Looking Into The S&P Crystal Ball

Dano:
[0:03] Welcome to On the Markets, presented by Sonoma Wealth Advisors. We are joined today by your usual host, Chris Sipes, CFP, and guest host sitting in for Daren Blonski, CFP today. I am Dan Elweir, the Marketing Director. To the delight and joy of many of our listeners and followers, Chris, I am stepping in on the show today. It's always a great moment. It's always well-received. People want to know what the unlicensed guy thinks about the market.

Chris:
[0:35] That's right. I'm happy to have you, Dano. Our fearless leader is a little under the weather today with that flu, cold, whatever you want to call it that's been going around. So thank you for stepping in. Not all heroes wear capes, right?

Dano:
[0:53] Hey, you and I are going to be a couple of Nostradamus' today because we're going to take a look at what we're calling the S&P Crystal Ball. I'm so excited to look at this deck because this is the time of the year where everybody's picking an animal, right? Which spirit are you? Is it a bull year? Is it a bear year? And perhaps some of the data we have showing that maybe you don't trust those prognosticators.

Chris:
[1:19] Yeah. uh not to not to kill all the foreshadowing but the punchline is that nobody knows right

Dano:
[1:29] Well let's get the it's fun it's.

Chris:
[1:31] Fun to talk about it anyway

Dano:
[1:32] That is and we've got the data to back it up let's get the legal stuff out of the way and then start the show.

Music:
[1:37] Music All right up first got to start with i don't know if i'd call this a meme or just I don't know what exactly the name for this type of graphic is, Chris, but I love it. It made me laugh.

Dano:
[1:39] We'll, Thank you.

Chris:
[2:23] Yes. Well, this is, for those that are just listening and not looking, it says, it's a quote from Andrew Mellon saying, gentlemen prefer bonds. And believe it or not, there was a time when this was true, right? And I think that modern day thinking about investing, especially lately with the benefit of the very recent hindsight, is that stocks for the long run. Stocks always beat bonds.

Chris:
[2:53] It's always been thus, and it will always be thus, but actually, that is not actually the case. When you look at longer history, there's some great work out by a professor by the name of Besson Bender, and he shows that, yes, stocks have done really very well over the long term, and there's nuance to that. And if you go back even further in their data and you account for some of the stocks that are many of the stocks that actually went to zero, because that happens a lot, that actually he shows that there's many, many periods, sometimes long term periods, 30 plus years periods where bonds have outperformed stocks in not only American history, but also global market history.

Chris:
[3:47] So the big theme of today is nobody can predict the future, right? And you never know which asset class is going to do the best, even though it feels like it's completely obvious in hindsight. That is never the case when you're looking forward. And that diversification is really going through some struggles right now. But if you look historically, I feel that we are in kind of an anomalous time right now. And the old principles that have prevailed in investing over the long term will eventually resurface.

Dano:
[4:33] And you know this is the perspective that that i can bring to the show today which is that i'm a little bit closer to a client um because i i am uh as i mentioned i'm the marketing director and so when when i first came and became a client myself of the firm of which i am um being an uneducated investor i didn't even know that i didn't really conceptualize that you could buy bonds as an investor just as easily as you could buy stocks. And that might sound really, really uneducated, but when someone thinks about jumping into, quote, the market, they don't roll into your office, Chris, and go, all right, Chris, give me some of them bonds. You know, I mean, everybody wants, the first thing you can go to are stocks. You wouldn't go to a casino and say, oh, I want to play the game that when I put a dollar down, I'm going to make a nickel, maybe even a penny. You know, I mean, that's, that's what not what people are, you know, primed or designed to think. But that seems to kind of be the case with bonds. Am I wrong?

Chris:
[5:37] Um, no, I don't think you're wrong. And, and, you know, I think that, um, you know, conceptually, if you think about investing, it's, it's not out of the ordinary to not understand what bonds are. Right. But when you look big picture, you can do two things with your money. Um, you can be an owner. So through, through stocks usually, which is, um, you know, you own equity in a business, a publicly traded business. Um, and, uh, then you've got bonds, which is where you're lending your money. So you're, you're either an owner or you're a lender. And uh and and so bonds that that opens a whole another world of who are you lending to how long are you lending that money and historically bond investors have been a little pickier and they're they're referred to as the quote-unquote smart money and that's because they have to be right with with bonds there's a limited upside the best that can happen is that you get your payments and your money back. The worst that can happen is that you get zero. So they're not like stocks where there's an unknown upside and a known downside. With bonds, there's a very well-known upside. That's the best you can do.

