Resilience in the Face of Uncertainty.

So what do we think about the recent macro shifts and what that means for markets and the economy? In short: while noise levels are high, fundamentals still offer a backbone of stability. We’ve seen a rapid rise in bearish sentiment that still lingers, declines in some risk assets that—as expected—are starting to stabilize, and uncertainty around trade and tariffs becoming slightly less uncertain with the administration’s 90-day delay, showing a degree of flexibility. The data pre and post “Liberation Day” remains stable: steady employment this week, stable credit, and continued consumer resilience.

Last week’s Investing with Data outlined how markets often experience movement in the face of uncertainty. We cited past drawdowns as historical analogues—short-term moves that don’t always signal a structural unwind. We shared research highlighting that average 3-month forward returns off similar sentiment spikes are often positive going forward. We’ve made our portfolio changes, we have virtually zero direct tariff exposure, and investor positioning is still extreme.

This week, we extend that view. Yes, tariffs are a shock. Yes, some companies will face real cost pressure. But oil prices, freight rates, and consumer spending trends suggest offsets are in motion. More importantly, the strength of employment and equity in household balance sheets leaves room for businesses to navigate. The key question now: how do businesses adjust pricing, margin expectations, and capex plans heading into mid-year?

Here is the summary if you want just that:

• Bearish sentiment has reached its highest level in decades = still good

• Consumers are still spending — and they have the home equity to back it up

• Soft indicators show weakness, but hard data remains intact and the Fed has room

We keep digging into the data and comments to measure economic health, corporate health, and market moves.

So here we go…

Looking at AAII Investor Sentiment Surveys, we're now at the highest level of bearish sentiment since 2005 — a 186% surge relative to six months ago. Historically, these spikes have coincided with inflection points in equity markets, not the start of deeper downtrends. Investors are positioned for pain, but markets often move before positioning catches up. The next 12-52 weeks after this tend to be skewed higher.

Now the largest company in the world has been hit hard. Apple remains front in center of the tariff debate as they build and sell in China. We went ahead and looked at the stock itself. Apple has officially triggered one of its rare technical signals — trading more than 14% below its 200-day. This has only happened a few times in recent years, and each has typically marked an opportunity, not a risk, for forward returns. Does it hold? What happens if the largest most prone to China risk is finding a bottom???? Let’s see.

We also have an economic cycle indicator. Where we track the 18 month change in rates, dollar. and yields. When they combined move up in tandem it often precedes weak times. We are not seeing that today! When you overlay real wages and savings, it remains a pretty healthy ENOUGH environment.

Wells Fargo earnings this past week is important. CEO made this quote which I think it important as they are mostly US only, and very prudent risk managers for loans.

“We continue to see resilience in debit and credit card spending, and deposit flows are consistent with seasonal trends.” That’s not panic — it’s normalcy. Even less affluent consumers, while under pressure, haven’t cracked. Still stable.

Add in that home equity is near record highs!

Despite higher rates, homeowners are sitting on 72.2% equity, one of the strongest levels in 50 years. That’s a massive buffer for consumption, borrowing, and economic stability — especially compared to 2008, when leverage was the rule, not the exception.

Moving away from Wells Fargo and to Bank of America. We are now basically touching the entire US consumer!

Spending on services and retail (ex-gas) is showing clear month-over-month improvement. Consumers are still engaging — especially in experience-driven categories like restaurants — and there’s no evidence of a sudden stop.

Wednesday we got jobless claims. What did we learn?

Jobless claims are nowhere near recession territory. At 215K, they remain below the 3-month and 6-month averages. This labor market is a core reason why recession hasn’t materialized. Our internal scoring gave this report a 9.2 out of 10.

With all this anxiety the FED is in a strange spot. I would not even say tough because our view is the inflationary risks are likely not as large as most think, along with real time inflation running well below, which means actual impact is also lower should the worst case inflationary impact hit. Market today is pricing in 3.6 cuts in 2025.

Some ask: Are negative shocks priced into markets. While things can always get worse, but earnings estimates are near lowest points in history. So markets have been acting on negative estimate revisions. This tends to be times to dig in not run away.

What is lost in all the noise is what are the upside scenarios? Here’s a bunch!

Business formations just turned higher. One of the strongest readings in a year. That lines up with the data we have shared in past 2 months. Cough cough Legal Zoom.

I will leave you with this.

Net exposure to U.S. equities is at its lowest level in nearly 30 years. Everyone’s defensive. which is often a contrarian signal. When positioning gets this lopsided, snapbacks tend to be sharp.

Have a good one!

See you next week!

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About Avory & Co.

Investing where the world is headed. 

Avory specializes in high-conviction equity strategies, emphasizing Secular Growth and Transformation Stories driven by exceptional teams. Data guides decisions. We cater to high net worth investors, family offices, and institutional investors. Note: This information doesn't constitute a recommendation to buy or sell any mentioned securities. Avory is based in Miami, Florida with clients all across the globe.

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Disclaimer: Not a recommendation to purchase or sell any securities mentioned. This is for educational purposes only.