Weekly Newsletter 02/28/25

Good afternoon,

U.S. stock markets attempted a bounce back to the upside today after equities were pressured on Thursday with the S&P 500 down over 1.5% and the Nasdaq off more than 2.5%. Mag 7* suffered worst pullback of 2025, down for a sixth straight session. Retail favorites, non-profitable tech, travel/leisure, building materials and autos some of the other laggards. Defensive and value stocks, bond proxies, regional banks held up better. Treasury yields meaningfully lower on the week.

*(Mag 7 is a reference to a group of stocks: Apple, Amazon, Microsoft, Meta, Nvidia, Alphabet and Tesla)

The “personal consumption expenditures” (PCE )is the Fed’s favorite inflation indicator and today it was reported January core PCE was in line with consensus and personal income increased, ahead of expectations. Personal spending less than expected. Analyst takeaway was a feeling this is not enough to greatly change the Fed’s current interest rate path.

Not much to point to behind bounce attempt other than a possible “buy-the-dip” with some names down sharply of late. Nothing incremental on tariffs or taxes overnight, while earnings a mixed bag and starting to shift the background with NVDA out of the way.

Stocks on track for a weekly pullback, led by big tech. Focus remains on overhang from policy uncertainty, particularly in terms of tariffs. Growth worries/negative macro surprise momentum, still sticky inflation, stretched valuations, deteriorating technicals, stretched systematic long positioning all given as factors for selling.

From my vantage point the selling feels very emotionally driven. Just a few weeks ago we detailed the record flows into the U.S. stock market from retail investors. Fast forward to this week and bearish (negative) sentiment jumped to 60% in week-ended 26-Feb from 40% in prior week, the biggest weekly increase since August 2019 and highest level since September of 2022. According to Bespoke Investment Group, there have only been six other weeks when bearish sentiment was higher. These occurred during the 1990 recession and Iraq's invasion of Kuwait, late in the GFC and in September 2022 just before the market lows. Also pointed out that unlike those prior instances when S&P was down at least 10% from 52-week high, index is now down just over 3%. Bullish sentiment down to 19% from 29% last week, the lowest level since March 2023. Bull-bear spread in negative territory fourth straight week at -41%, the worst reading since September 2022. Big jump in bearish sentiment comes on the back of softer consumer sentiment readings. JPMorgan also pointed out that following the past few weeks' massive buying flow, retail traders were aggressive sellers on Monday and Tuesday (before returning to the buy side on Wednesday). A wake-up call from recent complacency is to be somewhat expected in my opinion. Markets have spared participants from a “correction” or “crash” depending on your view for over 2 years. This is a very uncommon occurrence. Over the past 45 years the S&P has an average intra-year decline of 14%, yet average annual returns have been a positive 11%. What this means is one can (& should) expect a near 25% swing in any given year if you are 100% invested in stocks. For those that argue “the stock market is a casino” annual returns have been positive in 37 of the past 45 years…no casino pays out 82% of the time. However, living through such volatile swings with your hard-earned money on the line is way too stressful for many. We advocate a balanced approach to investing and a modest, long term, total return goal to prudently plan the vital need of retirement cash flow. No magic formula exists nevertheless simple fundamentals hold true. Keep your overhead low, understand what you own and why you own it.

You may have heard the term “Black Swan Event”. Defined as a high-impact event which is difficult to predict under normal circumstances but in retrospect appears to have been inevitable. A black swan event is unexpected and therefore difficult to prepare for but is often rationalized with the benefit of hindsight as having been unavoidable. You will hear all sorts of “experts” extolling their beliefs of what will cause the next big thing when, by definition, they won’t get it right.

My daughter, Ava, experienced her own high-impact event in an unpredictable situation, but in retrospect was inevitable. She fell off her horse and ended up with a small fracture in her right wrist. She wasn’t jumping nor galloping. Waiting her turn in the arena, another horse spooked which caused her horse to spook and what was a relaxing sit ended as an awkward fall. Animal spirits and herd mentality defined.

Thank you for your time and the link below contains additional personal finance articles and topics of interest.

https://www.raymondjames.com/evangelista/resources

“Permanence, perseverance and persistence in spite of all obstacles, discouragements, and impossibilities: It is this, that in all things distinguishes the strong soul from the weak.”--Thomas Carlyle

Kyle

KYLE CHRISTIANSON, CFP^®

Financial Advisor

Raymond James & Associates, Inc.

1421 Pine Ridge Rd, Ste 300

Naples, FL 34109

Toll Free (800) 843-2025 | Direct (239) 513-6525 | Main (239) 513-6500 | Fax (239) 596-5474

Kyle.Christianson@RaymondJames.com

Any opinions are those of Kyle Christianson and not necessarily those of RJA or Raymond James. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. There is no assurance any of the trends mentioned will continue or forecasts will occur. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. This is not a recommendation to purchase or sell the stocks of the companies mentioned. Leading Economic Indicators are selected economic statistics that have proven valuable as a group in estimating the direction and magnitude of economic change. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. The Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stocks of companies maintained and reviewed by the editors of the Wall Street Journal. The NASDAQ composite is an unmanaged index of securities traded on the NASDAQ system. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor's results will vary. Sector investments are companies engaged in business related to a specific sector. They are subject to fierce competition and their products and services may be subject to rapid obsolescence. There are additional risks associated with investing in an individual sector, including limited diversification. Investing in oil involves special risks, including the potential adverse effects of state and federal regulation and may not be suitable for all investors. Bond prices and yields are subject to change based upon market conditions and availability. Gold is subject to the special risks associated with investing in precious metals, including but not limited to: price may be subject to wide fluctuation; the market is relatively limited; the sources are concentrated in countries that have the potential for instability; and the market is unregulated.