May 2025 edition

Visual Description: The video opens with the Truist logo on a dark purple background and transitions to a man with salt and pepper hair and a black jacket speaking to the camera. 

Keith Lerner: Hello, everyone 

Visual Description: Text in a box slides in on the left of the video reads: 

Text on Screen: Keith Lerner, CMT. Co-Chief Investment Officer, Chief Market Strategist.  Truist Advisory Services, Inc.

Keith Lerner: We just published our monthly Market Navigator, and we really are coming off a historic month. So what I wanted to do today, in the minutes that we have together is one provide key takeaways upfront, talk about how our tactical view have evolved this year and where we stand now and then go a little bit more into this bull/bear debate.

Keith Lerner: And what are some of the key points and more importantly,  where do we land on that?

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Text on Screen: April marked one of the most significant market turnarounds in history

Keith Lerner:So going back to the key takeaways, we did have a really historic turnaround in April.

Keith Lerner: In fact, at one point in early April, the S&P 500 was down over 11%. It finished the month down less than 1%. So that is a really dramatic turnaround that is historically, unusual, but but a good thing, right?

Keith Lerner: We turned into the green, as we have moved back up, in this market, our point of view is the risk reward is becoming somewhat less favorable at least on a short term basis.

Keith Lerner: And even though we will preach balance, we have a little bit more of a defensive tilt relative to earlier in the year. And part of that is when we were at the lows, the market was pricing in a lot of recession risk.

Keith Lerner: So a little bit of good news has gone a long way. At this point, as we've now pricing in more good news, there's less of a buffer. Should we get some, some bad news. Right.

Keith Lerner: So there's just less of that buffer. And so let's let's go back 

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Text on Screen: The market backdrop continues to evolve, and so is our outlook.

Keith Lerner: and talk a little bit about how our tactical position has evolved.

Keith Lerner: As you may recall, back in February, markets were close to all time highs.

Keith Lerner: We did downgrade our view of equities and upgrade cash slightly. And that was at that point, our view was the market was being somewhat complacent, not pricing in some of of the event risk that we actually started to see in April.

Keith Lerner: So again, as we think about it, as we've had this rebound in April, again, at some point from peak to trough, we were actually down 19%, from the February high to the low.

Keith Lerner: And we've bounced back quite a bit. So what we've done with the snapback, we have downgraded equities one more notch from neutral to less attractive.

Keith Lerner: We've upgraded cash one more notch. And we also see some opportunities in credit, specifically investment grade as well. And when we talk about these changes, it's not an all or nothing change.

Keith Lerner: They're marginal changes relative to long-term targets. And what we're trying to do is smooth the ride, but we're not doing a wholesale change. And obviously, you know, your advisor knows you best.

Keith Lerner: And whether these changes make sense, for you.

Keith Lerner: So so next, what I like to do is with markets is never black and white. 

Visual Description: Text in a box slides in on the left of the video reads: 

Text on Screen: The outlook is never black or white—it is shaped by a blend of positive and negative data points

Keith Lerner: We follow the weight of the evidence approach. And what I like to do now is just take a couple of minutes to walk through the, the, the bull side of the debate and then also the bear side of the debate.

Keith Lerner: And when you look at the, the, the bull side, I think the, the good news is we're probably past the peak of the tariff uncertainty. Doesn't mean we have clarity, but we probably hit the peak. So that's that's a positive insofar as once you get past peak uncertainty, markets tend to rebound when you look 12 months later. I think what we've seen by this earnings season is the artificial intelligence, and technology trends are still relatively healthy.

Keith Lerner: And we were talking a lot about that a few months ago. And we kind of forgot about it during this, this kind of pullback. But what that tells us is that secular trend is still in place. What’s also notable, is during this pullback, the Magnificent Seven, a name used with some of these mega-cap, technology names, actually pulled back on a valuation level to the same area they were all the way back in late 2022 when ChatGPT first came out.

Keith Lerner: So that's a positive as well. And then we might start talking about soon more about the tax extensions, deregulation. These are all positive, things.

Keith Lerner: Now on the other side, the bear case is that we are certainly seeing global economic trends weaken. And it's not just in the US. We're seeing it globally, in China and Japan, and in Europe. And in the US, you know, estimates for US GDP have come down from well above 2% now towards 1%.

Keith Lerner: And recession  risk, in our view are are rising. And we haven't seen the full impact of these tariffs as of yet. So that's number one. And even if these tariffs come down they're going to still stay somewhat elevated relative to history.

Keith Lerner: At the same time as the economy slows down we have this uncertainty with businesses, what we're starting to see is we're seeing earnings estimates start to fall across markets from large caps to mid caps, small caps and also international as well.

Keith Lerner: So again there's some offsets economy weakening somewhat. And we're seeing those earnings estimates decline at a time especially in the US where valuations are still somewhat elevated.

Keith Lerner: So we walk through this in the note about kind of the risk reward at this point. How high how high markets can go given valuations. So we walk through that in the note today is though some geopolitical risk as well as we think about, you know, what's happening with the Middle East and Russia.

Keith Lerner: So we put that all together and and listen we still remain optimistic longer term companies will adjust. But on a shorter term, a kind of a tactical perspective our view is the risk reward is becoming somewhat less favorable.

Keith Lerner: And again, we're preaching balance and a little bit more defense as markets have climbed back. You know as always we're going to follow this weight of the evidence approach. We're going to keep an open mind. But that's how we see things today. As our view evolves, we’ll surely, you know, keep you updated. And please check out our latest market navigator. Thank you.

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CN:2025-xxx EXP 05-2026