The NASDAQ has now advanced for 13 consecutive sessions, reaching new all-time highs following a sharp V-bottom recovery that began on March 30. This type of rapid extension has pushed the market into overbought territory, making a near-term pullback normal—and likely healthy. I would view any such weakness as a potential opportunity to add exposure.
Investor sentiment appears to be pricing in a resolution to geopolitical tensions, while continued strength in artificial intelligence remains a dominant driver of earnings growth. Companies are increasingly leveraging automation and AI to improve efficiency and margins, and this structural shift could prove as transformative as past industrial revolutions.
Liquidity conditions are also playing a key role. The Federal Reserve’s balance sheet peaked near $9 trillion in April 2022 and declined significantly into late 2024. However, since bottoming out at around $6.5 trillion in December, it has begun to expand modestly again. While not a full-scale easing cycle, even incremental liquidity support can help fuel equity market strength—particularly in momentum-driven environments like the current one.
Historically, V-shaped recoveries have often coincided with improving liquidity conditions, though it’s important not to over-attribute market moves solely to Federal Reserve actions. Policy decisions are typically driven by broader economic objectives rather than political outcomes, and markets respond to a complex mix of growth expectations, earnings, interest rates, and risk sentiment.
Looking ahead, fiscal dynamics remain an important backdrop. Elevated government debt levels and potential future issuance could influence both interest rates and monetary policy. Over longer periods, sustained increases in the money supply can contribute to inflationary pressures, which in turn may support real assets like gold. Gold remains in a longer-term uptrend, and a continuation of that trend would not be surprising in an environment of persistent deficits and accommodative policy bias.
Meanwhile, a significant amount of capital—roughly $8 trillion—remains parked in money market funds. This sidelined liquidity could provide additional fuel for equities if confidence continues to improve and investors rotate back into risk assets.
On the regulatory and structural front, proposals like the “Clarity Act” and the growth of stablecoins are worth monitoring. While innovation in digital payments could create new competitive dynamics for traditional banks, the scale and speed of any disruption will depend heavily on regulatory outcomes and consumer adoption.
Positioning
Portfolios are performing well year-to-date. We will remain disciplined—gradually deploying capital on pullbacks while continuing to manage risk and avoid chasing extended markets.
The LORD will continually guide you always. Isaiah 58:11