The Market Reflects The Consensus

DANO WEIR: I try to be funny, guys. Hey, I made a joke right before we started the show. Welcome to On The Markets from Sonoma Wealth Advisors. My name is Dano Weir. I'm the marketing director for the firm. I'm also a podcast host.

DANO WEIR: I'm here to help translate for you from our experts, our geniuses, our managing principals, Daren Blonski, CFP, Chris Sipes, CFP. Guys, we're starting a little bit of a seesaw this week. And we're not really figuring out, Daren, exactly which way we're going to go yet in the market.

DAREN BLONSKI CFP®: You know, I don't think you're wrong in that statement, Dan. We don't know where we're going. We never know where we're going. But there's some good signs, actually. The news isn't going to tell you about that. But from a technical perspective, I'm going to cover that here in a little bit. But, you know, we very well could have hit at least a short-term bottom. On March 7th, so 11 days ago, and I'll tell you why.

DANO WEIR: We're going to learn about what business leaders expect to happen in the next six months with prices and spending. We're going to learn what cash and money market flows are saying about the S&P. And Chris, once again, has found a way to incorporate a chart from the 1800s and why it's relevant for today. But first, this.

CHRIS SIPES CFP®: Please do watch the video through the next few hours. We're going to have a lot of people in the video through the next few days.

DANO WEIR: Chris is coming in hot with his meme game too. We have four memes to start the show. The first one, got a bear and a bull sitting on a seesaw, Chris.

CHRIS SIPES CFP®: Yeah, this is from the Motley Fool. We've been back and forth. It's been swinging violently, so hang on. Are we in a bull or a bear?

CHRIS SIPES CFP®: It's definitely the seesaw moves much quicker these days.

CHRIS SIPES CFP®: This one made me laugh a little. So this is showing IBit, which is the Bitcoin ETF from BlackRock, took in $50 billion in its first year. And we were talking a lot about the last six months or so about how gold was just on this epic run and nobody was talking about it. Most people didn't even know they owned it in their portfolios if they had it.

CHRIS SIPES CFP®: Really not getting any press. And that's starting to change. I bet. I believe the GLD ETF hit over $100 billion this week. And so money is definitely starting to flow into it. People are starting to notice and talk about it. So this is from the last dance. I think it was the documentary on the bulls, the 90s bulls, which I really enjoyed that series. I don't know if you guys watched it or not.

DANO WEIR: I absolutely watched it, along with many other people during the pandemic. They came out right when the pandemic started. And this particular meme, Daren, if you haven't watched it, this is a Michael Jordan documentary produced by Michael Jordan, by the way.

DANO WEIR: And he just goes on to any little thing. Like somebody steps on his shoe and he's like, and I took that personally. It's all it took. And then I went and ruined their family and burned it from here to the coast. It's just like, okay, dude. Okay, MJ. Sorry, man.

CHRIS SIPES CFP®: Yeah. Yeah.

DAREN BLONSKI CFP®: Perfect meme for gold you know people who hang out with me long enough realize that whenever you make a movie joke i'm going to look at you with a blank stare because i probably haven't watched the movie fact yeah right that's right that's right and here's a live shot from Jay Powell this week.

CHRIS SIPES CFP®: Boy the soap opera guys wow for for finance geeks this is about as heated and dramatic as it can get. We've got the president talking about getting rid of the head of the U. S. Central Bank, Jay Powell. And boy, he's got to feel like he's stuck between a rock and a hard place at this point, I'm assuming. So this guy's expression totally captured it the way I would think that Jay Powell's feeling at the moment.

DAREN BLONSKI CFP®: You know, a little history on that, Chris. Interesting. In recent history, the Federal Reserve and the executive branch and the congressional.

DAREN BLONSKI CFP®: Oversight committee you know there's been at least some perceived belief that the Fed had this independent although it was like a government organization it was independent of politics and that actually has not been true historically it's just more recently true or at least perceived to be true but i think once you look under the hood there's been a lot of political pressure put on the Fed over the years Trump has a particular flavor of it that's a little blunt in your face, but it's not.

DAREN BLONSKI CFP®: I think the media is reporting that falsely, that they're saying, oh, the Fed's supposed to be this independent, non-political organization. But it has a long history of being coupled with politics in the United States.

DANO WEIR: And for people who haven't followed that story, if we were to boil it down, the Federal Reserve is in charge of part of the interest rate. Equation, although they are in complete control of it. They can influence it.

DANO WEIR: The thought is that when they lower interest rates, that's good for a number of people, but perhaps bad for inflation. And so interest rates have remained high because they're trying to boil out inflation. Trump wants the interest rates to drop because that will benefit a number of his initiatives.

DANO WEIR: So Jerome Powell is stuck between, who's in charge of the Fed, is stuck between... Do I do what the president is asking? Or if I lower the rates, then that might send inflation. We don't think inflation is low enough yet. And then Trump this week has indicated he wants to and possibly can fire Jerome Powell. So that's kind of the 10,000 foot view.

DAREN BLONSKI CFP®: Well, and the reason for that, right or wrong, is the belief is that while the market's struggling, that if Chair Powell were to reduce interest rates, that would stimulate the economy. One of the things that the current administration is doing is absolutely gutting the fiscal policy mechanisms that were in place during the last administration.

DAREN BLONSKI CFP®: And what do I mean by fiscal policy mechanisms? That's the way that the federal government would put money into the system. And the current administration believes that the way they are putting money into the system was, well, not in alignment with their political views. So they're gutting that through things like USAID, using Doge, etc.

