How Low Can Stocks & Crypto Go? May 12th, 2025 - Driven By Braman Motorcars
The Markets Are Testing Your Nerves—Here’s What You Need to Know
Bottom Line: My first rule of money... Never let your money and emotions cross paths. This isn’t a doomscroll though after the past week you might feel that you’re living through one. This story is a weekly wake-up call to show you the near-worst-case scenario for stocks and crypto. Why? So, you can plan your financial future with a cool head, not a racing pulse. The odds of a near-worst case outcome almost certainly won’t happen, however if your plan accounts for it – it can help you manage through even the most trying markets like what we’re experiencing right now.
The US stock market is history’s ultimate wealth-building beast. Crypto? It’s minted millionaires from early believers. Fact: Over 90% of the time, investors who try to “time” the market end up poorer than if they’d just stuck to their original investments. This is about dodging that trap.
Here’s how the big three indexes are faring in 2025 so far:
- DOW: -3% (up>1% last week)
- S&P 500: -4% (up>1% last week)
- Nasdaq: -7% (up>1% week)
The market rally extended last week with all indexes slightly higher following the Federal Reserve’s expected decision to leave interest rates unchanged, the announcement of President Trump’s first major trade deal with England, with hope that more will soon be on their way to completion – including what was reported by President Trump as great progress with China over the weekend, leading a 90-day 115% reduction in the tariff rates charged by each country. The new tariff rate for US goods imported to China is 10% and for Chinese goods into the US is 30%. We’re also near conclusion of what’s been a terrific earnings reporting season for corporate America. Market movement will continue to be headline driven this week with trade front and center in the conversation. Let’s dive in a bit on earnings.
Entering today, 90% of companies had reported earnings. Average earnings growth has paced 13.4% year-over-year which is much better than the 7.2% expected. Additionally, the growth rate is the best it’s been during the reporting season, which is to say that earnings continued to improve as the season went along. Companies carried a large amount of momentum into the second quarter that we’re currently in and what we’ve seen from reporting all but guarantees that the second quarter will show a resumption of economic growth for the U.S. economy.
As for cryptos...
Digital currencies followed the best week of the year in the previous week with an even better one last week highlighted by bitcoin surging back above $100,000 as a new bull market breakout is pushing the leader close to all-time highs. The secondary tokens had great weeks as well but are still way away from highs indicating that digital currency interest continues to consolidate around bitcoin, at least during the current cycle as more investors have diversified into digital currencies, mostly bitcoin, as a hedge against a weaker US Dollar. That helps the base case by many crypto bulls that bitcoin is in effect “digital gold”. Here’s a look at where they stand.
- Bitcoin: +8%, last week +11% YTD
- Ether: +38% last week -25% YTD
- BitwiseETF (Top 10 cryptos): +12% last week, -5% YTD
I can’t value cryptos because they have no inherent value. Stocks, though? They’ve got bones. Let’s break down the S&P 500:
- Current P/E: 26.91
- Historic Avg. P/E: 16.14
Translation: On earnings alone, the maximum downside risk is 40% drop from here—3% less than last week as fundamentals improved faster than stock prices over the past week. The market is still slightly historically expensive; however, we have seen an 8% improvement in the fundamental value of the market during this correction cycle.
So, What’s Your Move?
If a 40% dip wouldn’t derail your life, you’re probably golden. If it would? Time to call a pro and build a plan that doesn’t leave you sweating bullets—or broke.
The markets don’t care about your feelings. Don’t let them hijack your wallet.