Cumberland Advisors' Market Outlook (May 9, 2025): A Pause in Volatility or More to Come?

"A Break in Volatility?" — Week in Review (YouTube link)

Matthew C. McAleer, President of Cumberland Advisors, provided a market update on May 9, 2025, noting a reduction in market volatility after a turbulent period. 

Key points include:

• Equities: The S&P 500, down about 4% year-to-date, experienced a sharp drop and rally but is now at a resistance level around 5,700. Matt anticipates higher volatility in 2025 compared to recent years, citing historical patterns where markets down through April tend to be volatile. His firm traded proactively, selling into January’s rally to build a cash cushion (10-13%) and redeploying it during dips in February-April. They are nearly fully invested but may reduce equity exposure if markets rise further, expecting volatility to persist.
• Bonds: Yields rose slightly, with the 10-year Treasury at 4.38% and the 30-year at 4.87%, as markets brace for upcoming CPI and PPI data, which will reflect new tariffs. The Fed maintained rates at 4.25-4.5%, adopting a wait-and-see approach amid economic slowdowns. Municipal bonds are seen as undervalued, with strong demand indicating reduced fear in the bond market. T-Bonds at 114-115 are critical; a drop to the mid-111s could signal a breakdown of their multi-year basing pattern.
• Market Outlook: Matt sees markets pricing in less severe scenarios, but economic challenges like tariffs and slower growth persist. Volatility offers opportunities, and his firm is selectively deploying cash into specific sectors and industries. The bond market’s reaction to upcoming inflation data will be pivotal.

The update emphasizes cautious optimism, with a focus on navigating volatility and monitoring key economic indicators like inflation and Fed policy.