DAREN BLONSKI CFP®: And... What that's creating is this disruption in government printed capital flowing into the markets. And so whenever you have a regime change, which in fact we have had and we are going through right now, a regime change, you typically have a recession coupled with that regime change.

DAREN BLONSKI CFP®: And one of the quote unquote last bastions of the previous administration's at least approach to fiscally stimulating, some would argue, is the Fed. They stimulate through monetary policy i think there's debate to be had as to whether or not you know they were acting independent and without political influence and so that's kind of the narrative you see being debated.

DANO WEIR: In least some of the things that are not necessarily being over said Chris in your opinion what would happen if Trump somehow was able to fire Powell you and replace him with someone? Not necessarily dissolve the Fed, but replace him with someone. What do you think might happen?

CHRIS SIPES CFP®: I think it depends on how he does it and who he replaces him with, of course. There's been talk about Secretary Besant floated the idea that they would basically name his replacement ahead of when he gets reappointed or is up for renewal in May of next year. So basically he's got a year left.

CHRIS SIPES CFP®: And so they would go ahead and name who would be the next chairperson, which would effectively undermine Powell. And they'd have like a shadow central banker. So I think if they did it that way and that next person was considered by the market to be a competent, independent central banker, I think it may not be as bad as if it's, you know.

CHRIS SIPES CFP®: Someone the market perceives is just going to be under the thumb of the executive branch. Because I think no matter whether you agree with the current administration or not, you have to remember it's likely that the other party is going to be in power someday too.

CHRIS SIPES CFP®: Do we really want the president having full control of the central bank? I personally believe the answer to that is no. And so I, regardless of party, regardless of whether I agree with them or not, I would not think that that is a good sign for showing the rest of the world independent governance.

CHRIS SIPES CFP®: You know, keeping the faith. Now, fun fact for you, to Daren's point about this, you know, this kind of pressure has always been there.

CHRIS SIPES CFP®: There's a famous story about LBJ slamming his central banker, William Metesney Martin, against the wall.

CHRIS SIPES CFP®: They got actually physical, so not so much just threatening words. But, and LBJ was a big dude. He was, I think, 6'4 ". And, you know, he, if he shoved you against the wall, you'd know it.

DANO WEIR: So, so thank you for sharing that. Thank you for sharing that because there, there is a sense of like unprecedented times. And I get, I agree. There are things that are happening that have not happened before. And yet you do need to remember that you don't remember everything and you didn't hear everything. And so as Chris has just shared, there was a time where. A sitting president slammed the bed chair against the wall.

CHRIS SIPES CFP®: Yeah. And, and, and don't forget, don't forget that Hamilton, was, was shot by Burr. And, you know, Hamilton was like effectively our, our initial treasury secretary. They, they were, he was shot in a duel. So, I mean, America's had a lot of crazy things happen, I guess. Hopefully that's comforting to somebody. I don't know.

CHRIS SIPES CFP®: You know, I think one of the things as we go through the slides this week, one of the most important things that you have to remember as an investor is that all known information is already in the price. And right now, all known information is very, very bad. And so people are feeling awful about the markets. And typically, historically, we've talked a lot about this. That's been.

CHRIS SIPES CFP®: That's been actually a good time to be to keeping the faith right that this too shall pass and when it does pass then you know there's always there's always tomorrow the world doesn't stop turning and these things don't stop cycling and so when we look at the investor sentiment this week another week over 50 we've dropped slightly in terms of the negativity but it's still very very negative the cnn fear and greed index clock at a high 21.

CHRIS SIPES CFP®: Remember, Dan, when we looked at it last weekend, it was four, which it was either three or four. I can't remember. So sentiment is absolutely at the bottom that it could possibly be. And then Bitcoin fear and greed is still at 33, which is up a little bit from the 25, but it's still extreme fear reading.

CHRIS SIPES CFP®: So basically, you've got all the the main sentiment indicators really showing a lot of negativity in the market. There's a lot of bad news baked into the prices at this point. And I thought this was interesting that was published in the FT and highlighted bespoke investment research. And the other piece that we have now is that it's political. We've got political feelings pushing us in either direction.

CHRIS SIPES CFP®: And this is American. They're showing the American attitudes towards free trade have rapidly polarized. And not only have they polarized, but they've split even further since the election and the inauguration. So, you know, a historical fact here that I think is kind of.

CHRIS SIPES CFP®: Strange is that it used to be the opposite of this it used to be the liberal you know party that was more protectionist pro-tariffs pro you know protecting you know putting in protectionist policies anti-free trade and now it's the conservatives and the right is is the champion of that cause so we've we've kind of done a complete flip on this.

DAREN BLONSKI CFP®: In this generation in terms of the outlook on free trade and it's it's interesting to see that it's pretty interesting when you look at over time like different politicians and i think you're seeing a lot of it lately where they'll be like well remember when Hillary Clinton said the same thing and when obama was trying to make government more efficient and Clinton was making government more efficient and how these different political these different items in our existence or in our life become politicized Bitcoin being one of them right now that it's like somehow now become the charge of the conservative movement.

DAREN BLONSKI CFP®: And I can't think of anything more apolitical than Bitcoin.

DAREN BLONSKI CFP®: It's just interesting how different politicians at times adopt different theories. And then that propaganda gets pushed at us from different angles and whatever source we choose to follow pushes it at us.

DAREN BLONSKI CFP®: But it's so important when it comes to investing to not biting on that propaganda push from either side and saying, OK, well, that's great. But let's look at what this really means for me. The scheme of a long-term trajectory, which is so important in moments like this.