Chris:
[6:58] So they tend to be a little pickier. And we'll see throughout the show today that the fixed income markets, the rates market, The bond market is showing some signs here recently that we might want to take a look at and see, hey, what's going on under the hood here?

Chris:
[7:19] But real quick on sentiment, boy, sentiment, look at the drop that we've seen just since the beginning of December. The first week in December, numbers dropped off of here, but we were in the 50s. So just within one month, we've dropped significantly and price will do that. So it definitely feels like the post-election honeymoon period, whatever you want to call it, has ended. Right and uh you know with the exception of today we had we had a little rebound in the in the market but really the santa claus rally did not did not surface this year uh we didn't really get much of a post-election bump um but you know pre-election we had we had quite a bit uh of return so but you tend to see sentiment follows price and the cnn fear and greed index is also showing that at 31, which is fear. This is about basically the same as last week. Bitcoin fear and greed at 74, greed, which is the same as last week. So no changes really on the CNN or Bitcoin greed index. So...

Chris:
[8:33] So if you go to the next slide, Dan, along with interest rates, another sign that we're seeing a little more stress in the markets is the strength in the dollar.

Chris:
[8:45] So this is a long-term chart of the dollar, the DXY, which is the dollar versus other global currencies. The most significant secondary currency in this basket would be the euro. And what happens when the dollar gets stronger is that it makes goods that are exported outside of the United States more expensive for other countries and so typically countries that export a lot don't love having a strong currency because it limits it makes the price of your goods more expensive in other countries so the dollar has been strengthening which is typically a sign of money flooding into U.S. Assets, and then globally people scrambling for dollars because dollars are the global currency. And usually you see dollar strength in times of stress. So I think this is something to keep an eye on because while we haven't really popped out in terms of like a new breakout in this, we are definitely, we've kind of reversed course post-election here on where the dollar was headed. And we'll see if this continues or if the quote-unquote dollar wrecking ball comes through to shake things up a bit.

Dano:
[10:11] Can you clarify that point one more time because it's counterintuitive? We see dollar strength in times of stress. It seems like in good times, the dollar would be quote, strong. That would be a natural conclusion. How do you mean.

Chris:
[10:31] Yeah. So because, and it's counterintuitive, because the global reserve currency is the dollar, meaning that people in other countries often use the dollar as a medium of exchange. And I think more importantly, people borrow in dollars. Other countries borrow in dollars because it's considered a stable currency. And so if you borrow in dollars and the dollar is getting stronger, that makes you paying back those loans more expensive. So it's difficult. And the more demand for dollars there are,

Chris:
[11:16] The more people globally are trying to acquire dollars for paying back loans, for just commerce in general. But also, if they're buying U.S. Assets because the U.S. Is considered a safe haven, a global safe haven, that will also create demand for dollars. So that's why it's historically looked at as a flight to safety, at least since the dollar has been the global reserve currency.

Dano:
[12:02] And anyone who thinks that hasn't been here. All right. Next slide. All right. What do you got next?

Chris:
[12:12] So here, this is from Ritholtz Wealth Management. Now, this is the time of the year where you're going to get a lot of forecasts. Okay. Hence the theme of the show. You're going to get a lot of forecasts. People saying, you know, here's what's going to happen in 2025. Five, they're almost never right. And here's an example, how the strategist did in 24. So the price targets that they put out at the end of 23. Now I'm not saying that these are not educated guesses. Obviously you look at the names here, you know, Citigroup, Ned Davis, Evercore. These These are all people with a lot of credentials, research,

Chris:
[12:59] You know, very smart, smarter than I am for sure. And they put together these forecasts based on their best, you know, assumptions. And yet the market does what the market is going to do. So here we see the S&P price versus the year end strategist forecast in blue. No one was even close. it far exceeded expectations. I think part of this is usually forecasts are somewhere in the neighborhood of 5% to 10% for S&P growth, given that the long-term average on the S&P is around 10%. They kind of play the safe route of, hey, it'll probably end up 5% or 10%. But if you go to the next slide, you'll see why that is a fallacy to assume that the S&P is going to end where it's averaged. Because here they're showing from Ritholds the average year up when the S&P is up and the average down year when it's down. Now, I know the fact that the S&P goes down might be some shocking news to some people what

Dano:
[14:16] Up to the right i thought it was up into the right yes right put my money in i thought i was supposed to go up into the right Chris.

