by Jason Bodner
May 28, 2025
Scanning the news feed is not for the faint of heart. A few recent headlines make my point:
- President Trump is embroiled in a battle with Harvard over admitting foreign students.
- Two Israeli Embassy staffers were gunned down at a Jewish Museum.
- The Ukraine-Russia war drags on.
- A record number of Americans applied for foreign citizenship to escape Trump's second term.
- Trump is fighting openly with Bruce Springsteen.
- "Sell America" is gaining momentum as rising U.S. bonds yields put pressure on stocks.
- And, to add insult to injury, the New York Islanders have the #1 NHL draft pick for next year.
It's all a bit much, and a new bout of negative sentiment can shake some investors out of their stocks, but I'm here to tell you that would be a bad idea, historically speaking, since when you tune out the media din, the data is not looking bad at all. Here's what I see when I turn off the news and consult the data:
First, the Big Money Index (BMI) shows us that, ever since the lows of April 8th, the overall direction of money is into stocks. We've seen a near parabolic rise since early April, when the BMI was in the mid-30s to now, just shy of 70%, which means that 70% of all signals over the past 25-days were inflows:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Originally, this rise in the BMI was due to immense outflows suddenly stopping. But since a week and a half ago, we have seen steady inflows in both stocks and ETFs:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
This is not mere short covering, as that time has largely passed. In the third week of every month, FINRA updates its Margin Debt Statistics. The number peaked at an all-time-high of $937-billion in January of 2025. We just got the numbers for April, where we see that margin debt has dropped to $850-billion.
Source: FINRA
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
While a 9.3% drop may not seem like much, keep in mind that's the amount of credit extended, but it can be leveraged, so if clients borrowed $87-billion more dollars in January, if that were leveraged 3-to-1, that is $261-billion coming out of the system. When leverage comes out due to shocks to the system such as Trump's announcement on Liberation Day, there is tight correlation with a drop in equity prices.
It looks like this:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
This deleveraging event is over for now. When margin calls come, those using it, must sell whether they want to or not. After that, investors stepped in to buy the castaways of the forced selling event.
There are other signs that our recent rally from April's lows was not merely short covering. The beauty of watching money flow is that you can actually see where the fund flows take you. Here, we see that since the pause of China-US tariffs on May 12th, there were substantial inflows into small and mid-cap stocks:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
We also see clearly, in the table above, that inflows outpaced outflows by nearly 5-to-1 in the 10-days between May 12th and May 22nd. What's more, we can see there have been inflows into growth areas of the market. The rise in Discretionary and Technology-sectors indicate a risk-on mentality, despite what the news is telling us. We see on the left that Technology and Discretionary were the lowest ranked sectors at market lows on April 8th. Now we see they rose substantially in the rankings while the defensive Staples sector fell:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Layer this constructive data with recent inflows in previously beaten-down sectors, and we can begin to celebrate. Below, we see inflows into Industrials, Technology, Materials, Discretionary and Energy:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
This is very positive data.
Want some more good news? Earnings are working well. According to FactSet, For Q1 2025 (with 96% of S&P 500 companies reporting actual results), 78% of S&P 500 companies beat EPS and 63% beat revenue. This is, of course, fantastic, but it also reconciles with the multi-year trend:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
The bad news is that guidance for some companies is proving to be a challenge, what with unknown tariffs on foreign trade inputs. Some companies reported earnings and sales above estimates but then lowered guidance. Some companies even pulled their full-year guidance as they struggle to see the future potential impacts of uncertain trade policy and how it might affect their businesses. When companies are uncertain, Wall Street is uncertain. If there is one thing Wall Street hates, it is uncertainty.
But these momentary assaults of bad news don't seem to have much of a heavy effect on stocks. Just 12-days ago, Moody's downgraded U.S. debt. That ominous headline surely should have sent stocks reeling, but the market shrugged it off. Trump attacked Apple, threatening possible tariffs if they don't make their phones domestically. Stocks gapped-down on the news, but they were bought back throughout the day. The news tries to keep us engaged, using fear and doubt as their addictive agent. But when we separate fact from fiction, and logic from emotion, we see a clearer picture. I believe it is still a good overall time to buy equities. I believe these trade issues will be resolved. I believe the tax bill will pass. I believe interest rates will fall, and I believe this will all happen before mid-term election campaigning begins.
A century of stock returns tells us to buy on the dips – however fearsome they may be. The Great Financial Crisis low of 2008-09 saw SPY close at $50.33 on March 9th of 2009. Today the SPY is at $583.09, or 1,059% higher. And that was during the midst of a non-stop onslaught of negative news.
Don't lose the forest through the trees. Focus on what is, not the worst of what could be.
""Your problem isn't external things. The real problem is the assessment you make of them."
– Marcus Aurelius
Navellier & Associates; own Apple Inc. (AAPL), in managed accounts. Jason Bodner does not Apple Inc. (AAPL), personally.
All content above represents the opinion of Jason Bodner of Navellier & Associates, Inc.
Also In This Issue
A Look Ahead by Louis Navellier
The Press (and Investors) No Longer Fear Tariffs, But the Fed Still Does
Income Mail by Bryan Perry
The Aerospace Defense Sector is Looking Bullet Proof
Growth Mail by Gary Alexander
Saluting Some Great Heroes of Economic Freedom…on Flag Day
Global Mail by Ivan Martchev
A Trillion Dollar Tweet – or Two
Sector Spotlight by Jason Bodner
Ignore the News Feed, For Your Psychological (and Financial) Health
View Full Archive
Read Past Issues Here
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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