DANO WEIR: Chris, this is just random history question, but Chris, was it not the Democrats who were actually, like the Democrats ceased to be a party, became the Whigs, and then renamed themselves or something like that? I mean, the two parties have essentially switched if you go far enough back. Is that not true?

CHRIS SIPES CFP®: Essentially, yes. And they've switched positions on things. Several times in the past. I'm sure they will in the future too. So I totally agree with you, Daren. I feel like there's two sides to every story and usually the truth is somewhere in the middle.

CHRIS SIPES CFP®: So don't let yourself get caught up in these whims. Talking a lot this week about like, you know, people say, oh, I'm so worried. I just, I went to cash in my 401k.

CHRIS SIPES CFP®: And i'm gonna wait and get back in you know and i equate that to back when i used to bet on sports in in college which was a short-lived thing because i lost all of the little bit of money that i was gambling on it but you remember parlays did you guys ever bet on sports and parlays yeah so essentially you have to get to you you get you get this you this you're enticed by this huge payout right like oh it's gonna let's just say it's gonna pay a hundred times and all you got to do is guess the winner of these three different matches all right and if you take the spread there's a kicker and all these things you're like oh how hard could that be right and you learn really quick quickly that it's very very hard in fact it's usually impossible you just end up losing all your money at least i did and i think most people do Because you've got to get all the probabilities.

CHRIS SIPES CFP®: You've got to get multiple decisions correct, and you're betting against the market assumption of what's going to happen when you're taking the spread. So the market already thinks, hey, the 49Ers are going to beat the Bears by 14 points. And it's remarkable how many times that is so very close to the truth.

CHRIS SIPES CFP®: Right?

CHRIS SIPES CFP®: And it's unbelievable, but that's how the market works. And it's the same thing in the investment world where you're betting that you know better, that you're going to get out, and then you're also betting again that you know better, that you're going to get back in.

CHRIS SIPES CFP®: And it hasn't worked in the past for most people, I'll put it that way. So I'm always a fan of like, let's look at what other people that have been successful do. How do they stay successful? And let's just, let's do that.

DANO WEIR: Right and avoid the things that people that have not been successful consistently do right Daren invert that Daren he brought up football Chris brought up football not me okay i just want to point that out did you pay him i'll.

CHRIS SIPES CFP®: Disclose that at the end of the episode that's right so okay so we got this from Lizanne Saunders the business leader survey of future prices paid expected in the next six months And Lizanne says, six-month outlook for prices paid. Component of the New York Fed Services Index climbed to 71.8 in April, the highest since July of 2022.

CHRIS SIPES CFP®: So to your point, Dan, about, okay, what is J-PAL waiting for to drop rates? Well, they're expecting that there's a possibility, at least, that inflation comes back with the tariffs. And that's not in the prices yet because they haven't fully kicked in. All the inflation data is...

CHRIS SIPES CFP®: Is looking backwards and so they they if if the inflation is going up then their hands are more tied on on the rates side of things so because you don't want to loosen rates loosen monetary policy into a an inflationary environment because you can lose lose control of the markets and lose confidence of the bond market more importantly which is very destructive. You don't want to lose the confidence of the bond markets.

DAREN BLONSKI CFP®: To that point, Chris, there's some that are saying right now that One of the theories is that when Trump kind of backed off on some of the tariffs, it was because he saw things blowing up in the bond markets last week. Right.

DAREN BLONSKI CFP®: And so if you're a person who's feeling very nervous, I would say pay less attention to the stock market. Watch the bond market because that'll tell you what's coming next. Secondly, one of the arguments that's being floated out there. Is that less countries are willing to buy our debt right now. And because of, what do I mean by that?

DAREN BLONSKI CFP®: They're not buying the U. S. Treasury. And because one of the theories is that if less countries are going to buy treasuries, then that forces the American Republic to buy, or the investors to buy treasuries. And one way to force them to buy treasuries is to actually let the stock market fall, right?

DAREN BLONSKI CFP®: Because then that creates a flight to safety. And so some would argue that letting the air out of the stock market is exactly what needs to happen in order for the current administration to pull off the regime shift that they're trying to do, which is effectively implement a quote unquote more free, fair trade system, which one of the reasons that has not happened is because so many foreign countries buy our treasuries.

DAREN BLONSKI CFP®: And if we make them unhappy, then they stop buying. Well, that dumps all our debt.

DAREN BLONSKI CFP®: Onto the open market that creates issues that pushes our rates up if our rates go up that creates all kinds of issues and so one way to solve that problem from a macro perspective is to let the air out of the stock market forcing and creating that run to safety which when more Americans more people invest in the u. s stock market will buy the treasury instead of buying stocks so what i it To say all this, we don't know exactly what it is, right?

DAREN BLONSKI CFP®: Nobody does. And I would argue that things are far too complex to be that simple. And usually, you know, it's the simplest answer that's the answer. But I think in this case, it's very difficult for any few actors to have full authority and or ability to manipulate change, govern the markets completely. But it's a theory to think about, right? Like, okay. And it's the same thing with the media right now.

DAREN BLONSKI CFP®: Why am I being shown? And I think we all have to ask ourselves this right now. Why am I being shown what I'm being shown by the government, by the media? What's the agenda here? And I think there's far too much on both sides, just accepting the narrative as it's being presented to them rather than questioning the narrative and questioning what the intention behind the narrative is.

DAREN BLONSKI CFP®: And I think if you think through that. Have a balanced portfolio, think through the idea that what you're seeing isn't necessarily always presented in truth and that you're questioning why you're being presented what you're being presented and also paying more attention to the bond market than the stock market. I think that's a pretty good recipe for navigating through this crisis, if you want to call it.

