V-ictory Formation: “The” Bottom looks behind us, Here’s What We Think is Next for Stocks

Another short data driven video investors.  For weeks starting about a week after the April 7^th bottom in stocks, our videos all highlighted the same opinion and thought. Our team messaged that we thought this would be “The low” for market and stocks would subsequently move sharply higher.  No lower low in the S&P500, no retest the lows, no making a new low, like so many retired billionaire alarmist hedge fund managers were voicing at the time and the weeks after April 7^th..  and very time to recover back above the 200 day and back to where the markets first broke its 50-day MVA in late February through the first week in March.

We hypothesized that the second leg of the move down to -20% was an event induced bear market correction, not a recessionary economic induced selloff that last for quarter and years sometimes.

Ex the GFC in 2007-08 and the popping of the speculative Dot.com bubble frenzy in 2000-01, which did proceed longer and deep recessions. History said enough damage had been done and we would form a V-bottomed in a near exact similar fashion as the V-bottoms the last 20 to 30 years.  And so it now appears, after nearly 1000 points up in 2 months, others are finally seeing what we did. A v-bottom in stocks.  Let’s call it the Victory formation and take a knee given our comeback prediction being met.

Looking in the rear-view mirror, the explanations will be, initial dovish tariff talk, then better than expected 1q EPS reports in April, a May 9^th China tariff “deal”, and then stable to better economic data in April and March.

Only the rumors of lighter tariffs came BEFORE the April 24^th Zweig Breadth thrust creating the first of what many chartists call a bullish “Island Reversal” pattern.

And investors, the good news here?  This V- looks to have happened WITHOUT Federal Reserve intervention and interest rate cutting.

So after regaining 6000 almost to the day the market would be expected to in a V-bottom, Friday June 6^th, what should one expect from here in the S&P 500.  In our May 31^st video titled “Stock Markets V-Bottoms (insert correct current link)  we laid out what investors might expect through the summer months. A brief recap.  A lurch and grind to 6200+ taking the better part of 2-3 months would be normal before dropping back to near flat YTD.   Here’s a link to that video.

But beyond the summer, what might investors expect from the markets in late 2025 and 2026? Are all the good times in the past?  Should you “go to cash” now given the markets regained most of its losses and sites 2-3% below its ATH near 6150?  History says no, one should stay the course and actually hope for the normal late summer/early fall fall to add to positions as more major gains could lie ahead over the next 15-18 months.  We’ve discussed the Presidential cycle many times the last 7 years at OHFG. We will get into the detail again later in the year, but suffice it to say we are inching closer to what is historically the best to for stock returns under a president.  The 4q furst year term and the second year of their term.  Why?  Probably because they focus on economic growth to help create a tailwind for their party into mid-term election in late year 2. We will cover that data later in the year.

Data from Chief market Strategist and fellow data junkie, Ryan Detrick at the Carson group also shows historically strong forward returns are possible from here. Despite the +20% move weve had off the recent lows.  In fact, historically, moves like this, fast and furious higher off lows, bode well for returns over the next year.

According to Detrick, looking at the previous 17 bear market corrections or near -20% ones, after stocks gained +20% showed stocks were up a year later 16 times out of 17, a .940+ batting average. The one and only time stocks were lower was during the selloff of the Covid pandemic. Investors, this data isn’t bearish.  This data says V-bottoms are bullish for future returns over the next year.  Hence me calling it a Victory formation.

Here’s the data, let it sink in.

An average return of near +19% and a median forward return near 18% with a 94.1% hit rate?  There are only 4 12-month return periods in this table that are lower than +13.1%, 1965, 1978, 1987, 2019.  If we take the average or median of these years from Ryans data table, we would get about the same triangulation for summer of 2026, around 7000 on the S&P500 no promises or guarantees.

Similar V-bottom data from my friends at Franklin Templeton Lukasz Kalwak and Chris Galipeau.  The 40-day SP500 return was +19% mid the first week in June right before 6000. Since 1935 there have been only 13 such periods, after which the average 1 year forward return after was?… +20%. No guarantees, but can you say wall of worry?

One can rationalize why markets have V-bottomed since early April on walking back of tariff extremism, better jobs, and wage inflation data, but viewers who know me know I like real time market data.  The bond market data since early April was saying real growth was “ok” and inflation peaked early in April, not the stagflationary doom biased call many have suggested.

Investors, even from here, after this rally, history, is on the side of the bulls not bears over the next 12-18 months.  The strategists who called for a retest have now been wrong for at least 1000 points.

So, from here, 6000 when this was penned, there is now change in my outlook, let’s call it what it would be, a lurch and grind higher, about 1-1.5% per month, about 100 points per month into an August summer top.  Which is a very normal seasonal time for the markets to peak.

After that, we would expect a normal summer pull back in the markets. Many institutions got too bearish near the early April lows and “de-risked” and are way behind the performance curve in the 2^nd quarter.  If this plays out as normal, they will be even farther behind the indexes and benchmarks by August, so any summer sell off into early October would likely be a buying opportunity for a yearend rally and more new ATH’s in 2026 like the V-bottom and Presidential cycle histories suggest. This is why our team has stuck with our 2025-year end target of 6600 even as stocks sold off into April, and most strategists slashed their targets from over this number to the low 5000’s and are now raising them once again.

Does that mean you shouldn’t add to stocks particularly if you are younger and in saving and accumulation mode?  No, rarely can you pick the absolute level in both price and time, on both the buy side, sell side, and buy side once again, particularly in growth stocks.  Regardless of the path for the economy and financial markets in the next few months, the investment team at OHFG will be here manning the ship and adjusting our models and long/short, hedged equity fund where we can.

Until next week, I’m taking a knee in the Victory formation, so have a blessed weekend and know that the OHFG team is doing what we can to plan for you and your family’s future regardless of what stage you are at in your career or retirement.