Here's the Deal - June 2, 2025

Economy: In early Recessionary Phase (Not necessarily a recession, yet.)

Market Cycle: Bull Market

_{Week 22 of 52 for 2025: 42.31% of the way through 2025}

Weekly Note:

Back in 2016/17, I started to realize something that changed the course of my entire approach to the markets: the people I trusted for economic and market insights, many of whom I followed for years, were consistently wrong. Unfortunately, it can take years to figure this out as each economic prediction takes months to play out.

They predicted another housing price collapse. A credit crisis. A market crash. Year after year.

But they had accumulated massive followings and wrote and spoke from a political viewpoint that I subscribed to, so they must be right… Or so I thought. Now I know that both of those are huge warning signs.

Instead of owning their mistakes, they moved the goalposts. They gave new reasons for the same old fear-based predictions that continued to never come into fruition. What finally woke me up wasn’t just the bad calls, it was the realization that these voices were selling confirmation bias, not insight.

For many of them, not a peep before the 2008 collapse. And for those who claimed to have “called it,” they were pessimistic for years prior and offered flimsy evidence that they even called it accurately in the first place. Yet then spent the next decade yelling “depression!” every time the market took a breath.

And for what?

Doom sells, so that’s their business model. But it’s not a strategy that is going to help you.

I know they were wrong, because I used to believe them. More importantly, I kept score. And I noticed a pattern: the most consistent purveyors of economic fear were overwhelmingly ideological and predominantly on the right. They weren’t doing objective analysis. They were pushing a worldview, and following a wanted worldview makes you easy to fool, and easier to market to.

As I keep saying, the trick is to understand the web of overlapping economic and market cycles and how they interact with each other. That’s how you cut through noise and determine what matters right now.

It’s not easy. But it’s a whole lot easier when you’ve got someone walking you through it in real time. That’s what I try to offer here each week. Because once you begin to understand how this system actually works, not just the headlines but the deeper currents, everything changes. You begin to see how and where you fit. But clarity requires sacrifice. It probably means giving up a few TV episodes each week in exchange for something that might actually help you build or expand a future on solid ground.

For me, one of those sacrifices was sports. I used to be a die-hard fan of a team in each professional sports league. Coming to understand that not only was it a release, but that it also stemmed from an obsession with high performance and what it takes to sustain it. But I gave up watching sports regularly to pursue and focus on what could actually help improve my life: understanding the economic system and thereby helping others make sense of it, too.

Now here we are in mid-2025, and the people who spent years pumping out doomporn have become… bullish? Some even going so far as to claim that the U.S. “exited a recession” in Q4 of 2024.

Seriously?

If you’re wondering how that’s possible, it’s not. At least not in the real data. Seriously, a recession while unemployment is in the low 4’s while profit margins remain elevated as profits continue to increase every quarter leading to a growing GDP for all but two quarters in three years??? Spare me!

But when your business model depends on selling narratives, you pivot to whatever keeps the subscription numbers up. The real shame? If they’d just done the real work, they could’ve profited and helped others profit from the incredible strength in both the markets and the economy over the past 15 years, instead of fleecing their paid subscribers with fear.

Now they have flipped from bearish to bullish after being wrong for over a decade. That is significant and absolutely something you want to know about. When everyone starts moving to the same side of the boat, something dramatic is likely about to occur.

Let me be very clear: What you get from me isn’t just opinion, it’s conviction built on data and decades of market behavior. But that conviction is always loosely held. I test my views against new information constantly. Even going back to the those very same doomers that I allowed to impede my economic IQ and personal growth for years. If the data shifts, so do I. Quickly, and without hesitation.

That’s why I speak with confidence. Not because I’m trying to drive clicks or sell fear, but because I’ve already done the work to challenge my own thinking. I don’t show up with viral bearish headlines. I show up to give you the clearest read possible on what’s really going on in the moment.

And here’s what I’m seeing now:

We’re in the late stages of both the credit cycle and the secular bull market. And the fact that the most consistently wrong voices are now turning bullish adds significant weight to that thesis.

They continue to push political agendas disguised as economic analysis, because if your worldview is more ideological than evidence-based, you’ll easily fall for whatever story fits your bias.

To me, it feels and looks as though we’re heading into a blow-off top moment in markets. One of those euphoric market phases that sucks people in, gets them to overcommit, and then pulls the rug. The same people now saying, “The stock market is a forward-looking indicator,” were saying the opposite just a year or two ago. About 80% of the time that’s a true narrative, but they’ve likely missed that at the end of credit cycles, that phrase becomes one of the biggest traps in finance. Plus, just a few weeks ago those same people were saying “the stock market isn’t the economy” because markets were in a correction.

Could I be wrong? Absolutely. And quite honestly, I hope I am. In fact, there is no shortage of people who’s work I have come to highly respect that think the economic train keeps chugging along bringing with it more and more new highs in the coming years.

It’s a weird place to be, hoping I’m wrong.

Because if I had to design a scenario that would hurt the MAGA crowd the most, it would look exactly like what’s unfolding now. Especially after so many were sidelined during the most epic 15 year stock market run in history due to following the advice of political charlatans masquerading as economic experts. That’s not a political statement, it’s just what history has proved and the data suggests.

Maybe AI really does extend this cycle the way the massive expansion of free trade and the internet extended the one in the '90s. Or, maybe we don’t get the blow off the top move later this year and instead markets are back at their April lows in a few weeks.