DANO WEIR: Chris, what were you saying about a parlay? I think Daren just pretty much laid that out in economic terms as well. This means that, and that, and this, and this, and this, and this, and this. Possibly, maybe, potentially.

CHRIS SIPES CFP®: Yeah, he's right, though. The market is a complex, adaptive system.

CHRIS SIPES CFP®: You can't say, oh, if this one thing happens, then this is going to happen, because every action has some reaction that's unknown.

CHRIS SIPES CFP®: And that complex adaptive system is going to continue. So this is from Lizanne Saunders again, per the New York Fed Services Index, the six-month Apex expenditures, or sorry, expectations fell to negative 21.7, the lowest since the pandemic. So that's the expected money that businesses are going to spend to put into capital expenditures.

CHRIS SIPES CFP®: Now, if you're looking at this chart and going, oh my gosh, that's awful. I better get out. Well, the thing is, refer back to the title, which is the market reflects the consensus. The market has already incorporated this information. This bad information is already incorporated in the price.

CHRIS SIPES CFP®: So meaning that if it's less bad than this, that will be good for the markets, right? So. So it's, I think a hard thing to wrap your mind around that it's not an absolute thing. It's a relative thing. What happens relative to the expectations of the market? Not what's actually happening, but what, what's happening relative to the expectations.

CHRIS SIPES CFP®: And, and that's, that's where it gets, that's where it gets difficult.

DAREN BLONSKI CFP®: So here's a mind twister for you real quick for you going to the slide. Hey, so if we go with the theory, right, that the market is adaptive and we go with the theory that, the market has already assumed all possible points of data or information.

DAREN BLONSKI CFP®: What if now the market has already absorbed a chaotic presidency where. There's just random things coming out left and right and out of right field and left field, and that it's building this kind of resistance towards that, right? So there's something to the positive, right, for those people that feel like the world is ending.

DAREN BLONSKI CFP®: In theory, if the market is capable of absorbing all information, one would also have to argue that the market is also now absorbing the idea that Trump in his policy agenda is going to throw out.

DAREN BLONSKI CFP®: Left field and right fielders, and that the market will develop a resistance to that over time, which is interesting, right? So that's a positive way to look at this situation. The market could be developing a callousness in some ways. And for somebody to say, well, you know, I don't know what Trump's going to do next.

DAREN BLONSKI CFP®: So I need to protect my assets and, you know, put them in something that's less risky. That's a possibility. But you could also argue that as the market absorbs the new data set. It too will adjust and therefore sitting on the sidelines would be a bad move.

CHRIS SIPES CFP®: That's right. And so we almost titled this something along the lines of everyone's so bearish, I'm bullish, you know, because we've talked about it before. Daren and I are both awful people to invite to a cocktail party. Yes. Don't leave me out.

DANO WEIR: Don't leave me out. I'm also awful.

DAREN BLONSKI CFP®: No, no, you're entertaining Dan to invite to a cocktail party because you actually understand current events. Yeah. We're like super boring here, right?

CHRIS SIPES CFP®: You're a great DJ. You're a great DJ. Yeah, you're a good cocktail guest. But, you know, Daren's going to talk about Bitcoin and I'm going to be the contrarian that like when everybody's jazzed about the markets, I'm like despondent like I was last fall.

CHRIS SIPES CFP®: You guys were having to. Keep me pepped up on this call every week because everybody was throwing money in as fast as they could. They thought there was no way that anything could stop us. Everybody's bullish as can be.

CHRIS SIPES CFP®: That just worries me because I'm a natural contrarian value investor. Now, you think they sell you companies at a good price because everybody's jazzed to buy them?

CHRIS SIPES CFP®: No, you buy them you get them at a good price because nobody wants them because there's some weird thing that's happening and hopefully it's temporary but like people aren't going to sell you something at a at a lower than market price unless they feel like it's good for them right and so and perfect example is international stocks you know we we literally got to the point where boring nobody wanted There's no way all Europe does is regulate, regulate.

CHRIS SIPES CFP®: You know, the United States innovates and, you know, whatever, blah, blah, blah, all the narratives, right? And so everybody left them for dead. And at least so far, right, international stocks, and this is from Mike Zaccardi, my online spirit animal, Mike Zaccardi. International stocks beating US stocks by 16.5 percentage points year to date.

CHRIS SIPES CFP®: Not only is that the Best start to a year this century, but it's the Best four-month relative return in the last 25 years. So who knows? This could be just a flash in the pan. But how many people had that on their expectations going back to what's consensus? What is the expectations? Who thought? Last fall that the place to be in 2025 was going to be international stocks. I can tell you, I didn't hear one person saying that.

CHRIS SIPES CFP®: So the expectations are baked into the price. You get paid for taking risk. You get paid to invest in the places that you don't necessarily think are going to be the greatest return, right?

DANO WEIR: I'll speak to that, Chris, because for the do-it-yourselfer, You know, when you hear that, you think, all right, well, I need to go choose something random. I need to choose something that seems like a dog and then it might go up. You could do that, but there's a lot of fear in that.

DANO WEIR: And that would be one of the benefits to working with an advisor, whoever you should choose, because you could talk to someone like Chris and say, well, I'm thinking about this. What do you think?

DANO WEIR: Well, I'm thinking about, you know, they can guide you and kind of learn what works for you because it can be scary as an investor to pick something which, I mean, you saw that last chart. That's going down the pyramid. You know, that was... From 2009 on down, that's not looking good. That doesn't seem like logically somewhere you could put your money.

CHRIS SIPES CFP®: Yeah. I'll see if Daren has any experience with this, but I personally have never had someone come to me going, you know what, Chris, these value stocks or these bonds or insert your hated asset class look so awful. Can you talk me into putting these into my portfolio? No, no. We.

