many high-quality BDCs, as well as weaker ones. The chaos and bad press surrounding private credit funds are not reasons to avoid BDCs. In fact, we think it’s a reason to consider it.

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Microsoft and OpenAI have mutually agreed to end Microsoft’s exclusive rights to sell OpenAI’s models. Accordingly, OpenAI can source arrangements with Microsoft’s hyperscale competitors, such as Amazon and Meta. In exchange for giving up its monopoly on OpenAI products, Microsoft will no longer pay OpenAI a revenue share from the OpenAI products it sells. However, OpenAI will continue to abide by its revenue-sharing agreement with Microsoft until 2032, two years beyond the original agreement. OpenAI API products will remain exclusive to Microsoft’s Azure platform, while non-API products can use any cloud vendor. Further, OpenAI has contracted to purchase an additional $250 billion of Microsoft Azure services.

The bottom line is that Microsoft retains significant protections, but OpenAI is gaining some freedom. Analyst Jason Ader of William Blair summarized the revised partnership terms as follows:

“By securing IP rights through 2032, Microsoft protects the foundation of its Copilot strategy and Azure OpenAI monetization — still, Azure will now have to compete for more of OpenAI’s workloads going forward.”

What To Watch Today

Earnings

Economy

Market Trading Update

Yesterday, we discussed the seasonality of May as we enter the year’s seasonally weak period. However, that won’t matter until next week.

Today brings a true gauntlet for markets. Microsoft, Amazon, Alphabet, and Meta all report after the close, and the FOMC delivers its policy decision midafternoon. Roughly 40% of the S&P 500’s market cap hands over its outlook in a single window, and the Fed gets to set the tone for risk appetite right before the bell. As I wrote last week, when the calendar concentrates this much catalyst into one session, the asymmetry tilts against complacent positioning.

Expectations are not modest. Consensus has Microsoft posting another quarter of mid-teens revenue growth driven by Azure and Copilot monetization. Alphabet is expected to show search resilience and cloud margin expansion. Meta needs to justify its capex trajectory with continued ad-revenue strength, and Amazon must demonstrate AWS reacceleration alongside retail-margin discipline. The bar is particularly high because prices have risen so aggressively in recent weeks. The Magnificent names are trading well above their 50-day moving averages with stretched RSI readings, and several are extended more than 10% above trend.

Here is the problem. OpenAI’s recent infrastructure announcement reframed the AI capex conversation overnight. Investors who had grown comfortable with the “AI builds itself in” narrative now face the prospect that hyperscaler capital intensity is rising again, not falling. Microsoft alone is likely to guide to capex above $100 billion next year. That is good news for Nvidia and the AI supply chain. It is more complicated for the hyperscalers themselves, where free cash flow conversion gets squeezed and return on capital math is pushed further into the future. The market has priced flawless execution and steadily rising AI revenue. Anything less rates a sell-the-news response, particularly given how stretched these stocks are heading in.

A few notes about earnings this evening:

• Meta’s revenue bar towers over the rest at +31%, but EPS growth is only +4% — that gap is the capex story in one chart. The Street is funding the build-out, but every dollar is going into MTIA silicon and data centers, not the bottom line.

• Alphabet is the only name on the slate with negative EPS growth (-6%), despite the strongest revenue acceleration ex-Meta. Stock-based comp and cloud investment are the swing factors. A clean cloud number near the $18.4B consensus, with RPO accelerating overrides, trumps the EPS optic.

• Microsoft is the most balanced print — EPS and revenue growth roughly matched in the high teens — but the bar to clear is Azure constant-currency above 38%. Anything below 36% reopens the capacity-constraint debate the bulls have been leaning on.

• Amazon is the wildcard. The EPS growth of just +1.3% looks soft, but that is the AWS capex flowing through depreciation. The print lives or dies on AWS actually hitting the 25%+ growth handle.

The FOMC adds another layer. A hold is fully priced. The risk lies in the press conference. If Powell pushes back on the easing path the curve has built in, equities will absorb that hit before they ever see the earnings tape. If he validates further cuts, dollar-sensitive names rip, but the hyperscaler reaction function is still tied to capex guidance and forward AI commentary, not the funds rate.

I am not adding risk into this print. Trim into strength on names trading well above trend, raise a little cash, and let the reports clear before reaching for exposure. Discipline beats conviction when four mega-caps and the Fed share a single afternoon.

OpenAI Doubts Raise Concerns For Oracle Investors

An article published on Tuesday by the Wall Street Journal reports that there are headwinds to OpenAI’s once-invincible growth story. Although a private company, OpenAI missed its internal goal of reaching one billion weekly active users by year-end and fell short of its ChatGPT revenue target as it is dealing with larger-than-expected subscriber cancellation rates. This comes on top of a report from earlier this year that also showed they missed multiple monthly revenue targets. CFO Sarah Friar has reportedly raised concerns that the company may be unable to fund its future computing contracts if revenue growth fails to keep pace with its internal goals. That is concerning for its clients, especially given that they just raised over $122 billion in a funding round.

