The Market Melt-Up Is Coming

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To investors, The market is preparing for a ridiculous melt-up in asset prices. At least that is what history tells us is likely to happen over the next year. Carson Group’s Ryan Detrick writes “The S&P 500 recently was up more than 19% in two months. You ready for this one? That has only happened seven other times and stocks were never lower 1 month, 3 months, 6 months, or a year later. In fact, up more than 40% on average a year later. My oh my.” This type of return would have been unfathomable just a few weeks ago when everyone was freaking out over the Iran war, but things can change rapidly in a digitally-connected world where capital and information move at the speed of light. For example, only 34 times in history has the S&P 500 has gone down 2% in a single day following a 10%+ move over the preceding 13 weeks. Over the next 12 months, the stock market was higher 29 of the 34 times and the average return over the next year was 17%. An easy way to see the ramifications of this volatility is through the misunderstanding of stock market returns. You will hear people constantly quote the S&P 500’s average return around 8%, but the truth is the index has done significantly better than that. Creative Planning’s Peter Mallouk highlights “the S&P 500 has returned an average of 12% per year since 1980 and has done so despite an average intra-year drawdown of 14%, and often drawdowns that are much worse.” There are various reasons for the outperformance, including persistently higher inflation, rapid innovation in the economy, and a larger number of investors with access to the stock market. Regardless of the root cause, there is incredible wealth being created by public equities and history is telling us to prepare for even better returns over the next 12 months. Momentum is not the only thing telling us a melt-up is coming. Charlie Bilello shows “S&P 500 earnings are now expected to increase by 25% this year.” He says “we’ve never seen earnings growth this high outside of post-recessionary rebounds. An unprecedented boom fueled by massive EPS gains in big tech.” We are seeing signs of a market melt-up outside of public equities as well. For example, Benjamin Cowen shows the bitcoin market has just hit an important bear market milestone where the supply of bitcoin held at a loss has become a larger percent of the market than the supply of bitcoin held at a profit. He writes “you start looking for major market cycle bottoms *after* they cross, not before.” If this signal holds the historical accuracy, it would show the most pure macro asset (bitcoin) is near a bear market bottom, which would likely produce significant returns over the next 12-24 months. Whenever I see multiple markets lining up for potential explosive returns, I start to pay attention. Add in the backdrop of Kevin Warsh stepping in as the new Federal Reserve Chairman with the explicit focus on lowering interest rates and you have all the ingredients you need for the market to melt up. The bears will disagree, which is fine. That is how markets are made. But stocks are going higher because AI is real and the dollar is fake. There really is no other way to put it. I hope you all have a great start to your week. I will talk to everyone next time. - Anthony J. Pompliano Founder & CEO, ProCap Financial (Nasdaq: BRR) P.S. Go Knicks! :) Why Is Bitcoin CRASHING?! Jordi Visser is a veteran macro investor with 30+ years of experience and the author of the VisserLabs Substack . In this conversation , we discuss why bitcoin is down 50% and whether the bear market is over, why he's still buying through the dip, how AI agents will drive bitcoin adoption, and why the rotation from AI hardware to human software is the biggest investment opportunity right now. 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Feel free to unsubscribe if you aren’t finding this valuable. Nothing in this email is intended to serve as financial advice. Do your own research. 1 Some taxes may apply. We recommend you consult your tax, legal or investment advisor. 2 Security, storage, wallet providers, and insurance may vary based on asset chosen and custody solution available. 3 Visit https://bitcoinira.com/disclosures for more details.