Doug Kass: Is the Market the Smile on the Mona Lisa?
While most bulls and technicians are interpreting the recent climb in equities as another opportunity to 'buy the dip,' the fundamentals are deteriorating.
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"At words poetic, I'm so pathetic
That I always have found it best
Instead of getting 'em off my chest
To let 'em rest unexpressed
I hate parading my serenading
As I'll probably miss a bar
But if this ditty is not so pretty
At least it'll tell you how great you are.
"You're Mahatma Gandhi
You're the top
You're Napoleon brandy
You're the purple light of a summer night in Spain
You're the National Gallery, you're Garbo's salary
You're cellophane."
- Cole Porter, You're The Top
While these previous price patterns/charts are obviously vague, should not be taken literally and basically BS, it's always fun to make the comparison. The 2025 Nasdaq pattern is very similar to 2022 (when the index broke 17,500) — so technically speaking, 21,000 is an important spot:
Here is the way Ella Fitzgerald saw it — and here is the way I currently see it:
"You're the Nile
You're the Tow'r of Pisa
You're the smile
On the Mona Lisa
I'm a worthless check, a total wreck, a flop
But if, baby, I'm the bottom
You're the top."
- Cole Porter, You're The Top
Bottom Line
Equities have recovered smartly from last week's lows and, as we and others anticipated, a knee-jerk higher has commenced.
At the bottom, we were deeply oversold — but the S&P Short Range Oscillator is now back into overbought.
Thus far, especially over the last two trading sessions, the rally in stocks has been unsupported by higher volume. Just the opposite (very low volume) has followed:
Most bulls and technicians are interpreting the recent climb in equities as another opportunity to "buy the dip."
Away from the less important technicals, the fundamentals are deteriorating. One of the foundations of our bear case was that 2025 S&P consensus EPS estimates were too elevated.
Indeed, over the last few weeks, first-half 2025 domestic economic real GDP growth projections have been significantly lowered — and so have corporate profit estimates (the previous consensus forecasts of +14% growth in S&P EPS was a pipedream).
In summary, my interpretation is less favorable and my 2025 market view is unchanged.
Recent Market Moves (and Volatility) Have No Bearing on My Full-Year Market Guesstimate
Based on my five scenarios (from very negative to very positive and attaching multiples to that distribution) I expect the S&P index to be down between five and ten percent for the full year.
It is my continued view that there is upside to about +5% (year over year), but my thinking remains that the high might have been already made in late January.
On the downside I see risk (for 2025) to be about -10% to -15% for the S&P.
Despite the anticipated and relatively narrow trading range there will be plenty of long and short opportunities on the road to the end of the year.
By Doug Kass Mar 25, 2025 3:00 PM EDT
This commentary was orginally posted in Doug's Daily Diary on TheStreet Pro.
At the time of publication, Kass was short SPY common (S), QQQ common (S).