The impact of OpenAI’s shortfalls is pressuring companies like Oracle. Oracle provides two core products to OpenAI. It is the primary builder and operator of Stargate data centers that train and run OpenAI’s models. Second, Oracle provides cloud computing services directly to OpenAI. More simply, Oracle builds the buildings, fills them with chips, powers them, and charges OpenAI to use them. Accordingly, investors in companies like Oracle are voicing concern over concerns at OpenAI.

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Throughout March, the U.S.-Iran conflict drove crude oil prices above $100 per barrel, leading to broadly weaker stocks, with an emphasis on the technology sector. At the end of the month, the market reversed course, forming a bottom. The burgeoning rally was boosted on April 7th by the two-week ceasefire. At the same large-cap growth and technology stocks started to lead the market higher. Oil prices stabilized and fell, risk assets rallied, and semiconductors, one of the most oversold sub-sectors, snapped back the hardest.

The SOX rebound has been turbocharged by investors chasing the AI theme. Fundamentals do support some strength in the rally. To wit, global semiconductor spending is projected to hit $1.3 trillion in 2026, a 64% year-over-year increase. However, the rally has driven the index and many underlying stocks to extremely overbought levels. A pullback, or at a minimum a consolidation, is likely at this point. Below, we share the gains since April 1 of the top ten SOX holdings.

What To Watch Today

Earnings

Economy

Market Trading Update

Yesterday, we reviewed the technical backdrop as we enter the last trading week of April. Notably, we are closing April with the S&P 500 carving out a sharp recovery from the conflict-driven correction lows, and traders are already asking the obvious question: “Is it time to sell in May and go away?” After watching the index push back into short-term overbought territory on the daily RSI, that question deserves a straight answer rather than the usual seasonal cliche.

The data is clearer than most realize. Since 1950, May has averaged a return of roughly 0.2% for the S&P 500, essentially flat. That’s not the headline. The headline is what comes after. The May-through-October stretch has historically delivered an average gain near 1.7%, while the November-through-April period averages closer to 7%. The seasonal pattern isn’t superstition. It’s a real performance gap that has persisted across 7 decades of market data. However, as you will note in the chart below, it is the August and September weakness that spoils the summer fun, as May, June, and July tend to post positive returns, especially July.

This year, the calendar matters more than usual. 2026 is a midterm election year, and midterm cycles carry their own seasonal fingerprint that overlays cleanly on the May weakness. Since 1950, the second and third quarters of midterm years have produced the worst stretch of the entire four-year presidential cycle. Average peak-to-trough drawdowns in this window range from 15% to 17%, with the cycle low typically forming in late September or October, followed by a sharp Q4 reversal. The year after a midterm has averaged a gain of more than 30%, which is exactly why patient traders treat midterm summer weakness as a setup, not a catastrophe.

Stack the two patterns together, a “Sell in May” period entering with the market already overbought, layered over a midterm year that historically chops sideways-to-down through autumn, and the right posture isn’t panic. It’s preparation. Trim positions where you have outsized gains. Raise stop levels on existing longs. Build a small cash reserve so you have ammunition when prices do come in. Watch the 50-day and 200-day moving averages carefully. They’ll tell you whether any pullback is corrective or something more concerning.

The seasonal headwinds are real, the midterm overlay sharpens them, and the market is overbought as we enter the worst six months of the year. None of that means dump everything. It means tightening the screws, keeping some powder dry, and respecting the pattern that has made September and October among the best buying opportunities of every four-year cycle.

Chipmakers Are Driving The Market

The graph below shows the sharp ascent in the SOX index ETF (SOXX) over the last 18 days. Given the rise and significant contribution of semiconductor stocks to the technology sector, the sector is now very overbought. The second graphic, courtesy of SimpleVisor, shows that technology is the only sector overbought relative to the S&P 500. The other sectors have all lagged in the recent market rally. The third graphic, from the “coming soon” new version of SimpleVisor, highlights the gross outperformance compared to almost all sectors over the last week.

As we note in the opening section, semiconductors are extremely overbought, and the broader technology sector is very overbought. Such outperformance relative to more value-oriented stocks prompted a change in our Factor Rotation model last week. The model now favors value over growth stocks.

Hormuz: Why Markets Are Shrugging Off The Oil Shock

As of this writing, the Strait of Hormuz remains effectively closed since February 28. Roughly 20% of the world’s seaborne oil stopped moving through the chokepoint. The International Energy Agency described the event as “the largest supply disruption in the history of the global oil market.” Gulf producers shut in nearly 9 million barrels a day of production. U.S. gasoline at the pump jumped from $2.98 to over $4.00.

Every historical template for this kind of shock, 1973, 1979, 1990, pointed to a stagflationary body blow that breaks markets. After 30 years of watching cycles play out, I’ve learned that when the tape refuses to confirm a catastrophe narrative, it’s usually seeing something the headlines miss. That’s exactly what is happening with the Strait of Hormuz. Brent peaked near $120 and now sits around $96, well below the $132 the Dallas Fed modeled for a closure lasting three quarters. The S&P 500 is grinding higher. China, which takes roughly a third of its crude through the waterway, hasn’t buckled.

