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In just two days — May 15th and 16th — both our DunhamDC (globally diversified model) and DunhamDC US (U.S.-focused model) had fresh SELL Greed triggers, responding to a market overtaken by euphoria.

Put simply, using the analogy from Benjamin Graham’s iconic 1949 book, The Intelligent Investor:

This marks the second time in just a few weeks that both models triggered in tandem — a rare back-to-back signal that highlights the sharp momentum and emotional extremes driving global equities right now.

Recent Strategy Moves

Here’s a look at the recent strategic actions for DunhamDC:

  • Early March: A BUY Fear trigger was hit as markets pulled back, allowing us to increase equity exposure at more attractive valuations.

  • April: A volatile month saw two BUY Fear triggers in early April, followed by a mid-month SELL Greed — a rare and telling 3-signal sequence.

  • May 2nd: A SELL Greed trigger hit as market euphoria ramped up — followed by another SELL just two weeks later, confirming continued excess.

And DunhamDC US strategic changes:

  • January: A BUY Fear trigger during early-year weakness, followed by a SELL Greed trigger as markets rebounded.

  • March: A BUY Fear trigger on the return of initial volatility as markets panicked.

  • April: Two BUY Fear triggers in the first week — capturing the severe U.S. market anxiety.

  • May: Two Sell Greed triggers hit as sentiment turned increasingly euphoric.

Why Is Mr. Market So Greedy Lately?

While there have been many things that have buoyed prices lately, here are some key catalysts:

1. U.S.-China Tariff Reduction Agreement:

  • The U.S. and China agreed to a 90-day reduction in reciprocal tariffs.

  • U.S. Tariffs: Reduced from 145% to 30% on Chinese imports.

  • China Tariffs: Lowered from 125% to 10% on U.S. goods.

  • This development has alleviated global trade concerns and spurred optimism in equity markets.

2. Technical Indicator Signals Bull Market:

3. Resilient Economic Data Amid Sentiment Decline:

Fun Fact: Retail Investors Beat the “Smart” Money by “Buying Fear”

 

An interesting trend lately was that retail investors (those using personal funds, not institutions) were net buyers while Wall Street (institutional money) dumped equities.

When President Trump announced tariffs on April 2, Wall Street panicked. Hedge funds sold, strategists urged clients to flee, and U.S. stocks lost ~$6 trillion in value in just two days3.

But retail investors — often dismissed as "less sophisticated" - saw an opportunity.

They bought stocks while Wall Street sold. And a week later, Trump paused most tariffs as deals are being worked out, and the S&P 500 has surged 18% since.

This is one of the rare times when retail investors have actually beaten Wall Street.

How did they do this?

  • Be Contrarian: Retail traders snapped up stocks even as Wall Street bailed, buying a net $50 billion in U.S. equities.

  • Diamond Hands: While institutional investors panicked, everyday traders stayed calm. As Dave Mazza of Roundhill Investments put it, "In a market dominated by fear, the small-but-steady buyer is winning."

  • Long-Term Focus: Free from benchmarks and nervous clients, retail investors kept buying - and it paid off.

It’s important to note that retail traders aren’t bound by complex models or pressured by clients. They see market panic and price dips as bargains.

  • Bank of America: Retail investors have been net buyers for 22 straight weeks — the longest streak since 2008.

  • Record Buying: Retail made up 36% of U.S. equity trading volume in late April — an all-time high, according to JPMorgan.

And because of this, retail traders benefited from a monster momentum rally – with the S&P 500 up 14% in just 17 trading days. 

Figure 1: Bloomberg, May 2025

It looks like retail investors did what Warren Buffett so famously said:

"Be fearful when others are greedy, and greedy when others are fearful."

And it paid off.

Mr. Market Beware: Has Momentum Gotten Out of Hand?

But success can breed risk. As retail investors chase rising prices, they may be walking into a trap – meaning they’re increasingly exposed to any future drawdowns.

  • Buying All the Way Up?: Retail investors have been net buyers throughout this rally. But as prices rise, they’ve also been buying higher (they’re essentially “averaging up”), which means they’re getting a bit greedy.

  • Self-Reinforcing Cycle: The more they buy, the higher prices go (remember, higher prices require even higher prices to keep the momentum going until eventually prices get too high for new money to come in, and profit taking may begin, pushing prices lower and lower as others bail).

Thus, if momentum suddenly reverses, retail investors could be left exposed.

  • Bearish Sentiment Flip: In early April, trade war fears had investors in panic. Now, with the "worst case" seemingly behind us, markets have rallied. But that doesn’t mean risks have evaporated.

  • Caution is Key: Momentum works both ways — and when sentiment changes, it can do so very fast.

So, while the crowd begins chasing stocks higher – there could still be more upside ahead (as we detailed two weeks ago, historically such runs beget higher runs).

But the higher something goes, the greater the risk of a sudden drawdown.

Keep that in mind.

Final Comments

DunhamDC remains dynamic and unemotional.

  • If this rally keeps running, DunhamDC will sell into greed.

  • If volatility returns and fear takes hold again, DunhamDC will buy into weakness.

It’s that simple.

A strategy built on data - reacting to Mr. Market’s mood, not the media’s noise.

Because in today’s market, what the crowd does matters more than what the headlines say.

And whatever happens next, DunhamDC won’t guess. It will respond.

Want to Learn More?