CHRIS SIPES CFP®: We, I think though the value comes on the opposite side where I'm not going to name the stock, but there was a few weeks last year, maybe a couple months where every other email was, how do I buy this? You know, literally some people that weren't able to pronounce it, they wanted to buy it because they heard from a friend that the friend was getting rich on it. Right.

CHRIS SIPES CFP®: Those are harder conversations because it's like. Hey, it's a great company. I see it everywhere. It's tied to a narrative that makes total sense that it's going to dominate the world. Like, take my money. You know, that's, that's the harder conversation. Because I've never, never had the opposite conversation with any client before. So, okay, so what what's causing maybe some of this outperformance?

CHRIS SIPES CFP®: This is from Ryan Kirkland. And he says, or sorry, this is Eric Balchunas from Bloomberg. Last year, Europeans put half of their cash into US-focused ETFs, but this year it's only 3%. They are so over it. Meanwhile, though, US investors have barely budged, keeping the faith, and Asia has actually increased investment in the US. Fascinating stats from Soro Vegas, I think is how you pronounce that. But.

CHRIS SIPES CFP®: So the foreigners may not be buying our bonds they also may not be buying our stocks like they used to because that was a way of recycling money previously as well is that a lot of foreign countries the u. s has a home country bias but if you live in another country a lot of those people were investing in u. s stocks because you know you All the names, all the name brands, right? And the U. S.

CHRIS SIPES CFP®: Market was doing so well. So if they start to pull back on that a little bit, invest in some of these other countries, that could also be a headwind for U. S. Markets. Okay, so this consensus, what's consensus, right? This is really cool. And this is showing, let me just pull up real quick what this is a combination of because it's several factors. Factors that go into how this is calculated.

CHRIS SIPES CFP®: And so this is growth expectations, cash level, and equity allocation. So the combination of those things, and this is from Bank Of America, and they put this together and they look at how this has read in the past. And look at all the other times we've been down on this low side, right? There's always been a terrible narrative. We're lower right now than we were after 9-11. The Iraq War. We're down on par with the GFC.

CHRIS SIPES CFP®: The U. S. -EU debt crisis, if you remember that, around 2011, 2012, the quote-unquote pigs countries that were going to go bankrupt in Europe.

CHRIS SIPES CFP®: We had Silicon Valley Bank. That was scary, right? People worried about their money in their bank accounts. And in hindsight, again, those all looked like opportunities in hindsight versus look at the other side where had you invested, look at BRICS because I know that's one people are not going to feel as emotionally tied to.

CHRIS SIPES CFP®: But back at that time, Brazil, Russia, India, China, those were the BRICS countries, the fast-growing emerging markets. People were… putting money there because they had done so well. Their price to earnings ratios got bid to sky high. And then guess what?

CHRIS SIPES CFP®: Since that time, those stocks and those stock markets have gone really nowhere. And now people are looking at them like, why would I invest there? You know, there's been no returns for over 10 years. And same thing with the blue wave, that was the top of 21.

CHRIS SIPES CFP®: Everything got priced crazy and then we got 2022 where we got the correction. So, you know, I, I think it's just important to know where you are in the cycle of sentiment. When you're trying to make your decisions around your investing and running with the herd from an investment standpoint, usually is not the right thing to do.

CHRIS SIPES CFP®: Another sentiment indicator is people putting money into money markets and cash ETFs. And this is from All-Star Charts. They've got this quote from Peter Lynch, who is a famous mutual fund portfolio manager. And he says the key to making money in stocks is not getting scared out of them.

CHRIS SIPES CFP®: And Charlie Munger said something to the tune of, if you can't be sitting through a 50% drawdown, you shouldn't be investing in stocks, right? Now, that's probably extreme because most people don't own just stocks.

CHRIS SIPES CFP®: Most people don't invest like Charlie Munger did, which I think he owned like three or four stocks. It was like Costco and Berkshire Hathaway and a couple others. He was extremely concentrated. He was also extremely well-connected, also a professional investor.

CHRIS SIPES CFP®: 50% drawdowns for him probably happen pretty regularly. But I think you get the point. It's an expected feature of investing, especially in stocks. And the reason why people get paid higher returns over time is for taking that risk. There's got to be compensation for the risk. Well, guess what? Right now is that risk that pit in your stomach that you feel is you taking risk in the markets that you get paid for over time.

DANO WEIR: What's a cash ETF?

CHRIS SIPES CFP®: I think they're referring to short-term bond funds and such that are focused on basically preservation for the most part.

DANO WEIR: Okay.

DANO WEIR: Here it is. Chris, thrown it all the way back to 1801.

DANO WEIR: Every other week, he's got one.

CHRIS SIPES CFP®: This is amazing. Mike Sicardi, they use the IMF and MBER and et cetera. Now, this is GDP growth rates, the percentage of GDP growth rates over time.

CHRIS SIPES CFP®: And they've got the average contraction, the average expansion. In the post-war era, the average contraction is only about 10 months, and then the expansions are closer to 64 months. So it's been smoothed out over time.

CHRIS SIPES CFP®: Knock on wood, right? You can see we used to be a lot more volatile in the GDP measurements, but it's been smoothed out more recently as we've gotten to... To be more of a developed economy and such.

CHRIS SIPES CFP®: And modern central banking, I mean, look, it's not perfect. There's a lot of flaws with it, but it has helped take care of a lot of panics. You read about panics in the 1800s when there wasn't a central bank.