So the question isn’t why the catastrophists were wrong. It’s what they missed, and where the real risks now sit.

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IBM beat earnings expectations across the board. However, they didn’t change their forward guidance for the year. Its CFO, Jim Kavanaugh, noted, “I don’t think we’ve ever raised guidance in a first quarter.” Despite good earnings, the market wasn’t happy because they didn’t provide a first-quarter outlook, as is typical for the company.

The NOW situation was a little different from IBM’s. They withheld earnings guidance specifically because of the situation in Iran. Per an interview on CNBC, its CFO, Gina Mastantuono, said she “took a little bit of incremental conservatism because of the ongoing conflict in the Middle East and its potential impact on deal timing.” The market didn’t like the company’s conservative posture.

As we share below, both companies’ stocks were trading poorly before earnings. Investors wanted more than good earnings reports; based on the strong negative reaction, they wanted guidance on how AI is impacting the companies. The simple lesson, especially for technology stocks, is that silence on guidance is bearish.

What To Watch Today

Earnings

Economy

Market Trading Update

The S&P 500 closed Friday at a fresh all-time high of 7,165, up 0.80% on the session and extending the index’s remarkable run off the March lows. The week, however, was anything but smooth. Thursday’s session delivered a gut-check: reports of air defense systems activating over Tehran sent WTI past $106, and the S&P dropped 0.41% as the oil-volatility transmission mechanism briefly reasserted itself. Friday’s recovery came on Intel’s blowout earnings (+21%), Trump’s three-week extension of the Israel-Lebanon ceasefire, and crude pulling back to $94. The VIX settled at 18.92, below our 20 thresholds, but Thursday’s spike was a reminder of how quickly that can change.

The technical picture remains unambiguously bullish across all time frames. Investing.com shows 12 of 12 moving average signals at “Strong Buy.” The 14-day RSI is near 70, indicating an overbought condition. The MACD, a measure of momentum, is on a “buy signal” and rising. The index is trading above the 50-DMA (~6,790) and above the 200-DMA (~6,705), both of which are rising. Breadth has held with roughly 52% of constituents above their 50-DMA, but needs to strengthen if the rally is going to continue.

The tension in this tape lies between technical strength and fundamental fragility. As noted below, the Michigan consumer sentiment printed its lowest reading on record. Furthermore, the Iran peace talks have stalled, with Thursday’s Tehran episode a stark reminder that the geopolitical risk premium hasn’t fully unwound. Oil’s $94 price represents the kind of volatility that whipsaws systematic strategies and undermines the VIX’s descent. The Fed remains on hold at 3.5–3.75% with markets pricing no cuts in 2026. At BofA’s target zone of 7,168–7,206, now just 0.4–1.0% overhead, the index is approaching a natural ceiling where profit-taking is likely.

For now, the market continues to climb a wall of worry, and the technicals say respect the trend. RSI is elevated but not grossly overbought, and while breadth is improving, all moving averages remain green. Our March 200-DMA analysis continues to play out textbook. But Thursday’s reversal on the Tehran headlines was a shot across the bow; this market remains one oil headline away from a 2–3% air pocket. The pullback we flagged last week hasn’t materialized so far, which is making the setup increasingly stretched. New money should wait for a retest of 7,000 or the 50-DMA (~6,979). Stay long but trail stops and take partial profits into BofA’s 7,168–7,206 target. Trade accordingly.

The Week Ahead

After a couple of weeks of limited economic data, investors will start to get a picture of how inflation is reacting to higher oil prices. On Thursday, the PCE prices index for March is expected to show +0.3% growth excluding food and energy. The headline number is expected to rise by 0.6%. Despite Friday being the first Friday of the month, the BLS employment data will not be released until May 8th. The Fed may provide further guidance on inflation as the FOMC meets on Wednesday. No changes to rates are expected, but we may get some more information on why they reduced QE from $40 billion to $25 billion a month.

As we share below, courtesy of SensaMarket, there will be plenty of important earnings reports due this week. Thursday could be a volatile day as Google, Microsoft, Amazon, and Meta all report after the market closes on Wednesday.

Government Debt: Not What The Doom Crowd Thinks It Is

Every few years, someone discovers that the United States government owes a very large amount of dollars and concludes that Rome is about to fall. A recent piece in RealClearMarkets by Nash, Thomas, Lang, and Rastin does exactly this. They rely on the Roman Empire’s collapse and the Weimar Republic’s hyperinflation as cautionary parallels to America’s $39 trillion in federal government debt.

The argument is tidy, emotionally satisfying, but wrong in several important ways. Crucially, government debt is not what the doom crowd thinks it is, and the historical comparisons they love most have almost nothing in common with the American fiscal situation today.

