It’s the end of a long day and you’re scrolling on your phone. You want to catch up on the latest market news but instead you get tariffs… and more tariffs. Fires in California. Airplanes falling out of the sky. The idea of buying Canada. Renaming the Gulf of Mexico. Calls to Russia.
One headline after the next.
It’s called doomscrolling – consuming so much negative news that you often feel anxious, depressed, or overwhelmed. And so far, this year has been one anxiety-inducing headline after another.
All of this is leading to a lot of bearishness among investors. According to the American Association of Individual Investors (AAII) Sentiment Survey, market optimism has fallen. Last week’s survey found that bearish sentiment increased 4.4 percentage points to 47.3%. This is unusually high and well above the historical average of 31%.
When the news is scaring investors and causing massive stock dumps over a single headline, that’s when I turn off the news and look at the data.
Headlines have been especially unpredictable since President Trump was sworn in about four weeks ago. I dug into market volatility numbers from President Trump’s first term, and while we might expect it was more volatile than other administrations, that was not the case. Those years were good for stocks with the lowest volatility of any presidential term since 1997.
Here’s the data in the chart below. The third column shows absolute volatility over a 20-day moving average, and Trump’s first term was less volatile than those of former presidents Bill Clinton, George W. Bush, Barack Obama, and Joe Biden.
Only time will tell how Trump’s second term plays out, but I find that encouraging.
I’m not a therapist, but I do recommend putting your phone down – after reading this email, of course – and taking a break from the doomscroll. Instead, let me show you some perspective and positivity with five data-driven reasons I believe this will be a good year for stocks… and for making money.
1. So far, so good this earnings season
If you’ve been an avid Power Trends reader, you know I love earnings seasons. They tell us a lot about a company, and much of the reports go into my quantitative data I use to pick stocks.
This earnings season is almost over and so far, so good. Through the end of last week, more than three-quarters of S&P 500 companies had reported results, with 76% beating earnings estimates and 62% beating sales estimates. That’s great, and it’s right in line with multiyear averages.
Source: FactSet Earnings Insight
These earnings beats are the thing that gets me most excited, because they often cause shares to pop. That’s yet another reason to invest in high-quality, growing companies to begin with.
2. CPI isn’t as bad as it seems
Interest rates and inflation are sore subjects at the moment. But what if I told you that the Consumer Price Index (CPI) isn’t as bad as the headlines might make you believe?
Yes, the latest CPI was hotter than expected and inflation rose from a low of 2.5% to 3%. However, it has fallen dramatically from a high of 9.2%. The fed funds rate – the one the Federal Reserve controls – sits at approximately 4.33%, substantially higher than 3% inflation. That spread historically does not last, which is one key reason I still expect rates to fall this year.
I found the 64-year average for inflation is 3.76%. We are well below that – and we had a thriving economy and stock market much of those 64 years even with higher inflation. I expect that to continue.
3. Big Money is buying more than selling
My Big Money Index (BMI) tracks the buying and selling of large institutions. It’s what really moves a stock up and down. Market data tells me there’s currently more buying than selling.
That’s a good thing. Big Money is the money that controls stocks, so stocks move higher when the largest investors on the planet are buying. My BMI hit 63.2 today, meaning 63% of Big Money signals in my Quantum Edge system are buys. That leads to my next point…
4. Sectors are trending higher
Ten of 11 sectors are trending higher with more Big Money inflows than outflows. The only sector that’s stagnant is Energy. We know energy costs are more volatile right now, and oil prices rose 6.2% in January.
5. Stocks are at all-time highs
This might be a surprise given all the doom and gloom headlines. Just yesterday, the S&P 500 hit another all-time high – and is up 4% so far this year.
It all adds up to a favorable environment, especially for stocks with superior fundamentals, strong technicals, and Big Money inflows. Those are the stocks we focus on in Quantum Edge Pro, and I just recommended a new buy today.
I’m going to put my phone down, ditch the doomscrolling, and focus on the data that points to positives ahead. I hope you do the same.
Talk soon,
Jason Bodner,
Editor, Jason Bodner’s Power Trends