WHEN INVESTING BECOMES A LIFESTYLE YOU WEAR IT!

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THE LONG-TERM IS UNDEFEATED…

As we wrap up the second quarter, this has been a rollercoaster of a ride.

Global trade was impacted by Donald Trump and his trade agenda. The bond market lost some sponsorship from Japan, its biggest foreign purchaser—the dollar, lost some ground. The S&P dropped as much as 18.9% from its peak in February to its low on April 8th, only to violently rebound and close the quarter at new market highs.

We struck a trade deal with our biggest and most important trade partner, China, while Jay Powell and his inflation hawks used the potential rising prices as an excuse not to lower rates and were berated for it by Trump.

We negotiated a minerals deal with Ukraine, and a failed ceasefire between Russia and Ukraine. We did get one ceasefire in the plus column between Israel and Iran, but not before dropping a few bunker busters on their nuclear ambitions to get the conversation started.

Jamie Dimon sounded the alarm that the bond market could crash, but it was awfully reminiscent of Bill Ackerman's pandemic cry that the sky was falling—with one difference: Jaime’s cry seemed to create market volatility; Ackerman's cry created a 5 billion dollar profit.

Jay Powell was consistently verbally abused, and we saw more smoke than fire when it came to trade deals.

• Canada’s Digital Services Tax (DST) is a 3% tax on certain digital services revenue earned from Canadian users by large technology companies, regardless of whether they have a physical presence in Canada. The tax was enacted on June 28, 2024, but is retroactive to January 1, 2022, with the first payments due by June 30, 2025. This applies to both foreign and Canadian firms.

• Threshold: Companies with global revenues over $820 million (approx. €750 million) and Canadian digital services revenue above $14.7–$20 million per year.

Banks passed the Federal Reserve’s stress test.

The Federal Reserve’s 2025 stress test found that 22 of the largest U.S. banks are well-capitalized and able to withstand a severe economic downturn, including scenarios with a deep recession, a 30% drop in commercial real estate values, a 33% fall in home prices, and unemployment rising to 10%, which makes rates cuts in 2025 even more unlikely.

This reassurance reduces concerns about systemic risk, giving the Fed more flexibility to keep interest rates unchanged, since there’s less pressure to lower rates to protect banks or stimulate lending.

Inflation in the U.S. edged up slightly in the quarter, with the annual rate rising to 2.4% in May 2025 from 2.3% in April, according to the latest Consumer Price Index data. This marks one of the lowest readings since early 2021, indicating that inflation pressures have eased modestly but remain stable.

Earnings season stole the show in the first quarter of 2025 as S&P 500 companies delivered much stronger results than expected. Earnings grew by over 12% year-over-year, far surpassing initial forecasts, and sales expanded by about 4.4%. Notably, 77% of companies beat earnings estimates and 51% beat revenue estimates, with large tech firms and sectors like healthcare and communication services leading the gains. This broad-based strength, despite macroeconomic uncertainty and cautious guidance, highlighted the resilience and adaptability of corporate America, making Q1 earnings a major positive focus for investors.

Overall, there were equal amounts of headline-generated volatility as well as wonderful opportunities created by the constant tariff back and forth, promoting a bond market sell-off as the U. S. became less stable in the eyes of the world.

If you were a long-term investor with the mindset that bad times create great opportunities, you were thrilled to beat the indexes. You also were able to block out the distractions and profit while others panicked and sold in the peak of market uncertainty and volatility.

As the saying goes, the long term is undefeated!!

 WHEN INVESTING BECOMES A LIFESTYLE YOU WEAR IT!

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THE MARKET IS NOT A TIME MACHINE…

There is an old saying on Wall Street that time in the market is better than trying to time the market. Since the pandemic, we have seen an influx of over 30 million new retail investors enter the stock market.

Currently, retail investors are 25% of the daily volume, which is a huge number as compared to what market makers like Citadel control on a daily basis. Citadel Securities currently executes between $560 billion and $590 billion in trades daily, handling over 35% of all U.S. equity trades and about 40% of U.S. retail trading volume.