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Regarding breadth, consider that despite the S&P 500 being at a record high, only 65% of stocks are above their 20-day moving averages, 54% above their 50-day moving averages, and 60% above their 200-day moving averages. The graph below, courtesy of Charles Schwab, shows that a large majority of stocks, broken down by sector, are below recent monthly, quarterly, or 52-week highs. Even in the leading sectors, like technology, only 58% of the underlying stocks are at a 4-week high. Interestingly, despite oil trading in the mid-$90s, none of the energy sector stocks are trading at a recent high. The broad breadth takeaway is that a few stocks are leading the market higher, while many others are not keeping up.

We would like to see breadth improve to increase our confidence that the market will continue to move higher over the next few months. When a good majority of stocks across many sectors rise together, it reflects genuine, widespread bullish conviction and real money flowing into equities. A narrow rally, as we have thus far, is often driven by momentum chasing and sector-specific themes. That kind of demand is weak and can reverse more easily.

What To Watch Today

Earnings

Economy

Market Trading Update

Yesterday, we discussed why the market continues to look past the Strait of Hormuz closure and the temporary rise in oil prices. That conversation leads into today’s discussion about Energy stocks, which have largely erased the gains from a month ago amid the Iran crisis. Is there a buying opportunity for Energy, and if so, for how long?

Brent crude touched $105, and WTI pushed past $96 yesterday as the U.S. naval blockade seized ships and Iran attacked vessels in the Strait. You’d expect the energy sector to celebrate, but it really hasn’t. The Energy Select Sector SPDR (XLE) topped out in late March near $63, sold off roughly 13 percent, and is now stalling near $56 while crude grinds higher. That disconnect tells you more about how equity markets are pricing this conflict than any headline will.

Equity investors are treating this crude spike as an event, not a cycle. We saw the same behavior in March when oil ripped higher and XLE barely flinched. Investors have decided the geopolitical premium is transient, and they’re refusing to pay integrated majors for barrels they don’t believe will last. Exxon and Chevron, which together make up 40 percent of XLE, haven’t been repriced to $100 crude because the forward curve is already deeply backwardated.

Here’s the setup most investors won’t see coming. When the Strait reopens, and history says that’s a question of weeks rather than years, the supply curve shifts fast. Roughly 13 million barrels per day of production are currently sidelined. Add Iran’s blockaded 1.3 million bpd, replenished floating storage, OPEC+ spare capacity, and a 2026 baseline already projected for a 2 million bpd surplus. Those barrels don’t disappear. They just wait.

So is this a trade or a longer-term hold? For me, it’s a trade. The conditions that support a secular bid in energy, sustained demand growth, chronic capex underinvestment, and structural tightness, aren’t in place. What we have is a war premium layered on top of a structurally oversupplied market.

If you’re underweight energy, scale into XLE on pullbacks toward the $52 to $53 support shelf. Keep the position tactical, 3 to 5%, not a core holding. For a sharper beta to the headline, favor independent E&P names through XOP and oilfield services through OIH, where operating leverage to crude is meaningfully higher than the majors. Set a hard stop below the 200-DMA. Take profits into the late March high near $63. Scale out aggressively on any diplomatic breakthrough. Most importantly: Do not round-trip the trade.

Trade the war premium, don’t marry it. When the Strait reopens, the supply overhang returns, and late buyers will be left holding the bag as energy equities give back the geopolitical bid they only half embraced on the way up.

Treasury Buybacks: Money Printing Or Prudent Cash Management?

We were forwarded the tweet below and asked, “Why is the Treasury printing money?”

The quick answer is they are not printing money. The $15 billion in buybacks consisted entirely of securities maturing within a year. The money to buy the securities will come from the excess cash they are holding. The excess cash is from prior issued debt securities and tax revenue. What they are really doing is shifting their future cash flows. They are likely spreading future principal payments over time and avoiding large, chunky payments. This cash management exercise results in no money printing or changes to their outstanding debt. It’s just a smart way for the Treasury to handle its enormous cash inflows and outflows.

Car Crash

Wednesday’s Commentary, Car is Racing Higher, we led with a discussion of the stunning price surge in CAR shares. To wit, in about one month, the stock peaked near $800 per share, up from slightly under $100. The primary rationale for the sharp increase was a short squeeze, as we explained. While we didn’t know how much higher the squeeze could carry CAR, we were confident it wouldn’t end well. Accordingly, we stated:

While CAR can certainly go higher, the move is not sustainable. The reason is quite simply that CAR’s fundamentals are horrendous.

Little did we know that CAR would crash as quickly as it did, as shown below. After peaking on Wednesday morning, the stock fell precipitously. Hours after the downward spiral started, the company announced it was moving its earnings data up by two weeks. Given that the company is in an earnings blackout, they were unable to issue new shares at the higher prices. Thus, by moving up the earnings data, they could sell shares earlier. It may not have mattered, as the market figured out why the earnings date was changing and started selling aggressively to get ahead of the share dilution. This is yet another meme stock/short squeeze that worked fabulously until it didn’t!

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• Public Communications: Warsh stated clearly that he doesn’t believe in forward guidance. This seems to be a stark departure from prior Fed members, who presumed that the more the markets knew what the Fed was thinking, the less likely policy actions would shock the markets. Taking a step back from forward guidance could result in stock and bond market volatility, as investors are less clear about the future path of interest rates.

