Evercore ISI: The bear market in U.S. stocks has ended, and a "marathon-style" bull market will arrive under the shadow of tariffs

The Zhitong Finance APP noted that strategists at financial services company Evercore ISI pointed out that the latest market rebound marks the end of the 2025 bear market, but unlike in the past, this round of bull market will not be accompanied by a sharp rise, but will instead show a slow and volatile progression.

Strategist Julian Emanuel compared the recent market turmoil to the panic during the 1998 Long-Term Capital Management crisis. However, the rapid actions taken by the Federal Reserve to push the market to new highs back then are difficult to replicate today—current inflation is stubborn, the Federal Reserve is taking a wait-and-see approach, and the impact of tariff policies is still fermenting in the economy.

Emanuel wrote, "Trump's decision on April 9 to suspend tariff increases triggered a buying spree, ending this round of -21.3% cyclical bear market." However, he believes the recovery will be a gradual "process," with new highs for the S&P 500 potentially delayed until 2026.

The Evercore ISI team maintains a year-end target of 5,600 points for the S&P 500, provided that the final tariff rates remain at 15%-17%, which, although lower than Trump's initial proposal of 80%, is still close to the notorious levels of the 1930 Smoot-Hawley Tariff Act.

In terms of investment strategy, Emanuel warned that valuations remain high, with the S&P 500 price-to-earnings ratio at 22 times, although it has fallen from a recent peak of 25 times, it is still historically high.

He suggested a tactical allocation: buy quality lagging stocks in the communication services, consumer discretionary, and technology sectors, and reduce holdings in high-momentum star stocks that lack earnings revisions or stock buyback support (see the "anti-gravity stocks" list below).

The team also recommended using a September-expiring SPY options collar strategy (615C/530P/480P) to hedge risks and suggested that new funds enter the market in batches. This strategy locks in downside risk in the 480-530 range by selling call options at a strike price of 615, buying put options at 530, and simultaneously selling put options at 480, with upside gains capped at 615. Non-derivative investors can reduce holdings to lock in profits at highs and wait for better buying points.

Despite ongoing uncertainties, Emanuel pointed out that key sentiment indicators such as realized volatility and investor positioning show that the market has already experienced capitulation selling. Evercore's latest survey shows that 81% of clients believe a recession is imminent or already here, and this extreme pessimistic consensus often signals a turning point.

In short: the storm has passed, but the road ahead is long. Investors need to be prepared for volatility, especially considering tariff inflation pressures, the U.S. budget battle this summer, and the Federal Reserve's cautious stance. Emanuel emphasized that with limited policy options and high valuations, this round of bull market will be a marathon rather than a sprint.

Evercore ISI's "anti-gravity stocks" list (high momentum/low buyback/weak sentiment, recommended to reduce holdings at highs): Tesla (TSLA.US), Boeing (BA.US), Realty Income (O.US), CMS Energy Corporation (CMS.US), Ryan Specialty Holdings, Inc. Class A (RYAN.US), Sun Communities, Inc. (SUI.US), Aurora Innovation, Inc. Class A (AUR.US), JM Smucker Company (SJM.US), Houlihan Lokey, Inc HLI (HLI.US), American Financial Group (AFG.US), Rocket Lab USA, Inc. (RKLB.US), Kinsale Capital Group (KNSL.US), Aramark (ARMK.US), Hamilton Lane Incorporated Class A (HLNE.US), NNN Real Estate Investment Trust (NNN.US), IDACORP, Inc. (IDA.US), Kratos Defense & Security Solutions, Inc. (KTOS.US)