Sources:

  1. This Bull Market 'Escape Velocity' Indicator Just Signaled a Rally - Business Insider
  2. Stock Market Outlook: Major Rally Ahead If Soft Data Leads to No Recession - Business Insider
  3. Smart Money Loses to Retail Crowd That Bet on Epic Stock Rebound - Bloomberg 

Disclosures:

This communication is general in nature and provided for educational and informational purposes only. It should not be considered or relied upon as legal, tax or investment advice or an investment recommendation. Any investment products or services named herein are for illustrative purposes only, and should not be considered an offer to buy or sell, or an investment recommendation for, any specific security, strategy or investment product or service. Always consult a qualified professional or your own independent financial professional for personalized advice or investment recommendations tailored to your specific goals, individual situation, and risk tolerance.

Past performance may not be indicative of future results. No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment. There may be economic times where all investments are unfavorable and depreciate in value.

DunhamDC (“DunhamDC”) is a proprietary algorithm of Dunham & Associates Investment Counsel, Inc. (“Dunham”) that seeks to mitigate sequence risk, which poses a threat to an investor's returns due to the timing of withdrawals. The algorithm employs what Dunham considers to be a pragmatic strategy, generally making incremental increases to the equity allocation when global stock market prices decrease and decreasing it when global stock prices increase. This approach is objective, unemotional, and systematic. Rebalancing is initiated based on the investment criteria set forth in the investors application and is further influenced by the DunhamDC algorithm.

Due to the large deviation in equity to fixed income ratio at any given time, investor participating in DunhamDC understands that a large deviation in equity to fixed income ratio can have significant implications for the risk and return profile of the account. Accordingly, during periods of strong market growth the account may underperform accounts that do not have the DunhamDC feature. Conversely, during periods of strong market declines, the account may also be underperforming, as the account continues to decline, due to the higher exposure in equities. Similarly, if the fixed income investments underperform the equity investments, it is possible that the accounts using the DunhamDC feature may underperform accounts that do not have the DunhamDC feature, even though they may have adjusted the exposure to equity investment before a decline. Therefore, the investor must be willing to accept the highest risk tolerance and investment objective the account can range for the selected strategy. Please see the Account Application for the various ranges.

DunhamDC uses an unemotional, objective, systematic approach. The algorithm does not use complex formulas and is designed to create a consistent process with limited assumptions based on historical data.

DunhamDC may make frequent purchases and redemptions at times which may result in a taxable event in the account and may cause undesired tax-related consequences.

Trade signals for DunhamDC are received at the end of each trading day with the implementation of the trades not occurring until the next business day, which means that there is a one-day lag that may result in adverse prices.

DunhamDC operates within predefined parameters and rules, some or all of which may not be available to review. While this approach can reduce emotional biases and enhance consistency, it may limit adaptability to changing market conditions, economic considerations, or unforeseen events. Extreme conditions may require deviations from the program’s prescribed approach, and such adaptability may be challenging to incorporate. The DunhamDC algorithm is programmed based on specific criteria and rules, it may not capture certain qualitative or contextual factors that can impact investment decisions or movement in the markets. Beyond the initial assumptions used to develop the algorithm, it lacks other inputs or considerations that human judgement and discretion may be necessary to evaluate. DunhamDC may utilize historical data, statistical analysis, and predefined rules. It does not make any predictions and may add to certain investments before they perform poorly or may divest from other investments before they perform well. Dunham makes no predictions, representations, or warranties as to the future performance of any account.

Accounts invested in DunhamDC are subject to a quarterly rebalance to its target allocation at the time based on DunhamDC in addition to the signals provided by DunhamDC at any given time.

If the variance between any Dunham Mutual Fund’s target percentage of the total account value compared to the current percentage of the account value is greater than 1.00% at the time of the trigger point, the account in DunhamDC will be updated to the new target allocation.

Accounts invested in DunhamDC may contain non-Dunham Mutual Funds, which may materially impact if the account is being rebalanced at the trigger point.

Dunham makes no representation that the program will meet its intended objective. Market conditions and factors that influence investment outcomes are subject to change, and no program can fully account for all variables and events. The program requires making investment decisions based on factors and conditions that are beyond the Account Owner’s and Dunham’s control.

DunhamDC is NOT A GUARANTEE against market loss or declines in the value of the account or a timing strategy. Investor may lose money.

Asset allocation models are subject to general market risk and risks related to economic conditions.

DunhamDC has a limited track record, with an inception date of November 30, 2022.

DunhamDC has a limited track record, with an inception date of July 31, 2024.

Index Definitions:

The S&P 500 - The S&P 500 is a stock market index based on the market capitalizations of 500 large companies having common stock listed on the NYSE or NASDAQ. The S&P 500 Index components and their weightings are determined by S&P Dow Jones Indices. It differs from other U.S. stock market indices, such as the Dow Jones Industrial Average or the Nasdaq Composite index, because of its diverse constituency and weighting methodology. It is one of the most commonly followed equity indices, and many consider it one of the best representations of the U.S. stock market, and a bellwether for the U.S. economy. You cannot invest directly in an index.

Investors cannot invest directly in an index or benchmark.

Dunham & Associates Investment Counsel, Inc. is a Registered Investment Adviser and Broker/Dealer. Member FINRA/SIPC. Advisory services and securities offered through Dunham & Associates Investment Counsel, Inc. 

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