• Economic Models: Warsh is not comfortable with the Fed’s current inflation models. He seems to advocate a trimmed-mean inflation reading. Trimmed mean models strip out the outliers with the intention of filtering out one-off price swings that can distort inflation readings. As we share in the graphic below, the trimmed mean is less volatile. At 2.33%, it is also running about half a percentage point below the headline PCE price index.

• Fed Balance Sheet: He has advocated against QE since the GFC, despite voting for it as a Fed member during the crisis.

Regarding current monetary policy, Warsh believes inflation is lower than official indicators state. We have noted this as well with the Truflation data. He acknowledges that while the inflation path is trending lower, “there’s more work to do.” Further, while he may be open to cutting rates slightly, he came off as hawkish as he wants to reduce the Fed’s balance sheet. To wit, consider the following quote:

QE is reverse Robin Hood. It’s policy that steals from the poor, to give to the rich.

What To Watch Today

Earnings

Economy

Market Trading Update

Yesterday, we discussed the dollar and why a stronger market will likely continue to track foreign inflows into US markets. However, this raises another question I received during our live Q&A session on the RealInvestmentShow yesterday.

“Why is the market ignoring the risk arising from the shuttering of the Strait of Hormuz?”

It’s a good question, and honestly one that I have repeatedly considered over the last month as the events in Iran unfolded. Here is my best guess as to why the “doomsayer” case has been wrong, at least so far.

• First, “closed” was always a headline, not a fact. Saudi Arabia and the UAE rerouted 5 to 6 million barrels a day through pipelines terminating at the Red Sea and the Gulf of Oman. By late March, Iran had selectively reopened the strait to tankers flagged by China, Russia, India, Iraq, and Pakistan. The chokepoint wasn’t sealed. It was rationed.

• Second, strategic reserves actually functioned for once. The IEA coordinated a 400-million-barrel release, the largest in its history, with the U.S. SPR alone putting 1.4 million barrels a day on the water. That doesn’t replace lost volume, but it blunts speculative panic while physical workarounds take hold.

• Third, China was the biggest tail risk and China came in loaded. Commercial inventories sat near one billion barrels heading into the crisis, with another 360 million barrels of state reserve behind that. Iran granting Chinese tankers transit removed the rest of the downside. Beijing was never going to let this crack its economy, and it hasn’t.

• Fourth, the U.S. is structurally insulated. We produce more than 13 million barrels a day, we’re the world’s largest LNG exporter at 18 billion cubic feet daily, and less than 10% of our crude runs through Hormuz. In a global shock, the U.S. becomes the marginal supplier, not the marginal victim.

Now to the harder question. If the U.S. supply is offsetting the crisis, does that set up an oversupply collapse when the strait reopens? Here’s where I think the back end of the curve is mispriced. When Hormuz fully reopens, three things hit the market at once. Gulf producers restart roughly 9 million barrels a day of shut-in capacity. Tankers jammed up in the regional storage unload. U.S. shale, recapitalized by $95 crude, keeps pumping. That’s a textbook glut setup.

The offset is SPR rebuilding. Thirty-plus IEA countries have drained strategic stockpiles, and they’ll spend the back half of 2026 refilling. That creates real physical demand. Kpler already argues late-2026 Brent at $74 is undervalued. But the window between reopening and restocking acceleration could get violent. I’d expect a move back into the low $70s within 90 days of a durable ceasefire, with overshoot risk toward $60 if demand destruction lingers.

Here is the thing: I think the markets have already priced in all this.

If the supply shock really has been buffered, the market has already done the math and moved on. That’s what price action is telling us. The S&P 500 has pushed through Hormuz headlines the same way it pushed through tariffs, Fed succession noise, and March’s banking tremors. At some point, markets stop pricing risks they’ve already metabolized.

What replaces geopolitics as the driver? Earnings. And here the data is unambiguously bullish. With 10% of the S&P 500 reporting for Q1, 88% have beaten EPS estimates, well above the 10-year average of 76%. The aggregate beat sits at 10.8%, versus a historical 7.1%. Analysts have revised full-year 2026 earnings growth to 18%. Forward 12-month EPS has pushed the bottom-up index target to roughly $7,350, up 13% from the May 14 low. The estimated 2026 net margin of 13.9% would be the highest on record.

Do I buy the whole bullish read? Mostly, with a caveat. Stocks do follow earnings over time, and the earnings trajectory here is genuinely strong. But forward estimates almost always rise until they don’t. That’s the normal pattern, not a signal. The forward 12-month P/E is 20.9, above both the 5-year (19.9) and 10-year (18.9) averages. At those multiples, a clean beat earns a muted reaction, and any Q2 guidance that embeds the $4+ gasoline hit to the consumer gets punished hard. The market is right to pivot. It’s also walking a thinner ledge than the headlines suggest.

Bottom line: The market isn’t wrong to be calm about Hormuz, and it isn’t wrong to be bid up on earnings. The risk isn’t on the geopolitical side anymore. It’s whether forward EPS estimates hold when Q2 guides land, and whether the back end of the oil curve dislocates before SPR restocking can absorb the returning Gulf supply. Both are the other side of the same trade.

