CWS Market Review – March 25, 2025

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Here are some stats to consider: Since 1966, the S&P 500 has had 12 bull markets and 12 bear markets. Over that time, the market has been in a bull market 80.2% of the time, and in a bear market the other 19.8% of the time.

During bull markets, the index has had an annualized average gain of 21.2% per year. In bear markets, it’s lost an average of 35.5% per year. Notice how the bear markets are short but sharp while the bulls are long and slow. That’s one of the important truths about investing.

Here’s another way of thinking about it. Imagine that instead of investing, you went to a special roulette table once a year on December 31. This roulette table, however, has some unusual rules.

At our roulette table, you have an 80% chance of making 20% on your money for the coming year, and a 20% chance of losing one-third of your money for the year.

You may not think this is a very comforting game since you have a very real chance of losing one-third of your money in any given year.

While this roulette is a product of my imagination, the payoffs are close to accurate, and, as in real investing, the key strategy is to keep playing the game because the odds are very much in your favor. That’s why so much of successful investing comes down to doing little and waiting. For some people, that’s too much to bear.

It’s easy to be reminded of this as the stock market recently had a very quick correction. The S&P 500 lost just over 10% in 16 trading days. I see plenty of folks debating whether we’re in a bear market or not, yet the market has already made back nearly half of what it lost.

This year’s bear market began five years to the date after the fantastic Covid-induced plunge of 2020. Five years ago, the market gave us a 20% surge in just three days, but 25 years ago, the market peaked on March 24, 2000. We didn’t reach another new high for 13 years.

SAIC Rallies on Earnings Beat

Two weeks ago, I told you about Science Applications International (SAIC) which is one of our Buy List stocks. I highlighted the company because the business performance has been quite good, but the stock has taken a big hit, especially since election day. I always pay attention when good stocks are taken down, especially for transient reasons.

Many investors suspected that SAIC’s contracts would be under the knife thanks to the new Department of Government Efficiency, but that’s an exaggerated threat. SAIC does so many things for the Pentagon. In fact, SAIC is ultimately a money saver for the DOD.

In September, SAIC reported fiscal Q2 earnings of $2.05 per share. That was a 20-cent beat. Then in December, it reported fiscal Q3 earnings of $2.61 per share. That was a 44-cent beat.

Yet the stock started to fall since election day. In November, SAIC was as high as $156 per share. Earlier this month, it dropped down to $95 per share. This is when prudent stock shoppers take notice.

We’ve been paying close attention to SAIC, and we’ve seen several reasons to keep the faith. For example, in December, SAIC’s board of directors authorized a buyback of $1.2 billion. That’s a strong show of confidence. At the end of last quarter, SAIC’s estimated backlog was approximately $22.4 billion.

SAIC had also raised its guidance. The company projected full-year earnings between $8.50 and $8.65 per share. That’s a big increase over the previous guidance range of $8.10 to $8.30 per share.

That brings us to the recent earnings report. For the year so far, SAIC has made $6.56 per share. That means the guidance implied Q4 earnings of $1.94 to $2.09 per share. Two weeks ago, I wrote, “I think there’s a good chance we’ll see an upside surprise.”

I was right.

Last Monday, SAIC said it made $2.57 per share. That’s up from $1.43 per share the year before. Quarterly revenues increased 5.8% to $1.84 billion.

For the year, SAIC made $9.13 per share. That’s up from $7.88 per share the prior year. The company had free cash flow of $499 million.

SAIC also raised guidance for the new fiscal year. The company now sees FY 2026 revenues ranging between $7.6 billion and $7.75 billion. That’s an increase of $50 million to the low end.

SAIC raised its full-year earnings guidance for the coming year to $9.10 to $9.30 per share. That’s an increase of 20 cents to both ends. On Monday after the earnings report, the stock rallied more than 7% for us. The stock closed today nearly 15% above its low from earlier this month. This is another good example of why it’s good to stand by high-quality stocks that run into a little trouble.

By the way, I talk more about our Buy List stocks like SAIC in our premium version which you can sign-up for here.

Consumer Confidence Plunges to 12-Year Low

Wall Street got an unpleasant shock this morning when a report on consumer sentiment dropped sharply. The Conference Board said its measure for future expectations fell 9.6 points to 65.2. That’s the lowest reading since late 2013. Traditionally, any reading below 80 has signaled that a recession is on its way.

The measure for current conditions fell 7.2 points to 92.9. Economists had been expecting a drop to 93.5. That was the index’s fourth monthly drop in a row.

I can’t say I’m completely surprised by this news. Just look at the stock market over the past month, and you can see that investors are clearly nervous. The report also shows that only 37.4% of respondents expect the stock market to be higher one year from today. That’s a drop of 10% in the last month. It’s also the first time that most investors are pessimistic since late 2023.

I’m a firm believer that the stock market is a driver of consumer spending (though not the only driver). Happy stocks make happy shoppers.

I looked at Polymarket today which is a site where you can bet on real world events. Bettors currently think there’s a 33% chance of a recession starting later this year. Bettors also expect growth for Q1 GDP to be about 1%. That’s not so good.

Traders think that the Fed will soon be back to cutting interest rates. The latest expectations are that the Fed will cut twice more this year, and there’s nearly a perfect 50-50 split on the need for a third rate cut.

On the plus side, today’s new homes sales report showed a modest rebound last month. The Census Bureau said that new home sales rose 1.8% to an annualized rate of 676,000. The numbers for January were revised higher as well.

Is the U.S. stock market out of its hole? That’s hard to say. The correction was swift, and we’ve already made nearly half of it back. One good item is that the stock market just barely tipped above its 200-day moving average. This is a dumb rule that has a pretty good track record. Historically, the market has done much better when it’s traded above its 200-DMA compared to when it’s below the 200-DMA. Still, I don’t think we’re in the clear just yet.

The next big test for the market will come next Friday, April 4, with the March jobs report. The labor market has shown a little weakness lately but nothing alarming. At least, not yet.

That’s all for now. I’ll have more for you in the next issue of CWS Market Review.

– Eddy

Posted by on March 25th, 2025 at 5:11 pm


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.