Chris:
[14:25] You would not be crazy for assuming that that's just what happens every year. If you've been only investing here recently, you don't know much about market history. No one could fault you for assuming that. But typically, when the market's up, it's up a lot. And hey, when it's down, it's also down a lot. So I think back to 2022, what we saw. Now, the other piece of this, when you go to the next slide, I think is kind of even more important is that, you know, typically, recently when we've seen corrections, when, you know, we did have COVID, we had the fall in 2018, right around Christmas time, where we lost 20% in just a couple of weeks. We've had several corrections along the way, but I think the difference with the most recent pullbacks in the market is that it's recovered so quickly.

Chris:
[15:20] So even in 22, we got that major pullback, but we recovered fairly quickly. And that is actually not always been the case historically. This is from Evoke Advisors, and they're showing bull and bear markets all the way back to 1929, which was the start of the depression. And if you look at these market periods, bear being that the market's down, bull being that the market is up, you'll see where those averages come from,

Chris:
[15:54] Where typically the market goes in these cycles where it has a lot of really good years kind of in a row. And then it has a lot of really bad years to flat years also in a row. So typically, it's about 50% of the time the market is up, 50% it's down. It's just that over the period of history that we've looked at, most people refer to when it's been up, it's been up more than when it's been down. But there have been multiple historical times when the U.S. Saw periods of 20 years in the modern era. And even most recently in the 2000s, we had about nine years where the market just went nowhere. So it's not always the case that the market is going to go down and snap back immediately.

Chris:
[16:52] And so hence the It's for those that are diversified and they're asking themselves, because I think we're at a part in the language, but we're at a puke point for diversification. People are really starting to ask themselves, hey, man, what am I doing here? Like, you know, I've been invested in all these areas where it's, you know, historically made sense to be invested and be diversified. And I was told that was the smart thing to do and that that limited my downside, still giving me growth and avoided, you know, long periods of stagnation. And here I am three, four years later, and I really feel like I haven't gone anywhere. Um, and so the, the, the, the sentiment around, you know, kind of sticking with the long-term principles of diversification, I feel a lot of people are kind of like, okay, I've done this for three, four years now. I'm, I'm, I can't take it anymore.

Dano:
[18:02] I'm sick of going to the football party and my buddy is like oh yeah i'm up 40 oh i did this oh i had bitcoin oh i did yeah i'm up up up up up and you're sitting there going all right Chris what's up with these bonds what do we do what is the real hell you hear it enough that's really where i feel like it hits a lot of people is you just hear it you know you you're sick of you know the joneses yeah.

Chris:
[18:25] Why why am i invested internationally why do i invest in small U.S. Companies, you know, the, the Russell 2000 is, has been stagnant for four plus years. Um, why do, why would I ever invest in bonds? Why, you know, that makes that, that's been a horrible experience, right? Um, all of these different areas. Basically, why did I invest in anything outside of my house and the S&P 500 and even better, the NASDAQ? I should have just been all US, all NASDAQ in my house and I'd have been super happy.

Dano:
[19:06] We have another podcast called It's All Money and Daren and I host that show, Chris. I don't know if you had a chance to see the new episode or not, We went to a high school, our old, our, our high school, we went to Casa Grande and a student asked, um, should I start investing? And Daren gave a really great answer, which is that this generation has a core memory of the market just always going up.

Chris:
[19:33] Right.