CHRIS SIPES CFP®: And basically, the billionaires of those times, the JP Morgans, they had... The Rockefellers, the such, they had to come together and basically bail the system out. So it's, it's you know, it's not perfect, but it's the Best, it's the Best thing we got at this point.

CHRIS SIPES CFP®: Okay. Last slide. Now this is interesting because this is from Lance Roberts and this is the first time. He knows of, I guess it could be wrong, but the first time that he knows of, he's a housing analyst, that Zillow is forecasting a drop in home prices over the next year. So now they expect it to fall about 1.7% across the country.

CHRIS SIPES CFP®: Now that's going to be different in different areas, depending on the inventory and such, probably won't happen in every area. But nationally, this is the first time that Zillow has projected that they would see a drop in housing prices this year. So I think the administration is not unconstrained. To use a double negative. They are constrained by the market. They will be constrained by the market.

CHRIS SIPES CFP®: Their leverage is going to be constrained by the market, whether that's the bond market, the housing market, the economy, etc., etc. So they're going to have to deal with this complex adaptive system that these inputs that they're putting in, they're going to have to respond to it.

CHRIS SIPES CFP®: Because all of the tariffs and the administrative changes are going to have impacts on the economy in various markets. And, it does work in the way that once things start rolling in a certain direction, once that flywheel gets turning, it can be difficult to arrest it and change the direction. So, you know, I think it'll be yet to be seen how those market constraints are going to play out.

DANO WEIR: It's so interesting to see this because, and now granted, I just sat with six realtors for a future podcast episode, which we're going to have on our other podcast. It's all money. In which they told me Zillow is a back-of-the-napkin estimate, one.

DANO WEIR: But two, you've got a little bit of a lull here, and in fact, you've got, in some cases, prices going down, as this graph is showing, kind of the same narrative that we're saying for the market. And so it's hard to be that contrarian. It's hard to get on the roller coaster that's going down instead of the one that's going to the moon.

DANO WEIR: But That is where the opportunity is if your goal is to have a larger, bigger, more substantial return. But it's hard because as I've been a part of the show for the past few months, I'm really coming around to the idea that, man, humans just seek safety.

DANO WEIR: They seek security. They seek certainty. And you can see that in the markets. You can just see people clinging to those sure things. Who wouldn't? But it's the unsure things that more often than not end up. Being the opportunity.

CHRIS SIPES CFP®: Very well put.

DANO WEIR: And now we take out the candlesticks and the fine China.

DAREN BLONSKI CFP®: I know you guys were missing it. I know you were missing it.

DANO WEIR: He's been quiet for 20 minutes and we're letting him just blow it all out. It's his chance to look at the technicals.

DAREN BLONSKI CFP®: All right. Well, let's talk about... None other than the gold chart. So the gold has been going absolutely bonkers, which you can't look at this chart and not say, okay, what is the chart telling us? What's going on here, right? And so you start looking through what's happening, and there's a lot of gold purchasing.

DAREN BLONSKI CFP®: I saw a headline last night that the Trump administration is considering flooding the market with U. S. Gold to crush China because China's trying to stabilize its currency by acquiring more gold, which I thought was kind of an interesting strategy. But nonetheless, the gold chart is through the roof.

DAREN BLONSKI CFP®: Now, when you look at this from a technical perspective, you have something called like a cup and handle. This is on the monthly chart. And you can see that cup. And then there's that handle. And then you have that extension up, which is about a 50% extension after that. So a massive move.

DAREN BLONSKI CFP®: My look at this chart right now, the move is exhausted. If you also look at this move from a, what we call relative strength index indicator, right? And we look at the RSI on the monthly, you can see it's way above that 70% that tends to get exhausted, at least on the monthly. You can see it on the weekly, it's above that. And just peaking above on the daily. So. I'm in the camp.

DAREN BLONSKI CFP®: We're actually going to see by the end of this month, gold kind of come back down in. It's gone a little too far too fast because of that. I would be looking for some sort of news about resolution of tariffs and things settling down. Gold's kind of whispering that to us because it's gotten so out of whack that we're probably getting towards the end of some of the political strife, at least quieting down for a minute.

DAREN BLONSKI CFP®: Which I realized for most people, like, what are you talking about? You're telling me that we're getting to the end of macro politics because gold is getting so out of whack. And the reason for that and why I say that is that when you see things like gold, which is a run to safety type of asset, and it gets out of context of its historical moves, that's when you start to see some. Some settling down.

DAREN BLONSKI CFP®: Well, what would, what would cause gold to settle down? Well, that would be political, political fear coming out of the system. So I think there's some argument to be made unless this time is different, right? And those are the famous last words of every investor. This time is different. The whole system is going to collapse. So yeah, yeah, yeah. Well, which is not likely, right?

DAREN BLONSKI CFP®: Just to your point earlier, Dan, people love certainty and the default mechanism for society and communities is to seek certainty and seek stability and so systems will generally push back all the actors into a place of stability in a place where there's more certainty in the system and i think that that's the standard operating procedure unless it just all implodes right but i think that's less likely i know there's a lot of fear about that right now.

DAREN BLONSKI CFP®: There but i i think that's less likely let's talk about the S&P and we i think now a week and a half ago we did kind of an emergency broadcast on March 7th and we said well we think the bottom might be in on this one and the reason we said that is because we pulled out the relative strength index and we said well look this is way below where it should be from a daily chart perspective.

DAREN BLONSKI CFP®: It's hit the 2022 kind of... Area zone it's more prevalent when you look at the international chart to see it hitting that 2022 area of support which is right here we could go a little bit more on spy but to make it simple spy trade only trades at certain hours right from 6 30 a. m west coast to one o'clock west coast each day and then the market's still trading around the world so not see as much of the movement.

