A rare signal has just triggered that we haven’t seen since the 2008 financial crisis.
This indicator has only triggered 5 times since the 1970s, and each previous instance coincided with violent market declines during economic recessions.
What we’re seeing today is a complete collapse in job market confidence among American consumers.
While we’ve maintained that a recession likely wouldn’t arrive until 2026, this signal raised some red flags for us about the risk of a recession.
Since 1970, every previous instance of this confidence collapse occurred near actual recessions.
But as we always say at Bravos Research, our job isn’t to predict the economy or the markets.
Our job is to adapt to the market irrespective of the conditions.
We update our positioning based on the data we have right now and if the data changes, we adjust accordingly.
So the question now is:
Does today’s signal force us to rethink the odds of a 2025 recession?
Because if history repeats, the stock market correction we’ve experienced in Q1 2025 could be just the opening act of a more significant bear market similar to those in 2001 and 2008.
🚨 Navigating Market Volatility
Bravos Research members have successfully navigated this uncertainty with our defensive positioning strategy from March onwards.
We’ve had a stellar performance record with an average gain of 16.65% on winning trades while limiting average losses to just 3.67%.
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Consumer Confidence Often Leads the Labor Market
Consumer expectations about the labor market have proven remarkably accurate at predicting the labor market since 1978.
When Americans lose faith in job prospects on this scale, the actual labor market typically deteriorates shortly thereafter.
However, before drawing definitive conclusions, we must acknowledge the context around this signal.
Right now, that context is deeply political.
The current administration is pushing for major policy shifts, many of which are not popular.
The University of Michigan survey shows we’re at an all-time high for negative coverage on government policies from media outlets.
This media environment may be skewing consumer perception about the economic reality, making them mistake unpopular policies for real economic weakness.
Right now, Republicans still generally maintain a favorable economic view.
Whereas, Democrats are on the exact opposite end of the spectrum.
However, as objective traders, we must filter out this political noise, and focus on hard data.
What The Hard Data Shows
Setting aside political differences, the actual employment data tells a different story.
March payrolls added 228,000 jobs – a level consistently associated with economic growth, not contraction.
During recessionary periods, like in 2001 and 2008, job growth had already fallen below 100,000 before turning negative during the economic downturn.
That’s not what we’re seeing today…
Could tariffs change that?
Absolutely.
If tariffs start triggering layoffs, the recession could arrive faster than expected.
If that happens, the market could be facing a much deeper drawdown.
But for now, the jobs data is still holding strong.
Historically, when the economy adds this many jobs, it tends to coincide with a strong stock market performance.
Yet, despite that, the S&P 500 just went through one of its biggest liquidation events, before finally seeing a big bounce yesterday.
If we look at the VIX, which tracks volatility in the S&P 500, it had reached levels last seen during major crashes, like 2020, 2008, and 2001
All of these were times when the labor market was actually breaking down.
But that’s not what we’re seeing today.
Our Current Strategy
Given this analysis, we believe the markets have already priced in a huge amount of bad news.
That sets the stage for a base and likely a multi-month rally.
Back in March, we went quite defensive, raising cash and sending sell alerts on a lot of our positions at Bravos Research.
This wasn’t from trying to time the market, but from disciplined attention to our technical indicators.
Now that the market looks like it’s stabilizing, we’re positioning ourselves for at least a counter-trend rally.
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