Veteran analyst says stock market rally not 'real' until this happens

Today's feel-good could be tomorrow's fake-out

Jun 7, 2025 - 15:46

Veteran analyst says stock market rally not 'real' until this happens

Investors are feeling good about the stock market’s rally from April lows created after the bottom fell out when tariff plans were first announced.

Yet as investor emotions show a little more positivity, they are also more vulnerable to the idea that the rebound is nothing more than a bear-market rally, a brief bounce that could go away when the headlines change.

The Standard & Poor’s 500 Index – which entered the year just under 5,900 -- set a record close at 6,144.15 on February 19 as it reacted to the release of minutes from the Federal Reserve Board’s late-January meeting.

The index—the most common proxy for “the stock market”—had fallen from that level by the time President Trump announced his tariff plans on April 2. This sent the index reeling toward bear-market territory, nearly down 20% from its peak.

As tariff plans changed and morphed and were delayed, the market rebounded, recapturing its loss on the year by the middle of May.

Since then, however, the stock market has failed to break through to new record levels, and a long-time technical analyst, Willie Delwiche, says stocks will stay stuck in a volatile range—and potentially re-test lows—unless we see a crucial signal that the rally will be lasting.

The stock market rally has impressed, but one long-time analyst wants an important confirmation signal.
Image source: Michael M. Santiago/Getty Images

True rally or bear-market bounce?

Willie Delwiche runs Hi Mount Research. He is a business professor at Wisconsin Lutheran College and spent more than two decades as an investment strategist at Baird. He has seen rapid rebounds before, and he says they are meaningless without follow-through.

In a market with limited bandwidth, investors are caught in the middle of their range of emotions.

The latest AAII Sentiment Survey, released June 4, showed that neutral sentiment – an expectation that stock prices will remain largely unchanged over the next six months – was up this week, to nearly 26%. While bearish sentiment leads the way with more than 40% of investors, the negative and flat sentiment shows investors don’t trust the rally wholeheartedly.

“We have seen instances in the past where we've had big drawdowns, then huge rallies that failed just shy of new highs, that then cascade lower months later,” Delwiche said in an interview on “Money Life with Chuck Jaffe.” “So, breaking out to new highs would be the best sign of strength in the market.

“New highs are the most bullish thing that stocks can do,” he added. “And if we see that, it confirms that we are still in a bull market, not just some sort of very protracted, very exaggerated bear-market bounce.”

Delwiche says that the market is currently stuck in a wide and volatile range, below the previous peak of nearly 6,200 on the S&P 500, but above its 200-day (long-term) moving average of roughly 5,800.

He warned that a breakout to the downside could quickly send the market back to the April lows, particularly if the market takes it as a sign that the rally is over.

US stock market takes back seat to global stocks

One positive sign Delwiche points to is the strength of international markets, which hints that the current rally is broader and not entirely based on the Magnificent Seven stocks, the largest of the U.S. giants.

Delwiche pointed to data showing that 55% of global markets finished May at new highs, but the United States was not among them.

He said that more international markets are making new highs than there are single industry groups of domestic companies trading at peak levels.

“While we talk a lot about what the US is doing, we're also seeing international leadership, international strength, which is something that most investors -- if you look back over the past 10 years -- haven't seen much of at all,” Delwiche said. “That's encouraging on two fronts. We see global leadership, and then we also see broad participation within the U.S.”

The stock market held ‘hostage to headlines’

Delwiche has plenty of positives to point to based on both technical and fundamental analysis. He noted that the picture is hyper-dependent right now on the risks of the daily news cycle.

“The market is hostage to headlines right now, unlike any point I can remember in my career,” said Delwiche, whose interview aired on the June 6 edition of Money Life.

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“Not that the rest of the world is all unicorns and roses or whatever, but everyone is crowded into the U.S.,” Delwiche said. “If something has changed in the US from a political perspective or from a news perspective, I think at the margin that makes investors a little less complacent to stick around in the U.S.,” making the market more volatile and sensitive to news.

One possible play with the market in a trading range would be gold, which is up nearly 30% in 2025.

Delwiche said that, unlike commodities, which have not performed well, gold has not yet exhausted its upside potential.

“If there was a time that you would be interested in gold, this would be the time to have gold in your portfolio. is an absolute uptrend and it is trending higher relative to US stocks. Commodities overall are not holding up well. Gold specifically is and

There are periods where you want to have gold and there are periods where you don't want to have gold,” Delwiche said. “If ever there was a time when you should be interested in gold, this would be it.”