Dano:
[19:34] And I wanted to give a flip side example of that, which is that your core memory and your expectation for a car. If you were to go out and buy a car right now, your expectation is that the price would go down and down and down and down over five years, 10 years, 15 years. You would not expect that car to be worth the exact same thing, let alone more. Stocks are somewhere in between. That's, I think, the behavioral piece that you can, as an investor, make a shift is to say, it's not a car and it's not necessarily always going to go up either. Sometimes it's going to go up and sometimes it's going to go down. And, uh, sometimes, you know, there are a lot of advisors who don't really want to say that because, you know, they're trying to get you to be a client. But, um, that's one thing that we do with the company is we have shows like this and we, you know, show the data that shows, Hey, look, here's the bear periods. Here's the bull periods. and it does go up and down.

Chris:
[20:37] Yeah. I'm, I'm really glad that you use that example of the car, Dan, because that's, that's a perfect example of an anomaly that we've seen since COVID where, yeah, you typically, you buy a car and you expect the value of that car. If you're going to go sell it really any time after when you bought it, it's going to, you're going to sell it for less than what you paid for it. Right. Except for this post pandemic period where, Hey, a lot of people bought cars and they went up in value. You know, pigs were, pigs are flying everywhere. And here, you know, people are saying pigs don't fly. And yet you look out your window and you're seeing pigs flying everywhere.

Chris:
[21:20] And you gotta, you gotta ask yourself, you know, like, am I still tethered to reality, right? Or has everything changed and now pigs do fly? And not only do they fly, but they fly better than, you know, the most majestic bird you can think of.

Chris:
[21:37] And we're just, we're going to be in this space forever, you know? Maybe, I guess you never know, right? But this is from Charlie Bielo. And what he's showing here is the S&P 500 index, which is what they call a cap-weighted or capitalization-weighted index. That means that a bigger company like Apple has a bigger position in that index than Walmart.

Chris:
[22:10] So because Apple is worth a lot more when you add up the value of it for stock market purposes than Walmart, it's going to get a bigger position in the S&P 500, the bigger tile for those that watch the FinViz tiles that we do a lot versus an equal weight S&P 500. And that's just like it sounds. You take the 500 companies in the S&P 500 and you're putting in the same amount to each one of them. So it's a more diversified kind of approach to it. And Charlie says, the S&P 500 outperformed the equal weight index by 12% in 2024 after 12% outperformance in 2023. The only consecutive years with higher combined outperformance than 2324, which, and that was 98 99 which for those of you that don't know that was right before the yes yes yeah no i'm impressed you have been you've been listening to our shows yeah

Dano:
[23:13] I i that's that's stunning, Wow. Pigs are flying. I don't have anything else important to say, but that's wow to me.

Chris:
[23:25] So now I want to show you some more wows. Okay. Because there's, there's so many things that you can point to that could not have been predicted ahead of time. Um, I I'm reading this, this great book that was recommended on a, on a podcast. Uh, it's called how, how nature works. And it's by, a gentleman named Per Bach.

Chris:
[23:52] And I'm only just getting started on it, but the upshot so far is that nature changes in bursts. You have these long periods of time where everything is kind of stable and the same, and then boom, something big happens and then things change. And then there's a new balance or stasis moving forward. And Nassim Taleb has a similar approach to the markets when he talks about the black swan events are what change markets, right? So the thing that you cannot predict is what affects markets over time. And kind of going along with that, This is showing gold has beaten the S&P 500 total return in the 21st century. So this is from December 31st, 1999 to December 29th, 2023.

Chris:
[24:58] And I don't think many people would know this fact. And I think even fewer people, if you asked the average Joe on December 31st, 1999, hey, you got to put your money in something for the next 24, 25 years. You can pick gold or you can pick stocks. Which one's going to do better? How many people you think would have picked gold, Dan?

Dano:
[25:21] Yeah, never. I mean, gold is always, gold is like radio. I mean, it's just people are like, oh, it's finally over. or, oh, that's ancient. I used to work on radio, so that's why I say that. But I mean, it's one of those things that's like if you present it to someone, it just seems like just so antiquated. And yet, wow, look at that. That also is a wow.

