"Failure is the key to success; each mistake teaches us something." — Morihei Ueshiba

Good evening, 

Investor sentiment has been battered lately, and it shows. Despite a Friday afternoon bounce, the S&P 500 ended the week down almost 1% for the week, with selling that Fundstrat's Head of Research Tom Lee called "broad-based (and indiscriminate), reflective of an abrupt shift to 'risk off' coupled with likely margin calls."

Lee further attributed this souring market mood to a "growth scare." Investors had already received softer-than expected guidance about consumer spending from Walmart the previous week. This week, the Conference Board Consumer Confidence Survey added to worries that the economy might be approaching "stall speed."

The survey showed that headline sentiment fell to 98.3, down seven points from last month's reading. It also showed that the 1-yr forward inflation expectations rose to 6%, compared to  5.2% in December. Lee noted that "the commentary shows consumers are increasingly reacting to comments from the White House." However, in his view, "while there are merits to these concerns, we also believe these concerns are likely only 'flesh wounds' that do not affect the long-term view for stocks this year."

But getting back to investor sentiment: As Head of Technical Strategy Mark Newton noted during our weekly huddle, "If we look at AAII [the American Association of Individual Investors sentiment survey], we see that the percentage of bears was at 60% as of this past week. That's extraordinary." Head of Data Science "Tireless" Ken Xuan noted that we last saw similar bearish levels of sentiment in September 2022 – shortly before the market emerged from its decline to start its present ascent. 

To Lee, the worries could ultimately have positive implications for equity investors. With President Donald Trump's planned tariffs adding to concerns about a growth scare and the economy potentially hitting stall speed, the Fed might be forced to become dovish, he suggested. It seems like some investors are counting on that as well. 

Fed officials continued to speak about the need to be inflation vigilant this week, but "the bond market is pricing in a more dovish take," Lee noted, with trading implying that investors see higher odds of a rate cut in May and more cuts for 2025. "The potential reintroduction of a dovish stance by the Fed could bolster stocks in the event of lackluster macro trends" – thus activating the "Fed put" that Lee has previously written about. We see this in our Chart of the Week:

Much of the recent selling pressure has been in Technology. As Lee observed, "market participation is broadening beyond the Mag 7."

"Tech has been the worst-hit sector," agreed Newton. That has led to some moves in Healthcare that he views favorably. "Many parts of healthcare have already started to rebound – medical devices and healthcare services, for instance. Now we're starting to see it in the pharma trade. So this is sort of a safe area and an area where people are taking money out of tech to potentially position into healthcare. This is an area I would pay attention to. I think it's very interesting."

In the meantime, Newton adds a cautionary note: "To me, there's really a lot of reasons to be optimistic about trying to buy stocks when really the broader technical structure has not been broken. But looking at Presidential cycles going back the last 100 years, historically, when you change administrations, the first quarter of the first year tends to be very choppy."

Elsewhere

Shareholders at Apple and John Deere overwhelmingly rejected anti-DEI proposals this week, joining Costco shareholders in bucking a trend going in the other direction. In each case, investors soundly voted against activist shareholder proposals put forth by the National Legal and Policy Center, a conservative think tank. Republican pressure on corporations to ditch DEI policies is having more success, with the likes of Disney, Walmart, Target, Citigroup, and Goldman Sachs among those dropping or weakening their DEI efforts and programs.

Mexico agreed to extradite dozens of drug lords to the U.S. to face trial, part of the country's attempt to placate the Trump administration and fend off its tariff plans. Among the 29 to be extradited include leaders of the Guadalajara and Zetas cartels, as well as Rafael Caro Quintero, alleged to have murdered Drug Enforcement Administration (DEA) agent Enrique “Kiki” Camarena in 1985.

Amazon launched its own quantum chip, joining Google and Microsoft in reaching a milestone in its race to achieve practical quantum computing. Amazon's Ocelot prototype uses so-called "cat qubits," which the company says are less prone to the types of errors to which quantum systems are vulnerable.

President Trump announced that the U.S. would start its own "golden visa" program in which foreigners could pay $5 million to the U.S. government to buy permanent residency, green card privileges, and a route to citizenship. The program would replace the EB-5 scheme that lets foreign investors obtain similar benefits by making an investment of at least $1,050,000 in a "new commercial enterprise" that creates at least 10 new, full-time jobs for Americans.  The President acknowledged that Russian oligarchs could be among the participants, noting, "I know some Russian oligarchs that are very nice people."

The U.S. recorded its first measles death in a decade, a child in the western part of Texas. Texas is currently one of the several states experiencing an outbreak of a disease (124 identified cases in the state as of this writing) that had been declared eradicated in the U.S. in 2000. Measles is one of the most contagious diseases known to science, and though far less deadly, it is five to six times more contagious than the original strain of COVID-19 and seven to nine times more contagious than the Ebola virus. Infectious-disease experts directly attribute the resurgence of measles to increased vaccine skepticism and vaccination rates.

For about 90 minutes last April, a Citigroup client appeared to have enough money to buy Nvidia in its entirety 27 times over. The Financial Times reported this week that the bank had temporarily – and erroneously, obviously – credited the client with $81 trillion, more than triple the U.S. GDP in 2024. The correct sum that should have been deposited or credited to the account was $280. 

And finally: Foodies in China have taken to crashing funerals in an effort to try a famed noodle dish. Of late, the Erlong Funeral Home in Guizhou (southwestern China) has won online fame for a minced pork-and-noode dish that it offers to mourners as they make arrangements for their departed loved ones. Enthusiasts have taken to pretending to be related to the deceased, resulting in long lines for the spicy-and-sour dish.