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To investors,
The stock market has been on a tear the last few weeks. Carson Group’s Ryan Detrick shows the 17.3% gain we just experienced is the second best 8-week rally in history.
That type of return in just two months is bonkers. But the better part is Ryan points out that stocks have never been lower a year later after an 8-week win streak that gained at least 12% and the average return 12-months later is around 17%.
Not bad.
The story is similar in the Nasdaq as well. Bluekurtic Market Insights writes the “Nasdaq 100 is up over 16% in the first 98 trading days. When the Nasdaq gained 15%+ in the first 100 days, it was positive for the full year 100% of the time and 12 of 14 times for the rest of the year, with a 19% median gain. In the last 13 cases, it never peaked before Q4.”
This data doesn’t calm the nerves of the perma bears though. They are still screeching about an AI bubble, historical valuations, and potential financial destruction on the horizon. They will promise you that the stock market is only performing well because a small handful of stocks are driving the market higher, yet everything else is suffering.
That isn’t true though. Ryan Detrick silences the haters when he writes “the S&P 500 equal-weight just closed at a new high last week. This is a clue things are just fine under the surface.”
The story for the permabulls gets even better. Ed Yardini recently said “the S&P 500 is up 9% this year, but the price-to-earnings multiple has actually contracted 4.6%. The entire rally has been driven by earnings rising 14.4%."
So stocks are getting cheaper because earnings keep accelerating. That is the healthy signal you want to see if you believe this bull market will continue for months and years to come.
Why?
Phil Mackintosh shows “equity prices and earnings move together in the long run.” The higher earnings go, the higher stock prices go.
And all of this earnings growth and stock market performance is coming while the United States is still technically at war with Iran. If the Iran war officially ends, you should expect asset prices to take off higher amid the newfound certainty in markets.
We know this because, as Sonali Basak points out, “yields are starting to drop as an Iran deal becomes more hopeful and Brent prices drop firmly below $100 per barrel.”
Both of those are welcomed developments for investors.
This enthusiasm does not come without risk though. In my personal opinion, the largest risk for US stocks at the moment is the upcoming unlock of a significant amount of supply from new IPO issuance.
Kevin Gee wrote a great analysis recently asking the simple question: Can the market absorb three separate $1+ trillion IPOs in the same window?
We simply don’t have the answer to that question. We have never lived through this type of scenario. One argument would be the mega-IPOs are a top signal because the private markets are trying to grab exit liquidity before the market rolls over. The other argument would be there is insatiable demand for space and AI companies, so we actually need many more companies to go public than just these three.
It will be fascinating to watch this play out. While I hear the pessimists and their arguments, I fundamentally disagree the market is in a bad spot. Earnings are growing faster than the stock market. Stocks are getting cheaper. And the sky is the limit at this point.
Hope everyone has a great day. I will talk to you tomorrow.
- Anthony J. Pompliano
Founder & CEO, ProCap Financial (Nasdaq: BRR)
Bitcoin Will Breakout By Summer If This Happens
Jordi Visser ( @JordiVisserLabs ) is a veteran macro investor with 30+ years of experience and the author of the VisserLabs Substack.
In this conversation, we break down the surge in rate hike expectations, how the Iran conflict is fueling inflation, the AI trade rotation out of memory names, and why bitcoin stands to benefit from the macro chaos ahead.
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