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Inside Markets — Bullish Outlook Intact

Bullish Outlook Intact

June 4, 2025

The strength we have seen over the last two weeks has largely been driven by lower bond yields, hopeful trade rhetoric and bullish AI readthroughs. Equity investors will likely look through a modest economic slowdown as long as the trade rhetoric remains hopeful. However, a growth scare — especially from labor markets — and negative trade developments would lead to quick rerating in U.S. and global equity markets. This makes Friday’s Jobs Report an important near-term macro catalyst. Inline payroll gains > 100,000 would fit the modest slowdown narrative.

Yesterday’s close in the SPX generated momentum divergence signals that often occur before a near-term pullback. Similar signals on 5/16 and 5/17 preceded a mild ~3% pullback in the index. The intermediate technical outlook remains bullish as long as the SPX stays above ~5600, but we would prefer it hold the 5690-5730 range that includes the upside gap from the 90-day U.S./China trade détente. As long as the bullish technical outlook remains intact, corrective near-term price action should be taken as an opportunity to add equity exposure.

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