Chris:
[25:47] So the beauty about investing is that you don't have to be all in or all out, right? So if you give that same person the option, it's like, hey, why don't I do both? I can put some in gold. I can put some in the S&P. I can put some in some other areas because I admit that I don't know what the next 24 plus years is going to look like. Therefore, the most logical, the most aggressive strategy is to be invested across the asset classes so that I can benefit from wherever the growth ends up coming from. And sometimes it's multiple spaces. I mean, both of these would have been good options. You know, it's not like had you picked the S&P, you would have been kicking yourself. You did great. You just didn't do as well as if you were, say, all in gold. And I'm by no means saying you should have done that, right? But it's just to illustrate the fallacy of thinking that you can predict the future, especially that far ahead.

Dano:
[26:49] Yeah, this is the gold ETF and not the price of gold.

Chris:
[26:53] Um this is uh i believe this is just the um uh so dgci gold so that's that's a the indice um uh the indices that tracks gold same with the s p 500 total return this would have been using an index not an investable uh so it's it's apples to apples you know if you use the gold ETF versus an S&P ETF, that would have also been a good apples to apples comparison. These are both

Chris:
[27:31] Indexes. Yeah, so non-investable. Now, to blow your mind, this blew my mind. And I was like, huh, I could not believe this when I saw it. I had to actually run it for myself. um this is china the china total return index uh fxi as represented by fxi now these are these are etfs so uh and not investment advice right this is just illustrating a point here that put yourself back one year ago and you say okay uh you can put money in the in china in the in the in the chinese stock market, the NASDAQ or the S&P 500, and which one you think is going to do the best in 2024?

Chris:
[28:27] Well, surprise, surprise, China happened to outperform both of these other two indexes that did very well and kind of are always represented as these are the home run hitters, Right. Now, beyond that, I remember many people and if I'd even have been quoted on this show saying that China was uninvestable.

Dano:
[28:53] I'm just looking for the quote now. I believe it's a large, well-renowned research firm. Is it not? No name mentioned?

Chris:
[29:00] It was said many times by many different people, right? And this is late summer, fall, going into winter of 23, saying, hey, China has become uninvestable. And this is after it's dropped 50 plus percent. Um, you know, so basically like if you did this, this time period is, is cherry picked, right. Um, because the, the index had dropped, you know, 50 plus percent, um, as the Chinese market has really had trouble. Um, but if you go to the next, uh, slide, this is another mind blowing one. Um, and this is from Jeffrey Kleintop at Schwab. Using an article that was written at the end of 23. So he had no way of knowing what 24 held. But the headline that you can see there is, is China investable? And it was written on November 20th of 23. And you can see the very first sentence says, reasons prompting concern around investing in China may be improving, but volatility is likely to remain characteristic of Chinese stocks in 24.

Chris:
[30:14] Then listed in that, article, I would not have guessed this, but the annualized return of the China index versus the S&P 500 index from 1231, 2001 until the end of 23. So these numbers do not even show the benefit of how well China did in 24. This is ending in 23, where China absolutely bombed. And so over a longer period of time, these indexes have returned roughly the same. And that's because back in the 2000s, China did very, very, very well as part of the BRICS. And the BRICS countries were where everybody was putting their money at the time. And it was performing very well, while the U.S. Indices were going pretty much nowhere throughout the 2000s with a couple of big drops of over 50% along the way. So...

Chris:
[31:21] Mind bender, right? You don't know where, you don't know where the returns are going to come from. It's unpredictable. Um, and, uh, and so the diversification, while it just absolutely feels horrible right now, right? You've, you've been following all the rules and you're just not getting anywhere and it just doesn't feel fair. Right.

Dano:
[31:48] Um, and you know what I would love to see, I'm not saying to pull this, but I believe it was last week, you had an incredible chart that showed that the, if you look at 24, the S&P in 24 without Nvidia, not that that exists, but I mean, the S&P without Nvidia underperformed Europe, right? So show me this, show me this S&P without Nvidia versus China, right? Cause it's neck and neck here while lower here, but I mean, it would be drastically so basically without invidia i mean is invidia propping up the entire like country the entire market it's that concentrated it's crazy.

Chris:
[32:25] It it's uh i saw a statistic this week that it is now 10 percent uh the market cap of invidia is 10 percent of us gdp and uh at the height of the dot-com bubble cisco which was the invidia of its time in the dot-com uh was only five percent uh and and that was considered a you know wildly uh you know valued stock now nvidia is a great company and they're making money hand over fist right but goes back to the betting betting markets right if if you've got a horse that everybody knows is going to win or maybe we should use college football uh given that my my buckeyes had a big win this week that's That's right.

