The stock market’s move higher since April 9 has been impressive. The rally has been relentless after President Donald Trump paused most of the reciprocal tariffs he had announced only days earlier on April 2, so-called Liberation Day.
The S&P 500 has risen over 25% and the Nasdaq Composite has increased by 35%, with each recently notching all-time highs.
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The stock market’s move in speed and size likely surprised many, given that higher-than-expected tariffs had caused the S&P 500 to tumble 19%, nearly into bear market territory.
Many concerns during stocks’ sell-off, including the risk of stagflation or recession, remain possibilities, given that unemployment has risen this past year and sticky inflation could ding GDP later this year when the full impact of remaining tariffs passes through supply chains.
Stocks generally do best when investors are optimistic about future revenue and earnings growth, and households and businesses ramp up spending rather than retrench.
As a result, many people are likely scratching their heads, wondering what may happen next, especially since the S&P 500’s valuation has surged back to new highs.
Those in the bullish camp say the 19% decline in the S&P 500 between February and April’s low priced in enough risk to set the stage for persistent gains. Bears argue lofty valuations and a sputtering economy put stocks at risk of a reckoning.
Many Wall Street pros, including popular veteran trader Mark Minervini, have offered their opinions recently. Minervini was mentored by legendary stock picker William O’Neil and was featured in the “Market Wizards” book series for his ability to profit from good and bad tapes.
Recently, Minervini delivered a candid message about the stock market, and given his experience, considering what he has to say may be smart.
Image source: Michael M. Santiago/Getty Images
Stocks defy weakening economy, sidelined Fed
What will happen to the economy next because of tariffs is debatable. Tariff proponents believe that they’re the best way to strong-arm a return of manufacturing to America, and the risk of them igniting inflation is overblown. Opponents think tariffs weigh on already cash-strapped consumers, crimping economic activity and slowing business spending while C-suites await trade deal clarity.
The reality may wind up landing somewhere in the middle. If so, an uptick in unemployment, stalled inflation progress, and cuts to GDP forecasts could be in the cards.
Related: Billionaire Ackman has one-word message on stock market
We’re already seeing some worrisome signs.
While the unemployment rate is relatively healthy at just 4.1%, it has risen from 3.4% in 2023. Further, over 696,000 people have been laid off year-to-date through May, up 80% year over year, according to Challenger, Gray, & Christmas.
The most hawkish Federal Reserve interest rate hikes since former Fed Chair Paul Volcker battled runaway inflation in the early 1980s have contributed to the weakening job markets. The Fed’s current Chair, Jerome Powell, raised interest rates by 5% in 2022 and 2023, wrestling CPI inflation down below 3% from 8% in 2022.
The drop in inflation is welcome, but there has been limited progress recently. Core Personal Consumption Expenditures (PCE) inflation was 2.7% in May, matching January’s reading.
Stalled inflation progress may increase the risk that tariffs cause prices to swell again, putting the Federal Reserve in a bind.
The Federal Reserve’s dual mandate is low inflation and low unemployment, two often contrary goals. When the Fed raises rates, it slows inflation but increases unemployment. When it cuts rates, it lowers unemployment but accelerates inflation.
Late last year, the Fed switched from rate hikes to rate cuts, lowering its Fed Funds Rate by 1% to support the job market. However, sticky inflation and tariff uncertainty have since moved the Fed to the sidelines, which is problematic for stocks because higher rates drag on profitability and reduce personal and business spending.
In June, the Fed cut its GDP estimate for this year to 1.4%, down from 1.7% in March, and meaningfully below the 2.8% growth notched in 2024.
If Powell leaves rates unchanged and the economy gets worse, Congress may not be able to help. Fiscal policy is hamstrung by a mountainous deficit and soaring debt pile, particularly following the passage of the One Big Beautiful Bill Act tax cuts.
Related: Legendary fund manager has blunt message on ‘Big Beautiful Bill’
America’s deficit is already above $1.8 trillion, accounting for 6.4% of gross domestic product, and total public debt outstanding is roughly 122% of GDP, far north of the 75% level witnessed during 2008’s Great Recession. The CBO estimates that the One Big Beautiful Bill Act will increase national debt by $2.4 trillion through 2034.
While this backdrop threatens revenue and earnings growth, the stock market’s record-setting run suggests investors think any economic dip will be temporary.
Mark Minervini says traders are ‘fighting for pennies’
Mark Minervini has been trading stocks for nearly 40 years. A technical analyst, Minervini cut his teeth learning from William O’Neil, the veteran Wall Street stock picker likely best known as the founder of Investor’s Business Daily.
Minervini won the U.S. Investing Championship in 2021 with a remarkable 334.8% return, a record. He also won the title in 1997 with a 155% return.
More experts:
- Fed official sends strong message about interest-rate cuts
- Billionaire fund manager sends surprising message on trade deficit
- Hedge-fund manager sees U.S. becoming Greece
Since he’s a technician, Minervini uses price action to inform his buy and sell decisions. While the rally since April has been rewarding, he has noticed some trouble under the hood that could give active investors pause.
“If you are a breakout trader using tight stops — even though the indexes have ripped higher — you have likely experienced a low batting average,” wrote Minervini on X.
Minervini is a rules-based trader who limits losses by using tight stop-loss orders. Stops can protect your downside, but during periods of volatility, they can trigger more often than usual, reducing your winning percentage.
“The frequent occurrence of squats and outright failures continues to dominate as a theme around breakout levels, clearly signaling that conditions remain challenging and volatile around key risk levels,” wrote Minervini. “These failed breakouts reveal persistent overhead supply and insufficient follow-through from institutional buyers, underscoring a risk off market with regard to broad-based participation.”
Minervini prefers to buy stocks as they rise, believing winners will continue to win.
The failure of breakout stocks to follow through suggests to him that institutional investors aren’t willing to press the accelerator, making it challenging to profit big from trading stocks.
“I remain an active participant and careful observer, adjusting day by day and ensuring risk management remains my top priority,” wrote Minervini. “As far as breakout stocks are concerned, this is NOT yet an Easy Dollar environment. For the most part, we are still fighting for pennies.”
Related: Bank of America delivers bold S&P 500 target