DAREN BLONSKI CFP®: Now and i think we're in a global market so it's harder to read the charts from that perspective but i think it was way oversold and i think we saw that bottom play in and then we got a nice bounce and we retraced the move right and what i mean by retrace the move this was the all-time high up here on in the sp S&P 500 which is the 500 us largest us-based stocks on February 19th And then we...

DAREN BLONSKI CFP®: At least for now, found our bottom on March 7th, 8th.

DAREN BLONSKI CFP®: And then it traded up into this 50% retracement line, found resistance right there, and then bounced down and it's hanging out under there. But the fact that it closed on this long-term trend line I've been watching today, and you can see that the daily candlestick closed right on top of that trend line right here, that That tells me that there's support in the system generally.

DANO WEIR: What is that trend line timeframe? It is not the 200 day.

DAREN BLONSKI CFP®: Oh no, the trend line goes way, way back. So this is just a trend line. What you do is you find other areas where the market traded to. And this trend line has been basically following the upper move since the low of 2020. And anytime the market gets way out of whack, like it did right in 2022, it came back in. You can see it tested it, it rode that trend line.

DAREN BLONSKI CFP®: In 2022 and then bounced up. And now what we see is that we've just come back into that trend line. We traded below it, which was the excessive selling going on in the market, exhaustive selling happening. We found that support region right on that close to that 2022 high, and then we bounced up.

DAREN BLONSKI CFP®: And so when you look at this part from a longer term perspective, it's really hard to say the world's ending. And what you see here is more an example of markets correcting. And we've gotten so used, you can see here's the 20, this is the 2020 low. And you can see this trend line moving all the way throughout 2022. We came right in, traded basically two days of just blowout selling.

DAREN BLONSKI CFP®: And then we bounced above and closed above it. So I'd say right now, I know it's hard to believe. And I know that. Most people out there that are fearful right now, the uptrend is still intact. There's still a long-term uptrend still intact in the market. There is a short-term correction, right?

DAREN BLONSKI CFP®: In particular, we had our death cross, which is our 50-day moving average crossing below our 200-day moving average. And you can see that happened there. So that could mean that we have further selling to go. But right now, I have to say the trend is still intact. That might change next week, tomorrow, or day after. But right now, we still have an uptrend in place. We've just had a correction.

DAREN BLONSKI CFP®: We moved away from this long-term trend line. We traded back in in 2022. We moved away from it. We came back in. And the excessive amount of fiscal stimulus was pumped in the system over the last few years. And that has created these excesses in the markets. And the excesses are coming out. They're working out in the markets.

DAREN BLONSKI CFP®: And we're going through regime shifts. Doesn't mean we... Couldn't still be in an uptrend and even go into a recession. We could already be in a recession. There's a lot of things pointing to that. But long story short, it pays to just stay with the trend and the trend still can be argued to be up. Definitely weakening and definitely starting to show signs of weakening.

DAREN BLONSKI CFP®: But I could also see another let's say this thing rolls back over I can see a really strong test of this area here this 462 that was region was tested and buyers really stepped in right in here. But I can see us moving down in here and finding a really strong support. If we lost the 2022 high, then we would all have to be shifting gears completely about the market.

DAREN BLONSKI CFP®: And that'd be around 459 on the SPY, which is the index tracking the S&P 500. What is the S&P 500? Well, it's the largest US-based 500 stocks, right? So is that the market? No, it's not the market to Chris's point earlier. There's international, there's domestic, there's merging. All these markets are part of what we call the market.

DAREN BLONSKI CFP®: And there's a lot of them. The market that we generally think about when we think about the S&P is the 500. And you can see what's been happening is what Chris and I have been pounding our fists on the table for a long time. And that is that these big stocks, NVIDIA, Microsoft, Apple, Amazon, Google, Meta, and Tesla have been losing a lot of steam and are not doing well.

DAREN BLONSKI CFP®: And so all the other stocks have had to make up for these stocks selling off and the air coming out of the system. It goes back to my point that I've made many times that NVIDIA and adoption of AI is going to absolutely change our lives and revolutionize our lives in many ways we can yet to perceive.

DAREN BLONSKI CFP®: Yet we're probably going to go through what's called an S-Card adoption. Meaning at first it's a big deal, then it goes down, and then it goes back up. Very similar to what we saw in 2001 with the internet and WWW. Now everything's done on the internet, right? You think about our whole business is running the cloud. Now we don't have physical data points anymore.

DAREN BLONSKI CFP®: But that had to go through an S-Card adoption. All right, so let's take a look if we're talking larger recession potentially. Let's take a look at oil because oil can often be an indicator of what's happening out there when we look at oil because oil is in everything in our lives. Right.

DAREN BLONSKI CFP®: So if oil is going down, then that's telling us that expects to slow down. Since the fall, we've been talking about this and how oil was winding up to make a move and it looks like it's made its move down. So this tells me that, yes, we're likely heading towards more recessionary times, right? Because if people are using less oil, we see more recession.

DAREN BLONSKI CFP®: You can see the breakdown of this support here in this triangle, which is price getting closer and closer. And then there's a breakdown. Happened. 60. I would say 60 is the floor to walk. We go too hard below, too quickly below 60. I think you've got a bigger type of recessionary environment, but it could hang out here for a very long time or a bounce out of this area.

DANO WEIR: Darren, earlier in the broadcast, you mentioned that if people really want to look at what's happening with the market, not just the S&P, you said they should look at the bond market. Could you show us that and what they should be looking for?