GE Vernova Continues To Beat Expectations

GE Vernova (GEV) stock opened nearly 10% higher after the company handily beat earnings expectations, posting EPS of $2.06, almost 10% above estimates. Revenues beat as well, and forward guidance was increased from already optimistic levels. Importantly, their order backlog grew to $163 billion, representing about four times their current quarterly revenue. GEV stock has risen by nearly 200% over the last year due to its growth surge.

GEV is a primary beneficiary of the AI boom, as it makes the equipment that generates, transmits, and stores electricity, such as gas and wind turbines, as well as grid infrastructure. The quest for power for the massive expansion of data centers is driving outsized demand for its products. The following quote sums up GEV’s unique positioning with the AI boom nicely:

“The companies that sell the physical infrastructure for AI data centers are seeing demand faster than they can raise capacity”

GFC 2.0 Or False Alarm: Part Two

The graph below, courtesy of Preqin and the Daily Shot, shows the steady growth of private credit funds since the GFC. The “Dry Powder” category represents committed capital for investment that has not yet been deployed. For what it is worth, that amount is almost identical to the amount of subprime mortgages at their peak. The total global private credit market, including all other lenders, is estimated at around $3.4 trillion.

After the GFC, regulators forced banks to hold more capital and to retreat from riskier lending. As a result, an alternative credit ecosystem grew to replace banks. Private credit funds, business development companies (BDCs), and specialty finance vehicles have filled the gap.

Unlike the various subprime mortgage securities and derivatives, which were largely owned by institutional investors, retail investors have gotten involved in private credit funds. They were tempted with high yields and monthly or quarterly redemption windows.

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With 54% of the float sold short as of the latest reporting period, which ended late March, CAR was the most heavily shorted Russell 1000 stock. As we have seen play out with meme stocks like GameStop and AMC, such a high ratio of short sales makes CAR shares prime for a squeeze. As CAR initially rose, some short sellers were forced to cover their positions by buying shares, thereby accelerating the rally. Moreover, as the stock continued higher, more longs entered the market, further exacerbating the situation. And at the same time, some short traders added to their short position, providing even more upside fodder.

While CAR can certainly go higher, the move is not sustainable. The reason is quite simply that CAR’s fundamentals are horrendous. CAR entered 2026 with over $25 billion in debt, a near-$1 billion net loss, flat-to-declining sales, and just over $500 million in cash.

The risk for short sellers: In late March, Avis launched an offering to sell up to 5 million shares directly into the market. The higher price provided CAR a rare opportunity to chip away at its massive debt load. Don’t be surprised when they issue more dilutive shares now that the stock is multiples of where it was in late March.

What To Watch Today

Earnings

Economy

• No major releases today

Market Trading Update

Yesterday, we discussed that, on a weekly chart, the recent decline was much like what we have seen in prior correction periods. Two notable points were that 1) such rallies don’t retrace to lows, and 2) denote a completion process of the previous correction cycle and the return to the bullish trend. More importantly, we are in the midst of an earnings cycle that continues to signal stronger earnings growth ahead. This brings us to an important discussion.

Social media has been awash with dramatic proclamations that “the dollar is dying” and “nobody wants the USD.” The narrative has become so pervasive that it risks hardening into a consensus. However, a quick glance at the chart tells a more nuanced story. While the Dollar Index (DXY) has drifted lower over the past two years, it remains near 98 today, essentially flat over the trailing 12 months and still well above its long-term historical averages. That is hardly the collapse being advertised.

More importantly, the flow of foreign capital into U.S. assets has not merely held steady; it has accelerated. According to the latest Treasury International Capital (TIC) data, foreign residents purchased a net $101 billion of long-term U.S. securities in February alone, following November’s blockbuster $222 billion print. Over the last five reporting months, foreigners have added roughly $488 billion to U.S. long-term stocks and bonds, a pace that rivals the post-COVID liquidity surge and flatly contradicts the “capital flight” story.

The why behind those flows becomes obvious when we examine earnings. Consensus expectations for the U.S. IT sector have ratcheted higher throughout 2026, with earnings growth now projected at 43.4%, up from 30.9% at the start of the year. Emerging markets follow at 38.9%, while the U.S. total is pegged at 18.7%. More telling still, Info Tech earnings are expected to grow more than 2x faster than the S&P 500 as a whole (40% vs. 18%), with only Energy and Materials meaningfully outpacing the index.

Global capital allocators face a stark choice: accept mid-single-digit growth across Europe and much of the developed world, or own the companies actually building the AI infrastructure layer. That is not really a choice.

As long as U.S. earnings growth remains this differentiated, driven overwhelmingly by the AI capital cycle, foreign flows should continue to underpin both the dollar and U.S. equity valuations, regardless of the “dollar is dying” chorus on social media. Investors should position accordingly.

Narratives make headlines; flows make markets. Trade accordingly.

