Reality is Nothing but a Collective Hunch

We’re hard pressed to find a better quote for today’s mood. Last week, initial jobless claims ticked higher. GDP shrank for the first time in three years. Manufacturing activity skidded (again) with PMI sinking further into contraction territory. And yet, markets seemed to have missed the memo.

These aren’t small market signals but the kind that usually prompt investors to hit the brakes. Optimism though, is powerfully contagious and right now, it’s winning thanks to better than expected Big Tech earnings, and a growing belief that AI-led productivity gains will offset broader weakness. But how long can sentiment outrun signals?

Resilience isn’t the same as immunity. Sooner or later, investor confidence typically buckles under the weight of perception. As they say, history rarely rewards complacency and periods of heightened optimism often precede market corrections. As highlighted in a recent Wall Street Journal analysis, market disconnect from the data can be an inverse indicator of future returns.

With slowing consumer activity, lingering tariff uncertainty, and a softer job market creeping in, investors may want to revisit not just what’s driving this rally — stronger than expected earnings — but what it’s ignoring. Because if today’s reality is just a hunch, it will only take one more negative data point to derail momentum.

As May unfolds, the old Wall Street adage, “Sell in May and go away” is a timely reminder that investment strategies grounded in fundamentals are like spring allergies: if left untreated, misery is pretty much guaranteed.