The S&P 500 gained more than 3% for the third consecutive week last week, something that has only happened two other times in history. Those times were off the 1982 lows and after the COVID lows. The S&P 500 was up more than 30% a year later those two times. We aren’t saying that’ll happen again, but we are saying the blast of strength we’ve seen the past few weeks is a clue the lows are in and the bulls are back in charge.
What a Rally
The S&P 500 was recently up 9.8% in 10 days, for one of the greatest 10-day rallies in history. Some think large moves like this are bearish, but they actually tend to suggest higher prices ahead.
Looking at the 20 best 10-day rallies ever, the S&P 500 was higher a year later nearly 85% of the time, with the early 2000s tech bubble the only times it was down. Bottom line, this type of extreme buying is a hallmark of major lows and higher future prices.
The S&P 500 also went from oversold to overbought in record time. We’ll get a tad geeky here, but to measure overbought and oversold, we use an indicator called the 14-day relative strength index (“RSI”). We will keep this very simple, but this is a popular momentum oscillator. The RSI ranges from 0 to 100. When the reading comes in under 30, things are oversold, and when it comes in above 70, things are overbought. Well, the S&P 500 moved from oversold to overbought in an incredible 11 days, the second fastest ever! Only the move off the1982 lows was faster. Looking at the 10 prior fastest moves from oversold to overbought, the index was up six months later nine times with some very impressive gains.
Lastly, technology stocks have been on fire, with the technology-heavy large cap Nasdaq-100 index up an incredible 13 days in a row, one of the longest streaks ever and the longest win streak since 2013.
We found seven other times the Nasdaq-100 was up at least 12 days in a row, and the index was higher a year later every single time and up more than 19% on average. Some potential near-term choppy action would be perfectly normal, but bigger picture, this is another clue the bull market is back.
What Are Major Bank CEOs Saying?
Earnings season has just started, but it is off to a nice start, with nearly 90% of companies so far beating earnings estimates. Banks always report early, and we thought it worthwhile to share what the major bank CEOs had to say about the state of the economy and the consumer. Overall, the economy isn’t perfect, but it is far from a recession and the consumer is in solid shape.
“The U.S. economy remained resilient.“ — Jamie Dimon, CEO of JPMorgan Chase
“We still see continued resiliency in the underlying economy, and the financial health of the consumers and businesses we serve remains strong.“ — Charlie Scharf, CEO of Wells Fargo
“American consumers remained resilient.” — Jane Fraser, CEO of Citigroup
“[We’ve seen] solid consumer spending and stable asset quality, indicating a resilient American economy.” — Brian Moynihan, CEO of Bank of America
Consumer Sentiment Sinks as Inflation Outruns Wages
While consumer behavior remains strong, consumer sentiment has collapsed irrespective of which metric you look at. The University of Michigan Consumer Sentiment Index just crashed to its lowest level in the survey’s history—even below what we saw during the depths of the Great Financial Crisis in 2008-09, COVID in April-May 2020, and even the stagflationary 1970s. Surely things aren’t that bad? We’re nowhere close to a recession and the stock market just made a new all-time high. Hiring is weak, but layoffs are running really low. Yes, it’s a tough job market if you’re unemployed and looking for a job, but you’re probably OK if you have a job.
The confidence index from the Conference Board doesn’t look as bad, but only relatively speaking—it’s also fallen close to the COVID lows. Historically, the Conference Board measure tends to be more correlated with the labor market (hence the massive collapse in 2008-09).
Usually, sentiment takes a hit when gas prices rise, but that typically tends to be short-lived (since gas prices usually come back down). But the current collapse in sentiment goes beyond that.
What’s interesting if you look back at the previous chart is that sentiment collapsed during the COVID months in 2020, but recovered quickly after. In fact, the Conference Board’s index recovered to pre-COVID levels by June 2021. The Michigan index didn’t quite recover to that level, but this index tends to be more colored by politics and we got a new president in January 2021 (which is why it’s useful to look at more than one measure).
However, sentiment then collapsed from mid-2021 all the way through mid-2022. What happened? Inflation, which picked up in 2021 and peaked in mid-2022. Sentiment recovered over the next couple of years but took another leg down in 2025 amid the tariff chaos (more inflationary pressure) and then yet another leg lower recently amid the energy shock from the US/Israel-Iran war.
Inflation Is a Tax on Wages
Consumers don’t like inflation, which acts as a tax on wages. We looked at average hourly earnings growth from February 2020 onward (just prior to the pandemic). This sort of analysis always runs into some version of the criticism, “That’s just the aggregate. Lower income workers are worse off.” So we separated average hourly earnings for managers from non-managers (“production and non-supervisory workers,” as the Bureau of Labor Statistics calls them) and then adjusted these for inflation using the personal consumption expenditures (PCE) inflation index. We use PCE because it’s a broader measure of inflation than CPI. CPI has a third of the basket allocated to rents versus 16% in the PCE basket. Keep in mind that two-thirds of American households own homes, and most of them own one purchased pre-2022, which means it still has a very low mortgage rate—rents matter, but perhaps not to the extent captured in CPI.