Construction Labor Holds Up

Construction jobs, like construction spending, tend to be highly cyclical, changing with the pace of economic activity. While the economy has held up reasonably well, residential and non-residential construction spending has been flat, as we share below. Yet, the number of employees working in the construction industry has been steadily rising.

We believe this anomaly is largely due to construction spending in data centers. The second graph shows that data center construction spending has grown from $3 billion in 2016 to $47 billion today. Moreover, spending on data centers has overtaken that spent on offices.

Inflationary Anxiety Boosts Retail Sales

Retail sales, excluding auto and gas prices, rose by 0.6%. While that was slightly below expectations for a 0.8% gain, it was a strong pace. Consider that the data was collected in mid-March, when consumer sentiment was very low, and oil prices were soaring. It appears that the boost in sales may be partly due to front-running. Higher oil prices and related goods are creating some anxiety among consumers, and it’s likely that quite a few have bought items they might have bought later to avoid higher prices. This is similar to the tariff front-running we saw in early 2025. While it boosts sales in the present, it has a dampening effect on future sales.

Per the Conference Board Consumer Sentiment Index:

Unsurprisingly, given the Iran war oil shock, consumers’ average and median 12-month inflation expectations surged in March to levels last seen in August 2025, when US consumers awaited more tariff announcements from the US federal government.

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While Nvidia may lose some market share as CPU usage grows relative to GPU usage, there is another facet to consider that favors Nvidia. Profit margins on GPUs are almost double that of CPUs. For example, Nvidia has a profit margin of about 75%, while Intel and AMD are in the low- to mid-40 % range. There are two primary reasons for the distinct advantage as follows:

• Inelastic AI demand — Hyperscalers like Microsoft, Google, Meta, and Amazon are willing to pay premium prices for GPU chips because the alternative (delayed AI deployment) is costlier.

• Monopoly pricing — NVIDIA controls ~80–90% of AI GPU supply, giving it enormous pricing power.

CPUs are much more of a commodity than GPUs. As such, they face much more intense competition, which compresses margins. There are also ARM-based alternatives that offer further competition. So while CPU usage will increase relative to GPUs, profit margins will likely further compress for CPU makers, while remaining abnormally high for Nvidia.

What To Watch Today

Earnings

Economy

Market Trading Update

Friday’s tape told you everything you need to know about narrative-driven markets. The S&P 500 sprinted another 1.2% to fresh all-time highs above 7,100, crude crumbled 12% to $83, and the 10-year yield eased seven basis points to 4.24%. As noted yesterday, the catalyst was a single headline from Iran’s foreign minister declaring the Strait of Hormuz “completely open” — a statement that, within hours, proved to be more wishful thinking than policy. As such, after 11 consecutive advances, the market pulled back yesterday, as expected.

With momentum and relative strength significantly reversed on a weekly basis, the market surge looks much like we have seen at previous bottoms. What is notable is that in every previous case, once the momentum indicator returned to a buy signal, the prior correction phase was complete. That appears to be the case this time.

However, that sharp an advance is “properly primed for a pull back.” The technical tailwinds that powered this leg higher, such as large macro short-covering and systematic CTA demand, are coming to an end. Prime brokerage data tells the story. Overall book gross leverage sits at 310%, the 92nd percentile over one year and a near-record 98th percentile over five. Net leverage is more moderate at 75%, but fundamental long/short funds just posted their best three-week run since COVID, up 8.2% month-to-date and 7.1% on the year. In other words, the shorts have covered, the underweights have chased, and the engine driving this rally is likely to pause.

As such, use the current rally to rebalance portfolios, stop chasing the index, start hedging the tape, and look where no one else is looking. More importantly, raise cash levels to provide you an opportunity to add to equities further on any pullback to recent support.

Technology Leads As Breadth Deteriorates

A 13% rally in 13 days is quite the feat. Within the sharp rally, there is also a sharp divergence in returns. Hands down, technology led the market higher, while many other sectors relatively languished. As we show in the SimpleVisor analysis below, over the last three weeks, technology stocks (XLK) have moved from the bottom left, indicating oversold conditions on both an absolute and a relative basis, to overbought on both. At the same time, two of the more recently favored sectors, staples (XLP) and utilities (XLU), have moved lower. Their absolute scores haven’t changed much, but their relative scores have fallen quite a bit.

The market was in a topping pattern of sorts from November until a few weeks ago. During that period, lower-beta sectors led the way, while technology and communications faltered. The recent rally, as we noted, is being led by the sectors that powered the market before November. This again raises the question of whether the recent outperformance of technology and other large-cap growth stocks signals that the upward trend is back on track, or a brief respite before value and low beta take over and prices consolidate or even decline.

Market Lesson: Why Panic Is A Costly Mistake

The stock market selloff between February 28 and April 14 produced one of the more instructive market lessons in recent memory. It isn’t because of what the market did, but because of what investors did in response. By April 2nd, the AAII Sentiment Survey showed bearish sentiment at 51.4%, the highest reading in years, well above the historical average of 31%. Put option volume surged, and the financial media ran daily coverage of worst-case oil scenarios, recession projections, and S&P 500 targets as low as 3,800.

