Monday Takeaways: Historic Pattern Suggests 15% More Gains Ahead

Shah Gilani|July 14, 2025

Here’s a fascinating piece of history…

When the S&P 500 gains 20% or more in two months (this has happened 10 times), markets averaged another 15% gain the following year.

And the S&P has just done it again.

With five record highs in just nine trading days, this pattern could be playing out once more.

The setup looks compelling…

• Nvidia hits historic $4 trillion market cap
• VIX down to 15-16 range
• ETF flows into U.S. equities “stellar”
• Risk parity funds rotating from bonds to stocks.

But we’re entering a critical phase…

• Banks start reporting earnings this week
• We’re “priced for perfection” at current levels
• Broadening out beyond big tech still hasn’t happened.

I’ll explain why I’m staying long despite valuation concerns, how to position for earnings season, and what could derail this historic pattern.

Click on the image below for your Monday Takeaways.

TRANSCRIPT

Hey, everybody. Shah Gilani coming to you with your Monday takeaways from beautiful and sunny Southern California, the promised land. Hope you’re all doing well.

The markets didn’t do great last week. Friday ended on a bit of a down note. The week was down for most of the indexes, and that’s only because the Friday before, we were at all-time record highs.

Speaking of all-time record highs and me saying what I’ve been saying – stocks just look like they want to go up – we saw another record high this past week. In fact, that makes five record highs in the last nine trading days.

Yeah, stocks just look like they want to go up, people. That’s the takeaway from that.

The VIX is sporting a 16 number – 16 and change. It got down to a 15 handle. The takeaway from that is when the VIX is that low, risk parity funds are buying equities because the volatility being lowered on those assets – risk assets – means they are less risky right now technically than bonds are. So we’re probably seeing a lot of flows from institutions, from risk parity funds into equities. In fact, ETF flows into domestic U.S. equity benchmarks have been just stellar. So we’ve seen a lot of positive inflows.

Why? Because stocks just look like they want to go up, and they have been going up. So the takeaway there is that looks pretty positive all around as far as I’m concerned.

Speaking of positive, how about Nvidia – the first company ever to support a $4 trillion market capitalization? Well done, Nvidia. So yeah, there’s a lot of positives out there. The takeaway from all that is investors are optimistic that maybe they understand what the risks are, at least as far as they can see them, because we know what they are. It’s just a matter of how they manifest themselves.

But speaking of risks, we do have some stuff coming up this week which may be a bit disruptive. Before I get to that, a very cool fact: Historically, when the S&P 500 is up 20% or more in two months – which it just did in the second quarter – the 10 times that happened, one year later, the S&P was up 15% on average.

The takeaway from there is we’ve had two months of positive gains up to 20% from the lows in April. And historically, markets go up another 15% a year later. So again, a positive takeaway from that.

So what do we have coming up this week? What do we have to look out for? Well, number one in my book is earnings, and I’ll get to that in a second. But we also have inflation data. We have retail sales this week, which could make things bumpy if there are some unexpected surprises.

But really, the big thing this week is going to be earnings. The banks start reporting, and they should be good. Analysts started to knock down – well, they started really in the middle of the second quarter – knocking down estimates for earnings. Now, here we are starting the reporting period on second quarter earnings.

If companies can beat those knocked-down consensus estimates for earnings, likely their stocks will probably see a pop. So we have that to hopefully look forward to. But we get underway with bank earnings this week. Going to be interesting.

I think the trading should be good. Most of those bank trading desks have been spot on. The bond market has been a little bit tough, but it did have a pretty good rally for a good part of the quarter, and they should have caught that. As far as equities, they should have caught that because that was a pretty steady rise.

If they miss that, it says that they’re basically somewhere out in left field, and they should be right at home plate swinging because that’s what retail investors are doing – swinging – and they are hitting it out of the park.

So it’s going to be an interesting week. Could be some disruptions because of earnings. If there are misses in earnings in the banks, I think that would be disruptive because no one’s expecting misses. They’re expecting great earnings from the banks, and I think that’s what we’re going to get.

So we have an interesting week ahead. We have earnings season on us already. It’s going to be a fascinating week. It always is.

Again, the takeaway for me has been the same – stocks just look like they want to go up. For you, it should be the same thing. I’m playing from the long side.

Yes, I am ramping up some of my stops because we’re priced for perfection. That’s the only thing that worries me – yes, we are priced for perfection. Forward earnings, we’re looking at 22% on the S&P. As far as trailing, we’re talking close to 30%. So yes, valuation-wise, getting a little tough up here.

A lot of the stocks that have been leading are the typical big tech names, and I don’t see the kind of broadening out that would make me really comfortable – like 100% comfortable to go all in and just start adding more and more to my positions. But that could happen. We could see the broadening out. Haven’t seen it yet. It’s been led by a small group of stocks. Again, it’s that chase, and I think institutions can and will continue to chase if we get good earnings numbers.

Those are your takeaways for this week. Have fun out there. And as far as I’m concerned, get back to home plate and swing, batter.

Cheers, everybody. Catch you next week.