The Big Picture

First, let's take a step back.

Donovan Jackson
May 23, 2025

I appreciate everyone for tapping into my first post on my first ever blog “Don’s Dividends.” Who doesn’t love a good dividend? That is in case, if the dividend is not a way to hide the actual returns of said stock or ETF. We all know some companies like this. My goal of this blog is to drop solid, consistent insights into what’s on my mind. Think of this like my personal dividend to each and every one of you. Thank you again, and lets get into it!

Zooming Out

I am far from a macro-expert but first, I want to start with interest rates and the bond market. Lately, our current administration has been urging fed chairman Jerome Powell to cut rates. The funny thing is, he did cut rates, and they have been moving higher ever since. To me, this looks like a huge 20+ year base. And I’m sure you know the saying—The bigger the base, the higher in space. If both the 30 & 10 year break out of this monster reversal pattern, I think many people (myself included), will have to get used to higher rates.

Risk-On or Risk-Off?

As you know, we are in a secular bull market. One of the biggest goals of investors in my opinion should be recognizing the environment we are in, and then allocating capital accordingly. How do we know what type of environment we are in? My answer to that would be to look at Risk-on versus Risk-off groups.

I look at Consumer Discretionary as “wants” and Consumer Staples as “needs.” Whenever people’s wants are outpacing their needs, that is a bullish environment. This ratio found support exactly where it needed to, and falling below would be a major risk-off sign.

Small Caps are as risky as they come. When you have Small Cap Growth completing a multi-year base relative to Small Cap Value, to me, that screams risk-on.

High Beta is what you want to see outperforming during Bull Markets. If the most speculative assets are working, then that should tell you the environment we’re in. As long as High Beta relative to Low Vol is above those 2011 highs, I will have risk on the table. Above those recent highs from February of this year, I think it would be irresponsible not to be risk-on.

Conclusion

I will keep my first post short and sweet. I believe the market is showing signs that we are in a risk on environment, as long as we don’t have any random tariff tweets from the president. In regards to interest rates, if we see a breakout, we could see other sectors start to outperform like financials, industrials, and energy. Speaking of energy, check out this Equal Weight Energy chart overlaid with the 30 and 10 year yield. There has been an extremely high correlation since 2020 and the Covid Crash. Thank you for reading and blessings to all!