However, when you have that combination of bearishness, as we discussed in 5-Consecutive Weekly Declines, markets tend to perform better.

What was surprising was that the S&P 500 recovered completely in two weeks and is now setting all-time highs.

That sequence is not a reason to relax, but it is a valuable market lesson. It is also a good reason to examine what happened to investors who panicked, why the pattern repeats with such regularity, and, most importantly, what a well-constructed portfolio actually looks like when the next stock market selloff arrives. Because it will arrive. The only uncertainty is the catalyst.

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The concern, however, is forward-looking. Sentiment doesn’t just measure how people feel; at times it can shape how they spend. Recent data suggests the poor confidence feeling is slowly impacting consumerism. Real personal consumption expenditures, the broadest measure of what consumers buy, have quietly decelerated from roughly 3.5% year-over-year growth in early 2024 to under 2.5%. That’s not recessionary-like spending, but it’s a meaningful decline. Moreover, we are witnessing weakness concentrated in the categories most sensitive to confidence: discretionary retail, autos, and housing-adjacent spending like furniture and appliances.

The transmission lag is critical in predicting economic activity over the next few quarters. Historically, poor sentiment readings take three to six months to fully flow through into hard spending data. Which means the poor Michigan confidence survey is still only partially priced into the consumption data now being released. There may be more to come.

What To Watch Today

Earnings

Economy

• No economic reports to be released

Market Trading Update

The S&P 500 closed Friday at a new all-time high of 7,125, extending 1.8% beyond January’s prior peak and capping a 13.1% rally from the March low in under three weeks. This is one of the sharpest V-shaped recoveries in the post-GFC era. The Nasdaq posted its 13th consecutive gain (its longest winning streak since 2009), the Russell 2000 hit a new all-time high, with 75% of its constituents advancing Friday, and the VIX collapsed from 31 to 17. Oil pulled back below $90 before closing at $94, with ships beginning to transit the Strait of Hormuz. This is exactly the durable-bottom signal we identified weeks ago: a rapid recovery above the 200-day moving average, improving breadth, and oil declining with the VIX below 20.

However, is this just a short-covering rally or the resumption of the bullish trend? The answer is that this is most likely the resumption of the bullish trend.

Two weeks ago, just 27.6% of S&P 500 constituents traded above their 50-DMA (12th percentile). That number has surged to roughly 71%, well above the 50% confirmation threshold we set as the dividing line between a reflexive bounce and a genuine trend reversal. The Russell 2000’s move to all-time highs is the single most bullish breadth signal: small caps confirm this is not merely a Mag 7 short-squeeze. JPMorgan’s flow data shows retail participation rising from the 10th to the 55th percentile. When breadth and flows confirm the move, the rally has a structural foundation that pure short-covering does not.

None of this means you should chase here. After a 13% move in three weeks, the market is stretched on every short-term measure. The RSI is pushing overbought above 70, price is extended 7% above the 200-DMA, and the Nasdaq’s 13-day streak has historically preceded 2–5% pullbacks within two weeks. Retail’s return is a yellow flag of sentiment as the “easy money” phase is behind us. On a pullback, the 7,000 level, January’s former all-time high, becomes first support under the classic “old resistance becomes new support” principle. Below that, the 6,870–6,950 zone (February’s consolidation range) should attract strong buying. The 200-DMA (~6,683) remains the line in the sand. A healthy 2–3% pullback to the 7,000–6,950 zone is the spot to add exposure, not up here at fresh highs.

This rally is the real thing, but treat it with caution. Reversals can be swift, particularly if the narrative supporting the rally fails. For now, stay long, stay patient, and let the market come to you.

Trade accordingly.

The Week Ahead

Retail Sales for March will be the key economic data point this week. This figure will be interesting as it will be the first piece of hard economic data released from the government since the Iran conflict started. Expectations are that the number will be +0.4%, down from +0.6% last month.

Earnings will kick into full speed this week as we share below. Pay attention to any forward guidance these companies may issue in regards to consumer spending trends.

BLS Jobs Report: Is There A Better Measure?

“March’s 178,000 BLS jobs report came in nearly three times Wall Street’s 60,000 estimate. Markets celebrated. Almost nobody mentioned the entire beat traced back to doctors returning from a strike and weather rebounds. That’s not strength. That’s noise — and it’s a pattern we can no longer afford to ignore.“

Every time we see the BLS jobs report released, there are always problems with it. Over the years, I’ve come to accept that most government statistics are imperfect. Regardless, they are what markets pay attention to. However, it is increasingly clear that the BLS Jobs report over the last three years has been problematic. That report lands on the first Friday of every month and sends equity futures swinging before markets open. The problem is that the report has become so distorted by sampling failures, model-based imputations, and seasonal adjustments layered on top of more seasonal adjustments that the monthly print often tells us almost nothing reliable about the actual state of employment.

I realize that is a serious claim that borders on heresy, but let me back it up with the data. I want to show you what I believe is a simpler, more honest alternative. One that filters out the noise and reveals the employment trend that matters to investors and policymakers alike.

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