Approximately one-third of retail investors are classified as traders, so roughly 9.5 to 10 million. According to recent statistics, only about 10% to 15% of day traders are consistently profitable, while the vast majority—roughly 85% to 90%—either break even or lose money over time.

The question that needs to be asked and studied is if most new retail investors are losing, who is winning? And who is benefiting from the one trade away from a million-dollar mindset?

The answer is—the entire Wall Street system.

The evidence is in the numbers. At the start of the year, the U.S. stock market officially surpassed the U.S. bond market in total market cap—51 trillion versus 52 trillion—before falling, eventually back behind the bond market at 54.3 trillion to 55.6 trillion.

And while the total world bond markets still outpace the world stock markets by a wide margin, approximately 141 trillion to 110 trillion. The devil is definitely in the details. Traditionally, the bond market is seen as a safe haven or a flight to safety.

Meaning…during a turbulent period in the market, investors seek safety in low-risk income bonds; as a result, the stock market becomes a source of liquidity—Now, in an ordinary market, investors flee the stock market to lock in yields to escape the volatility of the stock market.

Today, we are witnessing volatility in the U.S. stocks, the dollar, and the bond market. On April 7, we saw bond prices drop, the stock market crashing, and the dollar falling simultaneously, which is a signal that there are bigger actors at work.

Meanwhile, retail investors were selling, as President Donald Trump announced higher tariffs on nearly all global trading partners. Retail investors sold off more than a net $7.48 billion, and then bought a net $7.32 billion over the following three weeks as they tried to time the market's bottom, but not before panic selling as the S&P 500 dropped sharply over 12% in 4 days.

The retail investors who foolishly tried to time the market significantly underperformed, missing a sharp rebound after April 9, lagging the S&P 500 by about 8.7% year-to-date.

Timing the market doesn’t work. The funny part is that over the entire year from April 2024 to April 2025, retail investors sold nearly $168.2 billion in stocks, while the S&P 500 still rose about 10.6% in that period.

As of June 27th, year-to-date, the S&P 500 is up 5.7%; the Nasdaq is up 2.9%; the Dow is up 1.1%.

So, had you sold and bought back, you’d be far much worse. This is why I have coined the phrase, we get bread when it's red. Because during that same period both the S&P 500 and the Nasdaq rebounded over 23% and if you owned specific companies you saw anywhere from 52% to a 90% rebound.

Here are 7 companies that were up over 50% since April 7, 2025:

• Coinbase (COIN) — up over 127%

• Palantir Technologies (PLTR) — up more than 65%

• Vistra (VST) — 90%

• Nvidia (NVDA) — 61.6%

• NRG Energy (NRG) — 70%

• General Electric (GE) — 62%

• Uber Technologies (UBER) — 52%

Had you averaged down instead of traded away your potential profit by converting it to a realized loss instead of losses or break even, you would have been in the green. The reason why the new retail investors are losing huge opportunities is due in part to how they were cultivated and pulled into investing.

They have a pandemic mindset that speaks of quick profits and haphazard decision-making. Their research comes from social media or an awkward glance at confusing data, where they are surveying for the first positive thing that ignites their greedy intentions, and then they are off to the races.

The first behavior they learned was trading, and the second and more detrimental was how to profit from nothing, so there was no skin in the deal. This fell right in place with the claws of the market makers and their algorithms, where it all but assured that they would be roadkill.

The basic tenets of investing were thrown out the window while the majority of 30 million retail investors plotted a course for money destruction. Although some made an attempt to learn the fundamentals, the main lesson learned was that short-term pleasure is long-term pain.

Unfortunately, the stock market has switched cars from being an investment vehicle to the pinball gambling machine of the financially ignorant.

As my dad used to say, a hard head makes a soft behind, so I guess in this case, until the displeasure of losing money peaks, trading over long-term investing will be a lost lesson.

WHEN INVESTING BECOMES A LIFESTYLE YOU WEAR IT!

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Kevin Davis Founder of Investment Dojo and Author of The C.R.E.A.M. Report