The Great Reversal: Why a Massive Bull Market May Be Just Getting Started

It’s remarkable how fast the narrative can change in financial markets. Just weeks ago, investors were rotating out of U.S. equities, lured by the relative outperformance of Europe and China. The headlines painted a bleak picture for America, pointing to a confluence of headwinds: economic shocks, fears of inflation’s persistence, and tighter financial conditions. Yet in a sudden and powerful reversal, the tides appear to be turning once more.

As economic pressures ease, policy pivots take shape, and investor sentiment rebounds, the conditions are aligning for what could be an explosive next phase in the global markets, led once again by the United States. While these shifting dynamics are enough to support a powerful rally on their own, there is a broader historical parallel worth considering.

The market setup we are seeing today bears a striking resemblance to the mid-1920s, particularly the conditions that led to the historic bull market that began in 1926. My research using quantum computing models has identified a month-by-month correlation between today’s economy and the market cycle of the Roaring Twenties. If history holds, 2025 may be the launchpad for one of the strongest multi-year bull markets of the century. You can find my original thesis here.

Why the U.S. Stock Market Underperformed in Early 2025

The first quarter of 2025 was marked by turbulence in the U.S. economy, stemming not from deep structural weaknesses but rather a series of short-term, idiosyncratic shocks. Chief among them was the economic fallout from the devastating LA wildfires.

These fires caused more than $5 billion in lost consumption, disrupting business activity, damaging infrastructure, and forcing thousands to temporarily relocate. The multiplier effects across various industries were felt quickly, weighing on overall GDP growth and dampening consumer sentiment.

Compounding the situation, the U.S. saw an unusual trade distortion as businesses rushed to import goods ahead of expected tariffs. This front-loading of inventory artificially boosted activity late last year while leaving a vacuum in the early months of 2025. These events, though painful, were transitory. They created a momentary soft patch, not a lasting downturn.

Insurance Payouts and Rebuilding Spark an Economic Tailwind

As devastating as the LA fires were, they set in motion a powerful force for recovery. Billions of dollars in insurance proceeds are now beginning to flow into the region, setting the stage for a major reconstruction cycle.

 This rebuilding effort is expected to generate significant economic activity across multiple sectors including construction, real estate, retail, and services. The impact is already being felt as companies ramp up hiring, order materials, and begin infrastructure projects.

In economic terms, this marks a transition from a negative shock to a positive stimulus. What was initially a drag on U.S. growth may now become a catalyst for acceleration heading into the second and third quarters. Investors are beginning to price this in, reassessing the resilience and dynamism of the U.S. economy.

Europe’s Short-Term Rally and Its Long-Term Limits

While the U.S. was weighed down by temporary shocks, Europe began to emerge as a relative winner in global markets. Investors were drawn to the region’s improving data, more aggressive fiscal spending, and sharply falling energy prices.

Stimulus measures from key European governments helped reignite growth and sentiment after years of stagnation. The valuation gap between European and American equities added to the allure, leading to a noticeable rotation of capital into European assets. However, the durability of this outperformance remains in question. Europe still faces a series of structural challenges including aging populations, low productivity growth, and persistent political risks.

While the recent rally has been encouraging, it may prove fleeting if deeper issues are not addressed. For now, Europe may serve as a tactical opportunity, but it lacks the long-term growth engine that powers the U.S. market.

China’s Stimulus Push Brings Temporary Relief

China also saw a reversal of fortunes as stimulus measures brought a modicum of stability to an otherwise sluggish economy. After a prolonged downturn fueled by property sector distress, demographic challenges, and weak consumer confidence, Beijing took steps to shore up growth.

Policy support for developers, infrastructure investment, and manufacturing subsidies helped boost short-term activity and reignite interest from foreign investors. Markets responded positively, with Chinese equities showing signs of life for the first time in over a year. Still, the underlying concerns in China are not easily resolved.

The real estate sector remains fragile, youth unemployment remains high, and the country continues to grapple with a long-term debt overhang. While the stimulus may provide temporary momentum, the sustainability of China’s recovery is far from certain.

Inflation Is Finally Falling—and That Changes Everything

Perhaps the most significant development in recent months has been the sharp decline in key inflation indicators. After proving sticky throughout much of 2023 and 2024, inflation is finally starting to recede in a meaningful way.

One of the clearest signals is the drop in non-owners equivalent rent, a critical component of shelter inflation. As this measure turns lower, broader inflation gauges are following suit, easing pressure on consumers and giving central banks room to maneuver.

Falling inflation doesn’t just help household budgets—it also restores confidence among investors and policymakers. With prices no longer rising at an unsustainable pace, the conversation is shifting from containment to expansion. The macro narrative is pivoting, and so is market positioning.

The Federal Reserve Pivot: A Green Light for Growth

Responding to these changing dynamics, the Federal Reserve has initiated a major policy pivot. After a multi-year tightening cycle aimed at taming inflation, the Fed has begun easing interest rates, marking a new era of accommodation.

This shift is a watershed moment for financial markets. Lower interest rates reduce borrowing costs for businesses and consumers alike, while also lifting asset valuations. More importantly, the Fed’s pivot signals confidence that inflation is under control and that growth can once again take center stage.

Historically, Fed easing cycles have been accompanied by robust equity rallies—and this time appears no different. With liquidity returning to the system, investors are beginning to rotate back into risk assets, especially those most sensitive to economic cycles and interest rates.

Oil Prices and Long-Term Rates Decline in Sync

Adding further support to the bullish thesis is the recent decline in oil prices and long-term interest rates. Cheaper energy lowers input costs for businesses across sectors, effectively serving as a form of economic stimulus.

Meanwhile, falling yields on 10-year and 30-year Treasuries make borrowing more attractive and reduce the discount rate applied to future earnings. This creates a favorable backdrop for equity markets, particularly for growth stocks and highly levered sectors. Together, lower energy costs and declining rates are creating a powerful tailwind for financial markets just as the economy regains its footing.

Is 2025 the Next 1926? The Historical Blueprint for a Market Boom

The parallels between today’s market environment and the 1920s are striking. A century ago, the U.S. entered an era of economic expansion driven by productivity gains, energy independence, and fiscal discipline. President Calvin Coolidge’s policies of tax cuts and reduced government intervention created a fertile environment for growth, much like the current policy backdrop.

Fast-forward to 2025, and we see nearly identical conditions. Policymakers are prioritizing deficit reduction, energy production is surging, and technological advancements—particularly in AI and automation—are unlocking new levels of efficiency. These forces were the backbone of the bull market of the 1920s, and they are once again at play today.

However, just as in 1926, the early part of the year has been marked by volatility. In both periods, the market endured a sharp but temporary correction before entering a multi-year rally. My research suggests that this shakeout will likely continue through early April, much like the correction of 1926, before transitioning into one of the most significant uptrends in modern market history.

The Race Is On—and the Market Knows It

The economic conditions of 2025 are setting up to mirror those of 1926, with a final shakeout paving the way for an unstoppable bull market. The alignment of fiscal conservatism, energy expansion, technological innovation, and bond market stabilization creates an environment that is historically bullish for equities.

If 1926 was the launchpad for the greatest bull market of the 20th century, then 2025 is shaping up to be the same for the 21st. Investors who understand this setup have a rare opportunity to position themselves for one of the most significant wealth-building periods in modern history.

The race is on. The final shakeout is nearing completion, and the breakout is about to begin. Those who are paying attention will be ready.