Chris:
[33:12] You know, you're not only betting on the team that is likely to win, but you also have to beat the spread. And the spreads are extremely high right now in terms of expectations on some of these companies. So it's not just betting that NVIDIA is a great company and that they're going to continue to make money. That's not the end of the bet or the investment. Um you're also taking on a huge huge spread um so anyway shifting shifting gears for a second you know maybe there's some signs of these anomalies starting to to to wane right um this is auto delinquency rates from the wall street journal um they're at they're starting to get to their highest uh point in more than a decade now like we talked about during covid when the government was raining money down on all of us. A lot of people took that money and bought cars because it's fun. And we went through that period of time where cars were appreciating in value when you bought them, if you could even get them. Used cars. My beloved 20-some-year-old Mercedes wagon was, was worth a mint.

Chris:
[34:30] Right. Uh, even, you know, car used cars were going up in value. It was insanity. Pigs were flying everywhere. Now that's started to, you know, come back to earth. Um, and you know, those bills are starting to come due, uh, you know, people signed on to things that they probably felt like that,

Chris:
[34:51] that gravy train was never going to end. Um, and took on some huge payments and now it's like all right a car truck is three or four years old i put a hundred thousand miles on it i still owe i still owe a mortgage on it like do i want to keep paying this thing totally i want to keep paying this or just let it go um

Chris:
[35:14] So interesting. Now, the other anomaly was in real estate. So you take a look at the home prices over the last year from October of 23 to 24. This is from Resi Club analysis of the Freddie Mac house price index. And you can see a lot of the states that benefited the most from the COVID migration, Florida, Texas, Arizona. Um you know i think the only one that i that i can remember that's on here that's still experiencing really rapid price appreciation is idaho um as one of the states where people were flooding to and maybe nevada i guess you could consider too but but really a lot of those other hot spots texas and florida being the two biggest ones you know austin famously uh experienced no, you know, no increase in price last year. Um, and so starting to see a cooling of some of that hot money that, that flew into those areas, uh, after the pandemic.

Dano:
[36:29] And so a lot of this has to be affected by interest rates as well. I mean, uh, well, hold on, look at Alaska, speak about jumping off the page. Alaska up 9%. That was not my bingo card. Wow. But I mean, real estate across the board, just ask a realtor how they're doing, give them a hug because it's not trading hands like it has in the past.

Chris:
[36:57] Absolutely. Yeah. So we're going to jump into some charts here and And apologies, because Daren's not here. These candles are some weak candles, Dan. I'm just going to warn everybody ahead of time. I was promised technical.

Dano:
[37:13] I was promised a Christmas tree chart.

Chris:
[37:16] I do not have the same. I do not have the same software that Daren has, nor the technical skill to fly around. Yeah, nor the interest. Yes, this is true. But we're going to do the best that we can here. So starting out with the S&P 500. Now we've got some simple trend following on here. I'm just a simple man, just a simple country boy. And you're looking at the 50-day moving average and the 200-day moving average, which are two common technical indicators to just show trend, right? And now, in fairness, the S&P, whenever you see the parallel lines, the ski tracks, hey, you're in a trend, right? But interesting to note that we finished the week under the 50-day moving average, And this is after kind of testing and playing around with that 50-day moving average over the last month or so. And so we did finish below. And all these charts are from Koi Fin, which is a great program that's available to anybody if you want to check these out for yourself.

Chris:
[38:35] And so anyway, I don't know. It's too early to call one way or the other. It's definitely not a trend change in the S&P based on this. I'm sure there's the candle pattern here that I'm missing, but interesting to note that we finished below the 50-day moving average this week in the S&P. Then we've got the Russell 2000. Now, these are the U.S. Small cap companies or the smaller companies, which are showing some struggle as the dollar increases in value, makes it, again, harder to export. So for any companies that are doing that now, again, we've still got the ski tracks mostly parallel in the upward direction. And so we are still in an uptrend. But you can see that the Russell really dropped off. I believe that was last month when we got this job numbers.

