A new movie due out next month called “Novocaine” is about a guy unable to feel pain. This is a kind of superpower, right up to the point where it becomes a keen danger, leaving him insensitive to damaging injury.
The stock market, similarly, was for weeks calm and unflinching against potential sources of hurt, until on Friday the indexes recoiled under the cumulative pressure of a slow-motion economic-growth scare, against a noisy backdrop of policy flux.
Prior to the shaky action Thursday and Friday, the market had been in “immaculate rotation” mode, a deeply split tape passing the baton from sector to sector, growth to value and back, mostly in stride. Buyers showed just enough exertion Tuesday and Wednesday to lift the S&P 500 a quarter of a percent to a marginal new record high each session.
This qualifies as resilience, though of an equivocal sort.
Warren Pies, co-founder of 3Fourteen Research, notes that the index logged a new record with only 5.5% of its members hitting a 52-week high, less than half the average on past days of a fresh S&P 500 high.
This isn’t an odds-on sign of deep trouble to come, but such behavior has meant a less-emphatic signal of good future returns, while making the market a bit more accident-prone. I noted on CNBC Thursday that the market was like a team with a great record in very close games. Many fans view this as a mark of a great team. Yet, in fact, the best teams simply play fewer close games thanks to their dominance. (Apologies for the harsh reminder, Chiefs fans.)
Scott Chronert, U.S. equity strategist at Citi, captured the vibe entering Friday: “Higher rates, lesser Fed cuts, DeepSeek, tariffs, and softer guidance despite impressive Q4 results all could have weighed more substantially on headline indices. Instead, we continue to trade near 25x trailing earnings, the index remains fully valued per our [discounted cash flow] work, and it has posted a total return of 3.8% year-to-date through yesterday’s close. While 2025 upside is a far cry from back-to-back 20%+ years, it is still nothing to scoff at. Breaking strong sentiment will take more than that.”
Source: https://www.cnbc.com/2025/02/22/resilient-stock-market-finally-succumbs-to-pressure-from-economic-worries-and-trump-policy-flux.html