V-Bottom Recovery: The Beat Goes On, What’s Next? Stock Market Update, Friday Sept 19, 2025
[embedyt] https://www.youtube.com/watch?v=h-aXNHg-xCA[/embedyt]
If the Fed Funds Futures market proves its generally worthless predictive self, that is being correct no more than 5-7 days in front of the Fed meetings, the Federal Reserve just cut rates for the first time in almost 3 quarters of a year a few days ago. The first time since December 18th of last year. And if you are an investor waiting on the Fed, you missed out on over 13% total gain in the SP500 since then, the same YTD at 13%, and an impressive almost 29% gain off the V-bottom low on April 8th.
Our team has discussed since mid to late April our belief that it was a V-bottom recovery and in general “no would get in” at prices they really wanted. That the retest of those April lows wasn’t coming and investors time was best used to study the history of V-bottom recoveries and their paths, over listening to the usual suspects and doomers predicting crashes based on intellectually stimulating but almost always irrelevant theories or “bubbles”.
The question now is “where do we go from here” if the V-bottom path continues to play out as I expect and what should an investor do about it. First, here’s my trusty overlay of the SP500 during the Dotcom/Internet buildout in 1997-2000 versus our current AI buildout which started in 2h2023. As frequent followers note, it’s my belief the October 1998 LTCM event driven selloff of -21% on the S&P 500 lines up almost exactly with our recent April 2025, event drive Tariff tantrum, Liberation Day selloff of almost the identical -21%.
Here’s the same overlay of the highly cyclical growth industry that has been critical to driving both cycles, the Semiconductor Sox index.
And finally, an even more cyclical subindustry with semiconductors, the semiconductor equipment index which is companies like ASML lithography, Lam Research and KLA Instruments. This is really the cyclical of cyclical growth industries. In fact history says, that the growth cycle in semis doesn’t end until this group outperforms for 12-18 months in a major way.
This group has generally been one of the worst relative sectors outside of software in the tech industry the last 18 months as they ran into three concurrent issues. The hype over the IRA Biden semiconductor spending and “Chips act” hit near the exact same time China orders peaked, our government sanctioned China orders, and demand from the likes of Intel for equipment fell off a cliff.
All these charts say to me the rally in stocks, specifically technology stocks isn’t over. I would expect some minor give back the second half of September, but not a great deal on a % basis. Meaning, I don’t believe the calls for -10% or worse will happen yet. In fact, historically with this kind of V-bottom set up, the pullbacks are usually contained to minor ones of 2-4%. Historical data from long Fed pauses is bullish.
The data on Fed pauses between 5 months and a year, says that stocks were higher a year later 10 out of 11 times with an average return of +12.9% and a median return of +14.5%.
The 2001 dotcom bust is in there, as is 9/11 terrorist attack both cuts trying to change recession momentum. 7 out of 11 times, the S&P500 was up more than 10%.
For a number of years, the OHFG team has tried to dispel investor fears of buying stocks at ATH’s as historically, returns have been quite positive over future time periods. Historically, ATH’s are NOT bearish and quite an ongoing positive feature in bull markets, both cyclical or secular.
Data from the Carson group showing that when the Fed cuts rate with stocks near all-time highs, stocks were higher a year later 23 out of 23 times.
These two data sets would triangulate to an S&P 500 target of between 7300 and 7400 using average gains sometime in 2026 after a slower early 4q25.
I’m going to go back once again to the Dotcom/AI cycles overlay we’ve been mapping out now since the V-bottom in April to see if this projection of 7300-7400 would make sense based on that history.
Here is an updated overlay of the S&P500 then and now once again. How remarkable is this.
We are still mirroring the same pattern back during Dotcom almost to the day and week in the S&P500.
Pretty crazy. Think about it. The names have changed, the weights have changed, and it was a generation ago, but we continue to mirror that period in investor history.
I still think that it’s likely that August 1st print was the low for the 2h2025.
Investors, we are in a bull market and a V-bottom pattern since April 8th. Volatile has collapsed and that’s without the Fed cutting. The costs of forward hedging remains relatively high versus actually vol. To me, that’s the “wall of worry”.
Be prepared in advance of the 4q25, to hear about the “chase for performance into year-end” before it takes place. Investors, if the V-bottom pattern continues its historical path, which I expect, expect some weakness into Sept month end on repositioning and institutional tax selling, and maybe the first few days of October, which should be bought. V-bottoms, historically, do not have ended or deep pullbacks on % terms until after the 10th and 11th month as you approach a year holding period for those investors who bought at or near the lows. Why? Probably because their gains become long term in nature and usually that can induce sales and profit taking. Should this pattern continue, I can see an S&P500 target near 7200 in February or early March of 2026 before an extended period of sideway, or meaningful % decline.
For those of you who stuck with your financial plan amongst the Tariff uncertainty in April, congratulations. For those of you who added or initiated new positions, a double congrats. That said, regardless of the path for the economy and financial markets in the next few months, the investment team at OHFG will be here manning the ship and adjusting our models and long/short, hedged equity fund where we can.
Until next week, have a blessed weekend, congrats to Coach Key and the GA Tech football team on their last second big win over Clemson, and know that the OHFG team is doing what we can to plan for you and your family’s future regardless of what stage you are at in your career or retirement.
Do you need a retirement plan that goes beyond allocating funds to truly fit your needs? We can help you create a retirement life plan customized for your retirement vision and legacy. Call us at 877-896-0040 or fill out this form for a free consultation: https://click2retire.com/lets-connect
Chris Perras
CFA®, CLU®, ChFC®
Chief Investment Officer, Financial Advisor
Chris is a seasoned investment professional with over 25 years of experience working with some of the most successful money management firms in the world. Chris has made it a point in his career to adapt as the market landscape changes, seeking to utilize the appropriate investment strategy for a given market environment. His transition from managing billions of dollars at the institutional level to helping individuals and families retire is guided by a desire to see first-hand the impact he is making in the lives of clients at Oak Harvest.
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