@bravosresearch: It’s happening AGAINBuckle u...

It’s happening AGAIN

Buckle up.

A thread 🧵

2/ A $54 trillion asset class has been bouncing back now

This is happening after a crash as violent as during the pandemic and the Financial Crisis

Today, a record 60% of US households have stock market exposure

The big question now is: can this rally really last?

3/ To answer that, we’re going to dig into hard historical data

But first, let’s outline the 3 potential paths ahead:

1) A sharp V-shape recovery back to all-time highs
2) A deeper pullback breaking the April 7th low
3) A choppy consolidation before another leg higher

4/ Let’s start with the V-shaped recovery

For that to happen, we’d need a dramatic shift in the economic outlook

Basically, all the fears priced in earlier this year would need to vanish soon

That’s a big ask, but it’s not impossible

Some are pointing to the US-China trade deal as a reason to be optimistic

5/ And we’ve seen V-shaped rebounds before

The most recent example was 2020

When stocks crashed 35% from COVID only to snap back to ATHs in almost a straight line

6/ Another example is late 2008

Investors went from fearing a total collapse to pricing in a strong rebound

But both of these rallies had something huge behind them:

Massive liquidity injections from the Fed

7/ We can see this by looking at the Fed’s balance sheet

The biggest liquidity jumps in history came right before those V-shaped rallies

Today, we’re not seeing the same setup

Still, not everything is working against a V-shape recovery

8/ For one, corporate earnings have held up well

Despite the 20% market drop, S&P 500 earnings estimates are actually higher now than they were in Jan And that strength is being driven by a few important tailwinds

9/ A weaker dollar is boosting international revenues

Lower gas prices are helping consumers stay afloat

And the Fed’s rate cuts over the past year may finally be filtering through the economy

These are all supportive for earnings and growth

10/ We've been flagging these tailwinds for months and help explain the market’s resilience

But above all of this looms one big storm: Tariffs

The US has just imposed a 3.6% average tariff on China, a brand-new number post-negotiation

11/ Treasury officials say this 3.6% rate is just the floor

We’re also looking at a 3.4% average global tariff, a 3.1% reciprocal baseline, and an extra 0.4% specifically on Canada and Mexico

12/ Yes, those numbers are lower than what many feared, but they still affect $2 trillion in trade

That could shave off 1.5% from GDP

For comparison, GDP fell by 3% during the Financial Crisis

Tariffs may not cause a full-blown recession, but they’ll slow things down

In our opinion, this reduces the odds of the V-shape recovery

13/ Just because a V-shape is unlikely doesn’t mean we’re going bearish

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14/ So if not a V-shaped recovery, does that mean we’re headed for a deeper drop?

For that to happen, things need to get worse - economically or geopolitically

History shows this kind of post-bounce breakdown has happened many times before

15/ In May 2008, stocks staged a rally after a sharp correction, but it didn’t last

The market eventually broke to new lows and fell much further

Similar failed rallies played out multiple times in 2001 as well

16/ If that happens again today, most people already know what that means

It’s what everyone has been warning about since tariffs made headlines

And the first red flag is already here:

Q1 2025 posted a negative GDP print

17/ That’s exactly how things started in 2008 and 2001, both of which went on to become full-blown recessions

In each case, the initial GDP contraction was followed by further contraction

18/ In both of those recessions, stocks dropped over 50%

So if GDP keeps contracting, there’s a real risk that this year’s drawdown could just be the beginning of something bigger

19/ But we’ve also seen single-quarter GDP declines that didn’t lead to recessions

Like we saw in 2022, 2014, and 2011

All were temporary slowdowns that turned into strong buying opportunities

20/ What was the key difference between those isolated contractions and full-blown recessions?

It was none other than the labor market

In 2001 and 2008, initial jobless claims surged alongside the negative GDP prints

Layoffs were clearly accelerating

21/ But in 2022, 2014, and 2011, despite negative GDP, we didn’t see a rise in jobless claims

And right now, in 2025, jobless claims are still stable

So that brings us to the third scenario:

Consolidation or partial retracement

22/ This scenario is where the market chops around, digesting the bad news, but avoids a recession

A perfect example was 2011

After a 20% drop tied to the European debt crisis, stocks went sideways for months before moving higher

23/ Another example: 1998

The Asian financial crisis sparked a 20% drop and recession fears

Stocks then moved sideways for a while, but the economy held up, and the bull market eventually continued

This scenario might be boring, but we think it’s the most likely path today

24/ Think of it this way: tariffs are a drag, but not a death blow

They’ve caused a slowdown, not a collapse

If the US avoids a recession in 2025, the market may keep chopping sideways for a bit

But will likely recover back to its highs

25/ Luckily, we don’t need to predict every move in the S&P 500 to make money

We just locked in a 50% gain on NRG, 17.5% on Zijin Mining, and IHS is already up 10% since initiation

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26/ Thanks for reading!

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