Chris:
[39:35] And most importantly, the Fed meeting. You can see that big red candle just straight down through the 50-day when the Fed met. And so we're kind of struggling and consolidating kind of in no man's land between the 50-day and the 200-day in the small cap stocks, which, hey, again, the pain train continues because small cap stocks have been here for the better part of four years now. Um, so we've just been trading sideways in this up and down purgatory, uh, for many years in, in the small cap space.

Chris:
[40:13] Um, then we've got, and speaking of up and down purgatory, we've got the developed, uh, markets, which is going to be your Europe, Canada, um, Australia, Japan, Japan makes up a big part of this and, Oh, Dano, we got the dreaded death cross in, in developed market stocks. So you can see since October, we've been in a downtrend. Uh, we've got the 50 day crossing over on a downward trajectory, the 200-day. So we got the blue line, by the way, I should have mentioned this at the beginning. Blue line is the 50-day. And I know these slides are hard to see.

Chris:
[40:56] Blue line going below the red line in a downward direction is called the death cross. And that's a technical term for technical analysts, which I love because it's very metal. It's a very metal sounding name uh but typically that means hey you're you're getting a downtrend and it's a confirmed downtrend uh look out below you know um so we'll see we'll see if the developed market can turn things around but not looking great uh there and uh speaking of that we look at the emerging markets those lines are converging we got the blue line converging with the red getting ready to uh we're headed for the death cross you know the signs on the freeway are saying you know death cross one mile ahead start merging right um and so we you know not looking good in that trend direction again since october really since the election uh foreign stocks have taken it on the chin especially because the dollar is getting stronger right so that makes when the dollar gets stronger, that is a headwind for foreign stocks. So they've really had pretty much everything stacked against them.

Chris:
[42:15] Now, um, let's take a look at the bond market, uh, up and down purgatory here as well. Now, I guess good news, bad news. Um, the, the good news is there's been so much bad news in the bond market that it can't, it's hard to believe it gets worse from here, right? It's been so bad, But, you know, 2022 was literally the worst bond market in history in the U.S. And we've just been kind of bouncing around here since then, you know, because interest rates have been, you know, in this area, which we'll see interest rates in just a couple of slides here. But this is what's called the ag, the aggregate bond market. This is a kind of medium term. So remember lending your money out. And this is usually within seven to 10 years. The loans are for seven to 10 years in these bonds. And this incorporates all types of bonds, government, corporate, et cetera. So it is considered the bond market, medium term bond market tracker.

Chris:
[43:30] And then we've got the long-term government-only bonds, the long-term treasuries. So those, again, are plumbing their lows that they saw in 23. We're getting close back to that range. But, but still, uh, you know, again, as long as interest rates on the long end have been really hanging out between, you know, four and a half to 5% for, for several years now, since 22, you know, we've been here. So, uh, you know, the last couple of years, those, those bonds have just been playing the, um, uh, uh, uh, the waiting game, you know? So bond holders are collecting a coupon. That's the good news. You know, you're getting, you're getting that, that regular coupon, your regular interest rate. So bonds are, are paying you something to sit through this pain. Um, but in terms of the principle on the bonds going up, they go up and then they go back down and they go up and they go back down. It's just like, you feel like they're going to launch and they're going to come back and you're going to be happy that you owned them. And then they just turn around and slap you in the face. And so it's been a long, hard road for the bond market here the last couple of years.

Chris:
[44:47] Now, what are we looking at here? This is the 10-year Treasury rate, government bond rate. And we're looking at this over a 20-year period. And the reason why it's highlighted there is because I'd argue that's the span of time from the great financial crisis in 2009 until we came out of the COVID crisis. That whole period of time was an anomaly in interest rates.

Chris:
[45:18] Not normal. Not normal to have interest rates as low as they were after that massive debt deflation that we went through after the great financial crisis. Not normal to have negative interest rates in some of the global sovereigns. So when you look at now and you go, gosh, how can this pain be so bad for so long? And how can interest rates stay, you know, four or 5%? How can mortgage rates stay, you know, seven plus percent? Well, the bad news or good news, I don't know what you want to look at it, depending on which side of the coin you're on, is that this is pretty normal, actually. The period that we just came out of was the abnormal. It's not normal to have negative interest rates. It's not normal to be lending your money to the U.S. government for over 20 years and collecting maybe one, one and a half. Or if you did that at the bottom of the COVID lows, you were getting around half a percent to lend your money to the U.S. government for 20 plus years. So, you know, it's, you know, one of the biggest anomalies to come out of this most recent period.

