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Stock market volatility has risen amid tariff announcements and growing fears of escalating trade wars. Adding to the uncertainty, US technology companies are now grappling with potential disruptions to their AI spending plans following the release of DeepSeek’s open-source model out of China. Touted as a major “breakthrough” for achieving US-level large language model (LLM) performance at a fraction of the cost, DeepSeek’s debut has raised questions about its impact on the competitive landscape. While details are still emerging and being vetted, the markets are contending with a series of near-term disruptions.The key question for investors: Are we witnessing a market peak with the bursting of an overvalued tech bubble or a prime buying opportunity in the midst of an ongoing bull market? Mike Singleton, Chief Strategist at Invictus Research, recently joined Financial Sense to share some key insights into his market and economic outlook. Here’s what he had to say… Podcast audio: Major Market Peak or Buying Opportunity? Mike Singleton Weighs In

A Reflationary Outlook for 2025
Singleton’s outlook for 2025 is anchored in a reflationary thesis, a continuation of the trend observed in 2024. “At Invictus, we are still reflationists, and what that means is we expect faster real growth and faster inflation into 2025,” Singleton explains. He emphasizes that the US economy’s size and inertia mean that changes in direction are gradual, contrary to the rapid shifts often anticipated by market participants. “The reality is the US economy is very large and it takes a long time to change directions,” he adds, underscoring the persistence of current economic conditions.

The Role of the US Consumer
The US consumer, responsible for approximately two-thirds of GDP, plays a pivotal role in Singleton’s economic outlook. He challenges the prevailing narrative that consumers are over-leveraged and unable to drive further economic growth. “Consumer credit divided by GDP is at a multicycle low. It’s as low as it’s been since the early 1990s,” Singleton states, highlighting the potential for increased consumer spending to fuel economic growth.
Income growth among US consumers is also very robust, Singleton points out, with wage and salary disbursements growing at 5.8% year-over-year. This is well above the average seen last decade and is helping to drive continued spending on goods and services.

Inflation and Its Impact on the Stock Market
Addressing concerns about the potential negative impact of rising inflation on the stock market, Singleton offers a nuanced perspective. He highlights that historically, corporate earnings, revenues, and stock prices have shown a positive correlation with inflation over time. “Unless the Fed is tightening monetary policy, raising interest rates enough to offset the increase in inflation that we’re seeing, inflation isn’t necessarily a bad thing for assets like stocks,” he notes. Singleton’s confidence in the stock market’s resilience is further bolstered by his belief that the significant monetary tightening phase is likely behind us, at least for the foreseeable future.

Bullish on Stocks: A 15% Return Forecast for 2025
Singleton’s bullish stance on the stock market for 2025 is underpinned by his expectation of accelerating real economic growth and corporate earnings. “We expect the stock market to return maybe 15% or so in 2025. We expect it to be a strong year,” he asserts. This forecast is based on a projected 12% earnings growth and a modest expansion in stock market valuations, supported by historical trends that show valuations expanding during periods of accelerating economic growth.

Housing Market: A Leading Indicator
Singleton identifies the housing market as a critical leading indicator for broader economic trends. Despite a 40% decline in total home sales since 2020, he sees potential for recovery driven by rising real incomes.“Pending home sales is up about 7% year over year…Mortgage applications for new home purchases are up at sort of a mid-single digit clip,” he notes, suggesting that the housing market could contribute to an acceleration in GDP growth to around 3.5%.

Valuation Concerns and Investment Horizons
While acknowledging that current stock market valuations are high relative to historical standards, Singleton cautions against over-relying on these metrics for short-term investment decisions. “Typically, a lot of these valuation measures…do predict stock returns, but not unless you’re looking out over 10 years,” he explains. Singleton emphasizes that at Invictus, their investment horizon is typically 18 months, aligning with the duration of an economic reflation or deflation cycle. This approach allows them to focus on the more immediate economic conditions rather than long-term valuation concerns.

Navigating Interest Rates and Bond Investments
Addressing the recent surge in treasury yields, Singleton acknowledges the potential headwind posed by higher borrowing costs. However, he remains optimistic about the economy’s ability to withstand this pressure. “At Invictus, we have a number of leading indicators and models that we look at and generally what they’re suggesting is real economic growth is going to continue to accelerate despite interest rates being a headwind,” he explains. In terms of bond investments, Singleton recommends focusing on the middle part of the yield curve, particularly in credit markets like leveraged loans and high yield, while maintaining an underweight position in long-term government bonds.

A Buying Opportunity Amidst Market Volatility
As the interview concluded, Singleton addressed the recent market volatility and pullback in major indices. He views the current dip as a buying opportunity, given that the market is oversold within an ongoing uptrend. “When markets are oversold in uptrends, you have very good reason to believe that is a good time to add exposure, especially when you think that economic conditions support a sustained bull market,” he asserts, supported by Invictus’s quantitative analysis of forward returns.More By This Author:Smart Macro: Roaring Bull Market In Gold, Near-Term Caution On StocksWhy DeepSeek Tanked U.S. Tech StocksBig Picture: Investing In A Trump Economy