With so much bad news in the financial markets during April, it was nice to have some respite for part of last week (up to Thursday at least).
Here is some more good news.
Despite concerns over potentially waning US exceptionalism, I got a kick out of Cullen Roche, Founder of Disciplined Funds, and his sarcastic post on X:
Who else is excited to see how we fix these problems? The USA's "broken" monetary system:
#1 in total wealth.
#1 in total GDP.
#1 in GDP growth in the G7.
#1 in global corporate profits.
#1 in GDP per capita in the G20.1
That's a bunch of el número unos.
Maybe we all should calm down a pinch.
Corporate profits have also been on a tear since COVID. Research from the St. Louis Fed elaborates:
U.S. corporate profits have risen markedly to near all-time highs since the start of the COVID-19 pandemic, both in nominal terms and as a share of national income… As of the last quarter of 2024, they were $4 trillion—2.3 percentage points higher as a fraction of national income than they were prior to the pandemic. The increase was entirely driven by domestic nonfinancial industries. Notably, retail and wholesale trade, construction, manufacturing and health care experienced a marked increase in profitability.2
What if there is a recession though?
We should never root for one, but the country has been through very rough patches before and has always gotten through it!
Through being the key word.
The volatility has been extreme here in April of 2025, but thankfully this has backed off some. Hopefully that can last. If it does, Datatrek reveals how that can be better news for stocks:
With just one “Crisis VIX close” in the books and a long history of solid 6- and 12-month forward returns when the VIX is merely elevated, it is very hard to get bearish here. We will be watching to see if the VIX continues to decline in the coming days and weeks as confirmation that last Tuesday’s +4 standard deviation close was truly an isolated incident.3
Furthermore, BMO reveals that stocks can bounce back fast after speedy corrections like we've experienced recently.4
Speaking of speed, a prominent technical indicator called the Zweig Breadth Thrust occurred this week. Blake Millard explains:
A ZBT occurs when the 10-day exponential moving average of the NYSE percentage of up issues rises from below 40% (indicating an oversold market) to above 61.5% within 10 days. In plain English, the Advance-Decline numbers suddenly go from NOT good to REALLY good in a short amount of time.5
This may be a portent of good things to come, as every time it’s transpired in the stock market since 1950 investment returns have been higher 6 and 12 months later.
There are other potential positive headlines on the horizon. For example, whether you are a fan of the current Presidential administration or not, there may be deregulation and tax cuts later this year that equities may enjoy.
None of the above is meant to be predictive. Nor does it discount some of the arguments from the bad news bears for further downtrend in the markets. After all, the communication around tariffs has been troublesome and remains unresolved.
All of us could use some positives, though, amid the firehose of negativity lately.
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Sources:
1. Posted via X on April 22, 2025. Accessed online: Cullen Roche (@cullenroche) on X
2. “What’s Driving the Surge in U.S. Corporate Profits?”, Ricardo Marto, April 21, 2025. Accessed online: https://www.stlouisfed.org/on-the-economy/2025/apr/whats-driving-surge-us-corporate-profits
3. Quoted from “STT: Crisis VIX Forward S&P Returns” email on Thursday, April 22, 2025.
4. Chart from Sam Ro “19 charts to consider as markets swing wildly 📈📊📉” published April 23, 2025. Accessed online: https://www.tker.co/p/stock-market-charts-april-2025
5. Quote and chart from Blake Millard via The Sandbox Daily (4.24.2025). Accessed online: https://www.thesandboxdaily.com/p/3-signals-that-have-my-bullish-spidey