Within 3 weeks, US markets went from extremely oversold (RSI \~20) to extremely overbought (RSI \~75), and are now only 3% below their February records. This would be the fastest “bear market recovery“ in modern history, exceeding even the COVID bounce which took 4-5 months.
Bear/Neutral case: Many economists have warned the dust from tariffs has far from settled, with effects on inflation & other macro numbers not likely to materialize for at least a few more months. Also, the universal 10% baseline tariff is likely to remain for the foreseeable future, regardless of trade deals. Finally, valuations at the February top were extremely elevated across numerous metrics.
Bull case: Hard economic data, including corporate earnings, have so far remained extremely resilient. With most S&P 500 companies having reported calendar Q1 2025 earnings, the growth rate is \~13-14% vs. Q1 2024. Amid tariff uncertainty, analysts have trimmed their earnings growth estimates to 5-7% for the rest of 2025, but this is still positive growth, and stocks always follow earnings over the longer term.
What do you think is most likely to happen next?
1. Rally continues up and through the February records
2. A pullback, maybe to \~5500-5700?
3. A retest of the April lows (but what would trigger this?) A few CNBC/WSJ analysts still think this will happen.
4. Consolidation around current levels (this rarely happens in today’s algorithm-driven markets – it’s always in mania or panic mode)