by Jason Bodner
November 25, 2025
It looks like this market has the flu.
My son caught the flu last week. He is feverish and miserable, but I let him know that this rough patch will fade and he’ll be fine. Markets are similar: Sometimes they feel awful, even when the underlying system seems healthy. And just like flu-viruses that can freeze in permafrost for decades and return, old market fears have a way of thawing back to life. Inflation worries, growth scares, yield curve panic and valuation angst never fully disappear – they just wait for the right conditions to reappear.
Historically, November has been the strongest-month for stocks, at least since 1990:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
But this November, the market got the flu, as the S&P, NASDAQ, and Russell are all lower:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Seasonality has been out of kilter for several-months now. August and September were stronger than their historically weak precedent. October offered a few bumps but still gained ground. November is what most Septembers look like: Uncertainty and a feeling that something is wrong. It is all just a delayed pattern, so let’s cut through the emotion and look at the data, because, even with the turbulence, I remain bullish.
First, the Big Money Index (BMI) continues to fall…to 45% last Friday.
Inflows dried up first, signaling a tired market coming off a massive run from the April lows. When the steady underlying bid softens, the “algorithms” and high-frequency traders sense it, so they press their advantage by shorting into thin liquidity. When bids are shallow, the spreads widen and volatility spikes.
None of this signals a broken market – just a fatigued one.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Narratives shifted fast. We went from a narrative of “everyone should pile into the AI train” to one where “companies are overspending and there isn’t enough power.” Sentiment cooled even though corporate fundamentals didn’t change. That’s the emotional side of investing, and emotions rarely wait for the data.
Some prominent investors, including Howard Marks, have warned that high forward P/Es signal years of flat-returns to come. The S&P 500 forward P/E, at 22.4, is above the 5-year and 10-year averages, and Marks frames this as a setup for a “lost decade.” But his argument assumes that these valuations are static.
P/E is simply price divided by earnings. Most bears fixate on price while ignoring earnings. If earnings rise, P/Es will compress without a price decline. That is exactly what is happening now. Both sides of the ratio are improving. Prices have cooled, earnings are rising, and that combination is healthy and bullish.
Earnings are not just good, they are excellent. With 92% of S&P companies reporting, 82% beat EPS expectations and 76% beat revenue. These are some of the strongest earnings in years. Q3 earnings growth is tracking near 13%, which would be the fourth-straight quarter of double-digit growth. This is nothing like the late 1990s, when many companies had no earnings. Today, earnings are broad, strong and rising.
This matters. Over-valuation narratives assume stagnant earnings, but the data shows that earnings are performing well, even as markets wobble, and that often creates opportunity. What feels like the “flu” is more likely deleveraging. Margin balances grew high, and when brokers tighten credit or accounts fall below required levels, forced selling begins. That selling hits liquid winners more than the weak-laggards.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Big leverage is hiding in plain sight, as with crypto-currency. Unlike brokers, crypto-currency platforms do not report margin credit in the same standardized way. But the symptoms are obvious. Bitcoin is sharply off its highs. So are the other crypto-currencies: Ethereum, Solana, Ripple and other major tokens are under pressure.
ETF outflows have been dominated by crypto-currency ETFs for weeks. Now it’s spreading to Equity:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Highly leveraged traders are getting liquidated. When that happens, they seek liquidity elsewhere. And the biggest pool of liquidity in recent months has been mega-cap AI driven-technology.
Add stress in private credit and risk appetite falls quickly. Crypto-currencies deleveraging spills into equities. Then equity margin-calls spill into other sectors, creating a domino sequence of raising cash. But none of this is fundamental deterioration. It is mechanical. And we see babies getting thrown out with the bath-water:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Outflows started in high valuation pockets. (That’s profit taking, in other words). But now, outflows are broad. Every major sector (except Health Care) is seeing some net selling:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Small-cap and mid-caps were hit first. Now, the outflows are spreading to large-caps.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
When outflows hit high-quality names with strong fundamentals and earnings, that triggers margin-call behavior. Investors do not sell their best ideas because they lose faith in them. They sell because they must raise cash. When margin-calls come, you sell what you can, not what you want to sell.
This is what makes a late-stage pullback unpleasant but healthy. It clears weak hands, resets valuations, and sets the foundation for the next advance. History also offers hope. Since October 29th, outflows have surged, and in the 17-trading days since, the ratio of inflows to outflows has dropped to roughly one-third.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Going back to 1990, with the 1,515 other times this has happened we saw strong forward returns:
Looking only at the past 15-years, the numbers look even better:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Pull-backs like this, especially those driven by deleveraging rather than declining earnings tend to be short-lived. They shake confidence, but improve conditions. Prices pull-back, earnings rise and valuations normalize. That is the recipe for the next advance.
The market feels sick, but the system is healthy. This pull-back is driven by deleveraging, not weakening fundamentals. Earnings are strong, revenue is solid, valuations are easing and outflows are clearing excess risk. These periods often set up the next move higher.
Volatility always feels personal, but like the flu in my house, with our son, the symptoms fade faster than they appear. Markets recover and shakeouts often make them stronger.
As Lao Tzu said, “If you realize that all things change, there is nothing you will try to hold on to.”
Let go of the noise and trust the data.
All content above represents the opinion of Jason Bodner of Navellier & Associates, Inc.
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Earnings Season Ends with Nvidia’s Spectacular News
Income Mail by Bryan Perry
Combating the Stubbornly High Price of Home Ownership
Growth Mail by Gary Alexander
Most Currencies are in a “Race to the Bottom” (vs. Gold)
Global Mail by Ivan Martchev
If Bitcoin Cooperates, We May See a Bottom for Stocks
Sector Spotlight by Jason Bodner
The Market Could Use a Winter “Flu Shot”
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Jason Bodner
MARKETMAIL EDITOR FOR SECTOR SPOTLIGHT
Jason Bodner writes Sector Spotlight in the weekly Marketmail publication and has authored several white papers for the company. He is also Co-Founder of Macro Analytics for Professionals which produces proprietary equity accumulation and distribution research for its clients. Previously, Mr. Bodner served as Director of European Equity Derivatives for Cantor Fitzgerald Europe in London, then moved to the role of Head of Equity Derivatives North America for the same company in New York. He also served as S.V.P. Equity Derivatives for Jefferies, LLC. He received a B.S. in business administration in 1996, with honors, from Skidmore College as a member of the Periclean Honors Society. All content of “Sector Spotlight” represents the opinion of Jason Bodner
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