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A Key Indicator — the Market Regime Model — Entered the “Red Zone” in March and April. Historically, the S&P 500 Has Declined an Average of 5.6% Over the Following 12 Months in Similar Cases.

This marks the first time the model has entered the red zone since February 2022, when the Fed’s rate-hike path triggered a bear market in U.S. equities.
According to Bloomberg Intelligence, the model flipped to red in March and April. Historically, in the past seven instances where the model entered this zone, the S&P 500 fell by an average of 5.6% over the next 12 months. The model tracks six key factors, including return correlations among S&P 500 components, the index’s position relative to its 200-day moving average, and the year-over-year change in price-to-book (P/B) ratio.
The biggest red flag triggering the shift was the S&P 500’s drop below its 200-day moving average in March — the first time that has happened since November 2023. The index currently remains about 1% below that technical threshold. Meanwhile, the P/B ratio has also slipped to levels typically seen during prior red-zone periods.
That said, some other indicators are still only in the early stages of deterioration. For instance, year-over-year changes in forward earnings expectations remain above the five-year average but have started to decline. M2 money supply growth has seen a modest rebound, though it remains well below levels that historically prompted Fed intervention.
On Wednesday, Fed Chair Jerome Powell said the central bank would not rush to cut interest rates until there is more clarity on the White House’s trade policy direction. While consumer and business sentiment has been weakening, Powell noted that hard data still shows a resilient economy.
Historically, red-zone periods have lasted an average of 16 months, during which the S&P 500 delivered an annualized return of -5.6%, compared with +29% in green-zone phases. To return to a bullish regime, a shift in the White House's protectionist stance may be needed — one that would help reduce stagflation risks and improve corporate earnings outlooks.
Seth Merrill, investment director at Crewe Advisors, commented: “There’s a growing belief that a Trump administration would scale back its tariff strategy if signs of labor market weakness emerge. The risk, however, is that by the time that happens, it may be too late — corporate profits could already be under pressure, and further deterioration in economic outlook could trigger more aggressive selling.”

This week's watchlist: $NVDA, $V, $BGM, $MA, $ASTH

A Key Indicator — the Market Regime Model — Entered the “Red Zone” in March and April. Historically, the S&P 500 Has Declined an Average of 5.6% Over the Following 12 Months in Similar Cases.

This marks the first time the model has entered the red zone since February 2022, when the Fed’s rate-hike path triggered a bear market in U.S. equities.
According to Bloomberg Intelligence, the model flipped to red in March and April. Historically, in the past seven instances where the model entered this zone, the S&P 500 fell by an average of 5.6% over the next 12 months. The model tracks six key factors, including return correlations among S&P 500 components, the index’s position relative to its 200-day moving average, and the year-over-year change in price-to-book (P/B) ratio.
The biggest red flag triggering the shift was the S&P 500’s drop below its 200-day moving average in March — the first time that has happened since November 2023. The index currently remains about 1% below that technical threshold. Meanwhile, the P/B ratio has also slipped to levels typically seen during prior red-zone periods.
That said, some other indicators are still only in the early stages of deterioration. For instance, year-over-year changes in forward earnings expectations remain above the five-year average but have started to decline. M2 money supply growth has seen a modest rebound, though it remains well below levels that historically prompted Fed intervention.
On Wednesday, Fed Chair Jerome Powell said the central bank would not rush to cut interest rates until there is more clarity on the White House’s trade policy direction. While consumer and business sentiment has been weakening, Powell noted that hard data still shows a resilient economy.
Historically, red-zone periods have lasted an average of 16 months, during which the S&P 500 delivered an annualized return of -5.6%, compared with +29% in green-zone phases. To return to a bullish regime, a shift in the White House's protectionist stance may be needed — one that would help reduce stagflation risks and improve corporate earnings outlooks.
Seth Merrill, investment director at Crewe Advisors, commented: “There’s a growing belief that a Trump administration would scale back its tariff strategy if signs of labor market weakness emerge. The risk, however, is that by the time that happens, it may be too late — corporate profits could already be under pressure, and further deterioration in economic outlook could trigger more aggressive selling.”

This week's watchlist: $NVDA, $V, $BGM, $MA, $ASTH