Beneath the surface, things are decidedly not fine, with nearly 60% of all S&P 500 stocks in bear market territory:
How can this be? As we’ve been discussing for months, equities have been held up by a very tiny minority of super large-cap stocks.
Paul recently read that of 94% of the S&P 500 stocks went to zero, the index itself would still be around 4,400.
The two most recent times that ‘market breadth’ has been this bad was during the bear markets of 2002 and 2020:
https://x.com/DeItaone/status/2105361629319680401
Further, something really powerful is lurking in the Treasury market (as well as the long-duration bond yields of Japan, France, the UK and Germany).
This is both eye-popping and worth keeping a very close eye on:
And the price of oil is so heavily manipulated at this point that veteran commodities traders and portfolio managers like Jeff Currie are throwing in the towel in exasperation.
So what gives? How can such stresses exist without it being reflected in the prices of things?
Paul and I discuss the idea that something truly broke during the GFC in 2008 and has never really recovered. The powerful changed the rules, and we’ve all had to adapt and adjust to those changes. I mean, just look at the trajectory of the S&P 500 post-GFC:
This is where having a risk-managed strategy along with tactical portfolio adaptations becomes very important.
Why?
Because ‘they’ can change the rules, but they cannot change basic economic principles and laws. One of those laws is, “you need cheap and abundant energy to support a growing economy.” Another one is, “a growing economy needs abundant and growing credit (or debt).”
The various shenanigans being deployed by this administration (and the last, by the way) are just that: tricks and deceptions.
So, what does one do?
Stay nimble, be ready for anything, and have defined limits and rules for when to press returns and when to pull back to a safe harbor position.
These are especially tricky times because so many formerly trustworthy sources of data and information have been subjugated to political will and narratives.
Tune in for the rest….
Timestamps
00:00 The Markets Beneath The Headlines
01:29 What Happened To Truth?
03:49 The Rise Of The Machines
06:10 The Oil Market Gets Broken
10:01 When Algorithms Front-Run Everyone
15:52 Markets Start Looking Like Casinos
19:02 The Stock Market’s Hidden Bear Market
25:43 Is The AI Bubble Finally Cracking?
31:25 How The Fed Changed The Rules
39:05 Inflation Nobody Wants To Measure
43:51 The Coming Return Of Money Printing
47:17 Europe’s Energy Warning
50:00 Bond Markets Start Sending Signals
51:23 When Market Veterans Cry Foul
53:22 Stay Nimble, Stay Prudent
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by cmartenson