Why I Suspect This Is A Bear Market Rally

I have been going back and forth over the last week or two: Bear Market Rally or Correction In An Ongoing Bull Market? In the wake of the strong bullish reaction to Google’s (GOOG/GOOGL) 1Q25 earnings report on Thursday April 24, I was leaning bullish. In a blog post I suggested the appropriate analogy might be 1998 when the bailout of the hedge fund Long Term Capital Management resulted in a bottom and continuation of the long bull market. But now I’m leaning bearish. Why?

For one thing, the kind of extreme volatility we’ve seen over the last month generally occurs during bear markets as you can see in the chart above from Andrew Thrasher.

For another, despite the generally positive reaction to Mag 7 earnings, the reports themselves have been good but not great. As I pointed out in the blog linked to above post-GOOG/GOOGL earnings, GOOG’s core search revenue growth continued to decelerate in 1Q25 to just 9.8%. Apple (AAPL) reported another muddling quarter last Thursday afternoon with iPhone revenue growth of just 1.9% – and the stock has performed poorly in its wake. Tesla’s (TSLA) 1Q25 earning report was notably bad with revenue down 9% and Non-GAAP Net Income -39%. The stock only rallied because Musk said he’d be cutting back the time he’s spending on DOGE to concentrate on TSLA. Amazon’s (AMZN) 1Q25 revenue increased only 8.6% and AWS 16.9%. The Facebook (META) and Microsoft (MSFT) quarters were a little better but by no means blowouts.

Finally, with Warren Buffett announcing his retirement at Berkshire’s Annual Meeting on Saturday, BRK.A/BRK.B shares dropped 5% on Monday. BRK is a $1 trillion+ company and one of the best performers in the market YTD. And now Palantir (PLTR) has been rejected at its all time highs after a stellar 1Q25 earnings report with the stock off more than 9% at the close of the after hours. The problem here is valuation with the stock trading at 80x 2025 Revenue Guidance.