Hard to believe that the S&P 500 (IVV) was at its recent all time high only a few weeks ago on October 29. Since then it has been very volatile and was down as much as -5.1% but is now down -4.1% off that high; not a lot (almost normal volatility), but notable. My recent blog posts have posited some bullish aspects so now seems like a good time to regroup and look at the factors driving the recent weakness.
As I reported in my last blog post, corporate earnings were coming in quite strong and we are still looking at a +10-11% growth for the full year 2025. Nothing to see there! There was a bit of “strongish” employment data and some hawkish Fed-speak, but the markets are still pricing a chance of another Fed rate cut in December, but it’s no longer the slam-dunk base case it looked like a few weeks ago. Also, long term interest rates and credit spreads have been mostly tepid, so the bond market is not sounding any alarms.
So, if corporate earnings and interest rates are key determinants of equity returns and all looks clear there, we should still be in “Bullsville”!
The only thing that reeks of pain is crypto currencies! Bitcoin is down about -25% from its levels back on Oct. 29. Maybe it is the chicken or maybe it is the egg, but both bitcoin and equities are down.
Despite the pullback, nothing in the fundamentals has really changed — earnings remain strong, rates are stable, and the bond market isn’t flashing trouble. This looks far more like a routine breather than the start of anything ominous, and D&A doesn’t try to time these short-term squalls anyway. As always, staying disciplined and ignoring the noise remains the smartest path forward.