Please Don't Be Dumb Money...

Take a look at this chart. It shows us the percentage of investors that are bearish on the U.S. stock market. It's currently sitting at 45%. The only three other times that we've seen investors be as pessimistic on the U.S. stock market as today was in 2022, in 2020, and 2008. If we look at the stock market in those instances, we can see that this pessimism occurred during very turbulent market conditions. At the bottom of the Great Financial Crisis, right after the COVID pandemic crash, and during the bear market of 2022. Today, the S&P 500 has been roaring higher. Despite this record advance to new all-time highs, investors are still overwhelmingly bearish. Many investors, especially in the retail crowd, do not believe that the stock market recovery has legs to go higher, and so are still underexposed to the market. That makes this rally probably one of the most painful rallies in recent history. And as I'm going to show you, there's probably a lot more pain left. But for those willing to take some risk today, we could be about to enter one of the most profitable market environments since 2021. If you've been watching our videos, you'll know that in early May, we flipped our strategy at BravosResearch.com from a defensive posture to being much more aggressively exposed to the market. Now, although in the near term, the stock market could still be vulnerable to some additional downside, this market has plenty of room to run higher. And I'm going to show you just how much. Over the course of the last two years, the Federal Reserve, the U.S. Central Bank, has been lowering its interest rate. Now, although this is something that everybody knows and is widely reported, most people fail to comprehend just how much influence this has. Because if we zoom out to the 1950s on this chart of the Federal Reserve's interest rate, and we add recession bars on top, we see that every single economic recession in recent history has been preceded by a rising central bank interest rate in the two years prior. Or in other words, never in a recent financial history has a recession occurred when the Federal Reserve has been lowering interest rates in the two years prior. This is the most powerful economic force in the world. It is the price of money. It tells us how much it costs to borrow money and how much we are rewarded to save, which are two of the most fundamental driving forces of the economy. Today, not only has the Federal Reserve been cutting interest rates, but they're also projected to continue cutting in the coming months. This is why we've been so vocal about a recession not occurring in 2025, despite the many gloomy projections that you'll find out there. And when it comes to the stock market, the biggest periods of pain, the biggest corrections, tend to occur during economic recessions. Outside of economic recessions, you can get some pullbacks, of course, but these tend to be short-term dips that are worth buying. Now, by this point in the video, a lot of you may be thinking that it doesn't feel like the US economy is thriving. It doesn't make sense that the S&P 500 would continue to surge higher, despite a record number of Americans living paycheck to paycheck. This completely rational observation is probably one of the reasons that's keeping so many retail investors bearish on the stock market right now. Because people look around, and they just do not see the thriving economy that is currently reflected into stock market prices. Well, believe it or not, this is a story that is reflected into the stock market. Because while the S&P 500, the index of large cap companies in the US, has been soaring over the last four years, when we take a look at the small cap index, the IWM, it has been pretty much flat over the last four years. And if we adjust this IWM index for inflation, we see that the small cap index is actually down by 20% over the last four years. So this chart is what represents the real economy that people are feeling and observing right now. We happen to think that this underperformance in small cap stocks may be about to turn around and begin doing some catch-up, something that I won't get into in this video. But even if it doesn't, just because things aren't great in the real economy doesn't mean that things aren't great for large corporations and that we shouldn't take advantage of this as traders. The truth is that this divergence that has been building for four years now could continue. S&P 500 profit margins currently stand at around 12.5%, which is about the highest they've ever been, and they're projected to increase in the coming quarters. And at the same time, S&P 500 stock buyback announcements have just hit record highs. So in other words, shareholders are regaining more ownership of their stock. These are things that you typically see during bull markets, and it provides an environment that as traders, we want to be taking advantage of. So far in 2025, we've had 50 winning trades and 47 losing trades. So we're right really only about half the time when it comes to our predictions. Our returns really come from having much bigger wins than our losses. And we think the environment that we're heading into is going to provide many opportunities to have some big wins. As of the making of this video, we have active positions on stocks like Mueller Industries, Dominion Energy, Walmart, ASND, and even Google, which are all stocks that we think can perform well over the coming weeks. Now, ultimately there will come a moment where we will have to take a much more cautious stance on the market and reduce our exposure to stocks. One of the things that we'll be looking at is the very same chart that I showed you at the beginning of this video. Because as the market rises, retail investors are going to become less and less bearish on the market. In other words, there's going to be less and less potential buyers. Every single major stock market peak in the last 15 years has occurred at a moment where most investors were not bearish on the market. It could be that by the end of 2025, this chart will look something like this. And at that point, we'll be shifting our strategy. If you want to follow and get access to every single one of our trades and our entire commentary week by week on the market, make sure you subscribe to our membership at bravosresearch.com. Thank you for watching.