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Today’s disproportionate outflow from gold miners even as physical gold continues to attract new money, is the proverbial “canary in the mine” that serves as a warning of looming trouble. When the miners are bleeding assets, investors may wish to take precautions against the impending risk of lower gold prices.

Read this week's Major Trend.

A wild April ended almost exactly where it started for the S&P 500, leaving our downside estimates pretty much unchanged. A decline to median levels (1957-date) would put the S&P 500 at 3,487 (a 37% loss).

The Select Industries portfolio is shifting defensively in response to evolving Group Selection Scores, exiting Homebuilding and Interactive Media while adding to more stable industries like Data Processing, Education Services, and Gas Utilities. April’s volatility also drove a broader rotation across the GS framework, with cyclicals like Airlines and Internet Services making way for more resilient Health Care and Reinsurance names. While Financials still offer upside if uncertainty fades, rising tariff risks have pushed several Consumer and Tech groups into the Unattractive category.

In early April, the popularity search for “NYSE circuit-breaker levels” spiked. The S&P 500 came within a whisker of an official bear market. Then, following a Presidential tweet to buy, the largest daily gain since October 2008 came along. By the end of the month, the index was riding its longest daily winning streak since November 2004. All of that turmoil and heartburn led to a -0.7% month-over-month change for the S&P 500.

After Royal Blue Value’s huge relative win in March (+7%), Royal Blue Growth posted its best relative performance month since 2001, with a 10% advantage over Value.

Our Ratio of Ratios sits right on top of its one-, two-, and three-year moving averages. The Small Cap discount has been greater than 20% for all three of those periods. For years, we’ve said that a recession was probably needed to change this valuation dynamic. So far, the mounting prospect of a recession has only exacerbated Small Caps’ plight.

The Up/Down ratio reads 1.53, which is below average. This “one-month” print breaks a streak of four successively higher readings. For the last twenty years or so, our Up/Down ratio has been pretty consistent about either being in an improving cycle or a deteriorating cycle. Is the mini upswing over?

Read this week's Major Trend. 

The S&P 500’s estimated bottom-up operating EPS nosed slightly higher during the first month of Q1 reporting. This is a welcome development following the steeper-than-usual decline over the past six months. Projections for the next three quarters of 2025 weren't as fortunate in April, as they all experienced a noticeably steep leg down of around 3%. The full-year 2025 operating EPS estimate for the index now sits at $260.72, down a conspicuous 4% since the beginning of the year.

Read this week's Major Trend.

Read this week's Major Trend.

Markets remained volatile in March, with growth stocks facing significant losses, particularly within large-cap sectors. The Core strategy, down just 2.2%, continued to outperform relative to traditional equity options thanks to its defensive positioning. Meanwhile, the Select Industries strategy benefitted from safe-haven sectors like healthcare and precious metals, while AdvantHedge saw a solid 5.9% gain, driven by profitable short positions in overvalued consumer and tech stocks.

Read this week's Major Trend. 

Read this week's MTI update

This cycle’s earnings performance has been exceptional. If EPS were to top out today, the peak-to-peak annualized performance from the last cycle high will have been the strongest among six cycles since the early 1970s. Nonetheless, nominal growth in EPS has been boosted by elevated inflation, which has supplied almost one-half of the last five years’ growth rate.

It’s worth considering that “this time” is not different. In fact, this time and may well be the same as it ever was, and the recent stock market collapse could morph into a perfectly normal cyclical bear market. Based on the average loss of the last 13 (non-recessionary) bear markets, SPX could drop to 4,153. 

Prior to Liberation Day, there was growing talk of a new bull market in a practice that had not experienced one  in years: Diversification. After being in the green all year until recently, our simple proxy for a diversified portfolio is now down 2.1%, but compared to the domestic equity benchmarks, that seems rather palatable.   

There’s been an intriguing relationship between the speed of a severe decline and the likelihood of a strong recovery. Yet, the cyclical backdrop is also a key factor, and today’s message from a range of economic measures is that the current correction is not a safe one to buy.

On April 4th, the S&P 500’s loss from its February 19th high reached -17.4%, a decline we’d consider a “severe correction”… if we thought it had fully run its course.