Chris:
[46:32] So a couple more here. We've got Bitcoin that finished the week above its 50-day moving average. Still looks like we're in an uptrend, even though we've seen some spits and sputters from Bitcoin. Totally par for the course. You could wake up tomorrow and it could be 120. It could be 80 and wouldn't be surprising either way.

Dano:
[46:59] So did Daren tell you what happened on our bitcoin episode of the podcast.

Chris:
[47:04] He did not he knows that as soon as he starts talking about bitcoin i immediately fall asleep and

Dano:
[47:10] So when the when the price was nearing 100 000 we figured i figured it was a good time to talk about it we had a great episode but i was about 20 minutes into a 30 minute episode with Daren like detailing full-on primer like what is bitcoin for me who didn't know much about it, 20 minutes in and i'm looking at him and i can just tell he's got a stack of paper he's ready to read and i was like yeah we're gonna have to go ahead they told the production crew like we're gonna have to double this episode this is now an hour episode Daren if anyone wants to know uh Daren is uh well versed on the subject so uh he's yeah probably perhaps that's why he's not feeling so well he's under the weather because it's been under a hundred again yes.

Chris:
[47:54] That could be it that could be it um so uh bitcoin bitcoin you know trading sideways but showing a little strength there so that's some good news uh for those of you that own some bitcoin and then if we look at our last slide we've got the uh gold um gold chart now

Chris:
[48:16] This one, I'm kind of torn on because look here, Dan, how many times that line's kind of approached that blue line, gone above it, gone under it, gone above it, gone under it. It keeps hitting it like a ceiling. That's what they call resistance. It's hitting resistance. It's kind of amazing how markets can be so pattern-seeking in that way sometimes. And so we did finish the week below the 50-day moving average in kind of a weak approach to it too. It doesn't, at least my read on it, it doesn't look super strong going into that. We can kind of petering around that 50-day moving average and you're starting to see that 50-day moving average curling over just a little bit. You know, it's not alarming yet, but, but nonetheless, a little change in direction there. So gold had a fantastic 24, you know, was up, was up significantly. I think it was actually up a little bit more than the S&P last year. I could be off on that. They were very close.

Chris:
[49:27] But nonetheless, maybe showing a little signs of weakness there in gold as we speak today. So that's, that's all I have for this week, Dano.

Dano:
[49:36] And comparing this, just to close out, comparing this to the chart we showed earlier, because we showed the chart earlier that gold over whatever that time span was, I think it was 20 years, you know, outperforming the S&P, right? So you show that earlier in the slide, and that's great. That's the historical performance. But this is looking, let's dial it in a little bit closer. So the historical performance is great if you've been in gold since 2000. If you're not in gold, that doesn't mean necessarily the right now is going to be continued up and to the right as we've said this episode so this is showing that yeah great it's had a great run but if you're just getting in right now maybe not am i reading that right.

Chris:
[50:18] Yeah. It's hard to tell, right? It's like predicting the weather. You can be somewhat accurate over a two-week period, and even then, they can be off. But the long-term, who knows? I mean, I think that if you're a diversified investor, it makes sense to have a strategic allocation to gold, and you just keep your

Chris:
[50:44] percentages dialed in there, right? You try not to think about it too much. And the whole, the whole, uh, hopefully the whole takeaway of this show was don't try to predict because, uh, it's impossible.

Dano:
[50:58] Uh, you might be better off using a crystal ball at this point. Uh, he is Chris Seif CFP. Uh, my name is Daniel Weir. I'm the marketing director and a host for the company. Uh, and if you're new to the channel, or maybe this is your first on the markets live stream, thanks so much for checking it out. Thanks for following us to the end. We are Sonoma Wealth Advisors. You can learn more about us at sonomowealth.com. And if you check out our YouTube page, there's two podcasts on there, including this one and other videos and education to check out. And Chris, thanks so much for having me on.

Chris:
[51:31] Thanks, Dano. Have a great weekend.

Music:
[51:34] Music