"Sometimes it’s to your advantage for people to think you’re crazy." — Thelonious Monk

Good evening, 

Is the bottom in? Fundstrat Head of Research Tom Lee thinks so, putting the odds of that possibility at 90%. A confirmed bottom would certainly be a relief to most investors: Lee described the three weeks since April 2 (which President Trump had termed "Liberation Day") as "the most difficult we have navigated in 30 years, more so than even Covid and the GFC." 

The S&P 500 rose 4.59% this week, while the Nasdaq Composite added 6.73%. Both indexes notched gangbuster gains. 

After peaking above 60 on April 8, the VIX has receded to around 25 (as of Friday close), and this Tuesday we saw another day in which over 90% of NYSE shares advanced. This follows a similar day of strong advances on April 9, when 94% of shares rose. This pattern is particularly noteworthy: Fundstrat's Data Science team found just three historical precedents since 1979 in which NYSE percentage advances matched or exceeded the 90% mark twice within a nine-day period (March 10, 2009, Aug. 9, 2011, and April 6, 2020). In all three instances, S&P 500 forward returns were generally positive, with a 100% win ratio three, six, and 12 months later. 

Much of the market's movements were driven by what Lee calls "positive policy shock." These include Trump walking back earlier comments that had suggested he might look for a way to fire Federal Reserve Chief Jerome Powell. Lee had previously described firing Powell as a move that "would deal a severe blow to investor confidence in the U.S. financial system."

On the tariffs front, markets also appeared to view remarks by Trump and White House officials as de-escalatory. Trump told Time magazine that "we're meeting with China" (though Chinese officials disputed this claim), while Treasury Secretary Scott Bessent described U.S.-China tensions as "an opportunity for a big deal" and eschewed the phrase "trade war" in favor of a gentler trade "rebalance."

Both Lee and Head of Technical Strategy Mark Newton also attached positive significance to the Zweig Breadth Thrust having been triggered on Thursday. Created by legendary investor Martin Zweig, this momentum indicator is triggered when a 10-day rolling average of advancing securities "thrusts" from below 40% (i.e., oversold) to above 61.5%. Our Chart of the Week illustrates Newton's observation: "The median return going forward tends to be quite positive following a period of abnormally high market breadth happening from extremely low levels."

In fact, while acknowledging the pain that has been wrought on many investors in recent weeks and the resulting damage to sentiment, Newton suggested at our weekly huddle that we have seen "a very meaningful amount of progress in the last two weeks, even though it's been choppy." In response to market naysayers, he argued that "it’s tough to say [we're in] a bear market until tech really breaks, and we haven’t really seen that."

Yet both Lee and Newton continue to urge caution. Although Newton sees the possibility that "we rally sharply for about a week," he warned that "I do think that [choppiness] continues," emphasizing that "I don't think it's going to be a straight shot higher." He also pointed out that historically, the Junes of post-election years have tended to be tough for investors.

For his part, although Lee sees the bull market as having been proven intact and asserts that the probabilities favor the "bottom is in," he also acknowledges that there are other proverbial other shoes that could still drop, including a non-zero risk of an economic cold war, a surge in inflation expectations, and a sharp decline in S&P 500 EPS estimates. Although Lee doesn't see these as likely, neither has he ruled them out.

Elsewhere

The European Union took antitrust action against Meta and Apple, imposing fines of EUR 200 million (USD $227.5 million) and EUR 500 million ($568.7 million), respectively. Both companies were alleged to have breached the Digital Markets Act. European officials penalized Meta over a paid, ad-free version of Facebook and Instagram that was briefly offered as an alternative to free versions that required users to consent to the sharing of their data. EU authorities also alleged that Apple engaged in anticompetitive behavior by failing to freely allow app developers to communicate with customers about alternative offers outside the official Apple App Store. A Meta spokesperson evoked current U.S.-EU trade tensions by equating the penalty to a "a multi-billion-dollar tariff on Meta," while Apple claimed that the European Commission was "effectively trying to force us to give away our technology for free."

Consumer-goods conglomerates Procter & Gamble and Unilever each warned of likely price hikes due to tariffs. P&G, owners of Gillette, Tide, and Crest, acknowledged that consumers were already "nervous" but warned that price hikes were "likely" due to increased costs from Trump's tariffs. Similarly, Unilever warned that increased costs could force the company to further raise the prices of its products, which include Axe body spray, Ben & Jerry's ice cream, and Vaseline personal care products.

A new analysis asserts that the 19 richest U.S. households collectively increased their wealth by $1 trillion in 2024. That's according to a study performed by Gabriel Zucman, an economist at the University of California, Berkeley and the Paris School of Economics. Those 19 households represent 1.8%, or about $2.6 trillion, of total U.S. household wealth, putting them in the top 0.00001%.

Florida Gov. Ron DeSantis (R) proposed relaxing child-labor laws to allow 16- and 17-year-olds to work overnight shifts even when they have school the next day, and removing limits on how many hours they can work each week. DeSantis, seeking to address the state's labor shortage, had previously signed other child-labor laws to allow 16- and 17-year-olds work on residential construction sites. DeSantis's policy moves are similar to other pro-child-labor policies that have been either considered or adopted in states like Iowa, Arkansas, and Ohio.

U.S. chipmakers reported that China has apparently exempted U.S.-made semiconductors from the 125% tariffs it imposed on all U.S.-produced goods on April 12 in response to U.S. tariffs on Chinese goods. The Chinese government has not officially announced the exemption as of this writing, but if confirmed, it would be similar to tariff exemptions the U.S. has made for imports of goods Americans cannot easily produce at home. 

And finally: Attorneys for MyPillow founder and vocal Trump supporter Mike Lindell were castigated by a federal judge this week after admitting to using generative AI to write a court filing that contained numerous hallucinations, such as citations of made-up legal precedents. Lindell was in court seeking to soften the damages awarded to Dominion Voting Systems employee Eric Coomer in a defamation suit. U.S. District Court Judge Nina Wang indicated that Lindell's attorneys, Christopher Kachouroff and Jennifer DeMaster, could ultimately lose their legal licenses as a result.