Either way, the result of an explosive market or one that rolls over here doesn’t mean a depression is coming. So best not to be over-dramatic with predicting what follows. More likely, it’ll feel more painful to people who’ve never experienced a normal recession as a working adult (which is a significant portion of the current workforce), or who forgot what 2008 or 2000-2002 was really like. A lot of people will be blindsided simply because they’ve never seen this side of the cycle play out in a more “ordinary” fashion as the last two recessions (08/09 and 2020) were significant outliers in their own right.

And that's exactly why most people struggle to understand the economy. They only see what’s right in front of them. They base their outlook on their own life or social circle, not the broader system.

The real skill? Learn how the system works, then map your profession, location, and situation onto it. That’s how you find your next move.

But you won’t get there by following people who’ve been consistently and provably wrong for years by letting political narratives drive their analysis.

The readers here who have known me for years and decades, know just how much I put into “being right” about any topic I choose to partake. That’s not a brag, but rather more of an admission of a major fault. With that being said, do you really think I started putting my work out into the world without tracking my own record and comparing it to others for years first?

If I’m wrong, I will readily admit it and explain what has changed. That’s the difference between a professional and a charlatan.

There’s nothing wrong with being wrong. But staying wrong when you are provably so with confirmation makes you an amateur or worse, a fraud.

So what’s the plan?

I’ll participate wholeheartedly in what could be a historic melt-up, while keeping one eye on the exit. But this could also last months should it occur. Ultimately there will be technical signs that it will be coming to an end. There are always signs.

Or, who knows. Maybe this is one of those times, “When keeping it real goes bad.”

Q1 GDP still negative, but a little better than the initial reading.

While still in negative territory at -0.2%, the second reading of Q1’s GDP QoQ growth estimate was a slight improvement from the initial reading of -0.3%. But as I suspected and wrote about when the first reading came out, it looks as though Q2 is shaping up to be another strong quarter of economic growth compared to the weakness of last quarter. Probably more so than initially thought due to the pull-forward affect of businesses taking advantage of the temporary tariff reprieves to load up on inventory before the tariffs go into full effect. Which is yet another reason not to expect the inflation caused by tariffs to hit the data for a few months.

PCE: Oh, the missed opportunity. 🤦‍♂️

Much like the April PPI and CPI reports earlier this month, PCE came in about as good as anyone could hope for.

If not for the poorly timed rollout of tariffs and the confusing, often contradictory messaging that’s followed, there’s a strong case the Fed might already be in a position to begin cutting interest rates once again. No way of knowing for sure as we will never know what bond yields would be doing now without the uncertainty caused by tariffs and inconsistent rhetoric the past few weeks.

A great yet frustrating development, no doubt.

As previously stated, the Fed will need to watch how tariff induced inflation shows up in the economy over the next few months. So far, no monthly inflation report has fully captured the effects of the new tariffs from start to finish.

At this point, I believe that May’s inflation numbers will likely remain relatively tame, with the real impact beginning to show up in June or July, once businesses begin operating under a clearer sense of the new rules and what tariff rates will stick.

Fanny May and Freddie Mac to be Privatized?

To be perfectly honest, this is a bit of a blind spot for me. Good thing the WSJ just came out with a great article explaining the situation and possible ramifications of higher mortgage rates due to the increased fees which would result. You can read it here:

The Trump administration wants to sell shares in Fannie Mae and Freddie Mac. How it does so will have a big impact on home buyers and homeowners.

Like I said, I really haven’t dug into this one yet. However, on the surface, if you want to improve housing affordability right now, then probably best not to add costs to the purchase of a majority of home purchases.

Again, timing is everything and it just does not appear that the administration gets that or understands how cycles work.

Ultimately it appears that there is a conversation to be had about the amount of gains to privatize if the government, and therefor the tax payers, are still on the hook as a backstop. Since it is housing, the answer is probably not a simple either private or public stake on this one.

Markets:

The week started with a bang as markets gapped up on news that the 50% tariffs on the EU announced a few days before would be delayed until July 9th. That announcement gave SPY the fuel it needed to jump above the key $585 level we discussed last week. Even more importantly, that level later held as support, a sign of strength.

Momentum continued midweek, boosted by a strong earnings report from NVIDIA after Wednesday’s close.

On Thursday, the market opened strong around around $593, but quickly pulled back as suspected and laid out last week. However, the pullback found support right around $585. Again, a critical area where prior resistance flipped to support. If that level breaks, I’d expect a move to begin down toward the $563–$550 range.

Now the big question: when does the possible melt-up begin?

Before that happens, I think we may see the indices pull back. Whether that comes before or after SPY tests the $597–$600 zone remains to be seen. Seasonally, markets do tend to end June, July, and August higher than they started, but the gains are typically more muted than the November–April stretch.

So if we do see unusually strong momentum this summer, I’ll be treating that as a potential signal as it may be a sign that something bigger is unfolding.

$SPY ( ▲ 0.5% ) S&P 500:

Could grind up here to $600 or maybe even get back to the highs, but I’m still thinking SPY heads for $565-555 in the following weeks to set up the Summer Rally in the next month or two.

Finding momentary support at $576, $571 along the way.

Look for $597, $605, and $613.25 for levels of higher resistance.

$DIA ( ▲ 0.94% ) Dow Jones Industrial Average:

$QQQ ( ▲ 0.34% ) Nasdaq:

$IWM ( ▲ 0.03% ) Russell 2000 (Small Caps):

Significant Economic Data from the previous week:

Economic Data to watch this week:

Quote of the Week:

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