Description

In the first half, Will and Adam discuss the rapid deterioration in consumer sentiment and how it is cutting across both economic and political divides, albeit to differing degrees. Some sentiment indicators, especially concerns over job loss, are at levels normally seen during a recession, in part due to the uncertainty over tariffs with large trading partners like Canada. Another concern is spending cuts. We look past the headlines to see that cuts have not yet taken hold, though with 85% of job growth in 2024 attributable to government spending, we could be in for a volatile transition period as a result of the "detox" the administration is seeking.  

In the second half, we look at the recent (albeit brief) market correction, and put it in historical context:

• Since 1980, the average yearly decline for the S&P 500 has been 14%.
• There have been about 117 10% corrections since 1928, so around one per year.  
• Statistically, a 10% correction turns into a bear market around 25% of the time, and that normally occurs when the economy dips into a recession. The rest of the time, the market recovers in about eight months, on average.

Although modest, the 10% correction is equivalent to 12% of GDP. That type of hit to wealth has contributed to a recession in about half of the prior 12 occurrences.

With the Magnificent Seven, on balance, lagging this year, we look at the prospect of a broader market showing the benefits of diversification, not to mention the strong start to the year for non-U.S. stocks, which have been buoyed by the shift in spending priorities in both developed and emerging markets.

Learn more about Formidable Asset Management, Will Brown, and Adam Eagleston by visiting www.formidableam.com.