Here are the non-inflation-adjusted or “nominal” earnings numbers. From February 2020 through March 2026:
- Average hourly earnings for managers rose 23%.
- Average hourly earnings for non-managers rose 34%.
- Prices, as measured by the PCE price index, rose 25%.
What’s interesting is that wage growth for non-managers has exceeded the pace of inflation over the entire period, while wage growth for managers has lagged. One big reason is that a lot of the COVID-related stimulus checks benefited lower-income earners more. The other reason is the tight labor market of 2022-23 that boosted wage growth above trend (lower-income workers tend to do better amid a tight labor market).
The chart below shows inflation-adjusted (or “real”) wage growth for managers and non-mangers relative to the pre-pandemic trend (March 2015 through February 2020). Real wage growth for non-managers (green line) got a big boost from COVID stimulus and proceeded along the pre-pandemic trend. On the other hand, real wage growth for managers (yellow line) collapsed well below trend when inflation picked up in 2021 and only started recovering in 2023 as the labor market started cooling. However, real wage growth for managers has run below trend over the past year, and for non-managers, it’s fallen. As of March 2026:
- Managers: +0.5% year over year versus 1.1% pre-pandemic
- Non-mangers: -0.1% year over year versus 1.3% pre-pandemic
Let’s look at just the past year. Nominal wage growth has been relatively strong, especially relative to the five years before the pandemic hit:
- Managers: +4.0% versus 2.7% pre-pandemic
- Non-managers: +3.4% versus 2.9% pre-pandemic
The problem is that inflation averaged 1.5% pre-pandemic, resulting in fairly strong real wage growth. But over the past year, inflation’s run at a 3.5% pace, erasing most of the wage gains. As one can imagine, workers are likely to give themselves a pat on the back for strong wage growth but blame someone else for high inflation. As a result, when inflation is eating away at wages, it’s a recipe for poor sentiment.
What’s important here is that higher inflation is not just about gasoline prices. There’s broad-based inflation across goods and services. Let’s look at a few major categories and compare inflation rates across three periods:
- Five years pre-pandemic (March 2015 – February 2020)
- The last six years (March 2020 – February 2026)
- Last one year (February 2025 – February 2026)
The pre-pandemic period is important because consumers are likely to contrast their current experience of inflation (and prices) to what happened 5-10 years ago.
The tables are separated into three broad categories: across food and energy, other goods, and services. To help show how the price level has moved, we include how much $100 worth of each category at the start of the period would have cost at the end, labeled “Value of $100.”
Here’s headline inflation, though as we’ll go on to see below, this hides the impact we all feel from higher prices on some very salient everyday items.
Next up: food and energy. You’re probably not surprised to see that a restaurant meal that cost $100 in early 2020 now costs $143, i.e. a 43% increase. In contrast, a restaurant meal that cost $100 in March 2015 would have increased to $112 in February 2020. The recent increase is much more perceptible than what happened pre-pandemic.
On the energy front, gasoline prices fell over the year through February (before the recent surge), but this was more than offset by higher utility bills (electricity and gas). Utility costs are an underrated source of inflation pressure. Over the five years pre-pandemic, utility costs barely moved, but a $100 utility bill in February 2020 would’ve turned into $155 (a 55% increase) over the last six years. The last year alone saw a 6% increase.
Here’s a look at several goods. Almost all of them saw prices actually fall pre-pandemic. That’s reversed since the pandemic hit, except for just a few categories. But over the past year, every category listed below except for used cars has seen prices pick up by an average of about 3% thanks to tariffs.
Finally, there’s services (other than housing), which is where a lot of households spend a big chunk of their wallets. Almost across the board, you can see how inflation has run at about double the pre-pandemic pace (much more so for airfares and internet access). And in most cases, inflation has picked up over the past year, exacerbating the problem.
Take something as mundane as laundry and dry cleaning: $100 worth of laundry and dry cleaning in early 2015 would’ve been equivalent to $117 just before the pandemic. However, $100 worth in February 2020 would cost $138 six years later. Just over the past year, inflation for this category has run at 6%!
Obviously, we “cherry picked” some of the items above and excluded some large categories like shelter (rents), healthcare including physician and hospital services, and drugs. However, the items listed are still meaningful for most households and together make up close to 40% of the PCE basket.
The big picture is that prices for most goods and services we use every day are increasing at a pace much faster than what we saw pre-pandemic, and wage growth is barely keeping up. Perhaps it shouldn’t be a surprise that consumer sentiment is in the dumps. But as we said at the start, consumer behavior is what really matters, and so far behavior has been largely immune to historically negative sentiment.