DAREN BLONSKI CFP®: Yeah. So that's a great question. It's right. Nice cue up. I could have cued that up better. So this is a 10-year treasury bond. So much of the bond market, quote unquote, is set off the 10 year. And you've heard Secretary Best at this point say, look, we're focused on getting that 10 year down.

DAREN BLONSKI CFP®: One of the arguments out there is that some of the groups that are disappointed in our tariffing of the other countries out there that own a lot of our treasuries are selling our treasuries. And by selling our treasuries, what they're doing is they're putting pressure on the 10 year treasury and pushing the treasury up, which is really bad for mortgages.

DAREN BLONSKI CFP®: Really bad for the real estate market, can really slow down the machinery. And the reason real estate is so important is because if you think about Americans in a consumptive-based society, much of our consumption happens inside our homes, right?

DAREN BLONSKI CFP®: So if all of a sudden we're buying less homes, we're not buying new homes, we're staying put in our homes, that's going to create an issue with consumption. I don't know if you guys knew this, but... I was listening to a podcast yesterday and the gentleman was talking about this. I learned this.

DAREN BLONSKI CFP®: I didn't realize that was still in place, but we still have COVID era blocks on foreclosing homes. Did you know that? During COVID, we put in these moratoriums on foreclosing homes, and those moratoriums are still in place. One could argue that's partially why we haven't seen a real downside in real estate market.

DAREN BLONSKI CFP®: But if we're going into a soft After real estate market Zillow that Chris talked about earlier, I would think they'd keep those moratoriums in place. I think there's some discussion in the Trump administration of releasing those moratoriums. But I would think that would absolutely wreak havoc on the real estate market.

DANO WEIR: How does that even play? I mean, so I own my home. I no longer can pay the mortgage. And so I stopped paying the mortgage and I would normally be foreclosed on and repossessed by the bank. But Since 2020, that's not been a thing. So you've got people who are just living in houses, paying nothing. Is that how that functions?

DAREN BLONSKI CFP®: I don't know exactly how the mechanics of it work, but that's my understanding. Something to that degree is banks can't foreclose on homes, which there's a lot of people out there sitting, not paying rent, not paying rent to the bank, I guess, or their mortgages.

DAREN BLONSKI CFP®: But if they release those moratoriums on foreclosures, that could create things in a bad way really quick, especially in markets like D. C. And Florida. But generally what you're seeing is any of your areas that people really fled to during COVID and inflated the prices of homes, you're seeing those areas really start to see some weakness and would expect.

DAREN BLONSKI CFP®: Those areas to be the weaker spots through this recession if that's what we end up in fact calling it or hitting just so you know just so if you're a listener the way a recession gets determined is by a board of economists that sit around and look at a bunch of data and then say oh yes this is recession and they determine it after the fact so you can slip into a recession before it's ever even you know quote-unquote blessed by the economist priests on high so.

DANO WEIR: And a recession in the economy isn't necessarily always correlated with the same thing happening in the market too.

DAREN BLONSKI CFP®: Absolutely not. Not in modern day markets at all because we've certainly seen that since 08, just exhausted fiscal stimulus happening. That's why our debt is out of control in this country and monetary stimulus at that too. So, I mean, you really think and we've said this over and over, but the amount of debt that we've taken on in the last five years is… insane. And it can't continue.

DAREN BLONSKI CFP®: You can't continue fiscally stimulating the way we have. And that's what's brought to the market. So, you know, what point do we say, okay, well, for the sake of the union, we have to stop and we're going to have to slow things down and let the economy find some balance. It's the same thing with like, when I tell my nine-year-old to get off his video games, right? Like, Hey man, you've had enough for.

DAREN BLONSKI CFP®: Night for the day your two hours is up and he gives me all this lip and jabber about it and then so i just turn his internet off and walk away because i'm not going to even debate it with him and he just loses it right and then an hour later he's fine playing outdoors and kicking around but you know you you have that same process kind of playing out you know economically right now where we have these sugar-indicted economic actors that are now having to come off of this sugar and it won't be pretty, right?

DAREN BLONSKI CFP®: There will be some issues, but it's, you know, regardless of your politics, it's absolutely fundamentally important if you believe in this country and maintaining this country as it is today. And some would argue they don't want that. But if you do believe that we have got to get a hold of our debt is an absolute problem. And that's not a political statement. But that's just a reality, whatever side you're on.

DAREN BLONSKI CFP®: All right. So that's the tenure. So watching that tenure and what that tenure does. And so what you saw when Trump was really getting aggressive with his tariff is this big, huge green candle moving up. And some argue that that's what freaked him out and bested out.

DAREN BLONSKI CFP®: He bested and flew down to Florida and said, look, man, you got to we got to back off on this thing. This is not good. We cannot have a 10-year going as high as it is because that will wreak havoc everywhere.

DANO WEIR: And on this chart, a green candle, meaning going up, is actually bad.

DAREN BLONSKI CFP®: On this chart, correct. You don't want higher rates, right? That means higher rates, higher mortgages. You actually want to see red in this chart. You want to see it go down. But you don't want to go down too fast. And we talk about this a lot. It's not necessarily the direction it's headed. It's how fast it's headed in any direction.

DAREN BLONSKI CFP®: Going back to your point about certainty, going back to Chris's point about certainty, it's the market needs to absorb the information. And if it moves too fast in one way or the other, That's what creates these breaks in the system, right? Economic actors can't adjust if it's moving one way or the other too fast.

CHRIS SIPES CFP®: Yeah, I think like, yes, it matters for the consumer. It means, you know, higher costs for interest rates. But in this context, it matters more as a confidence barometer, a global confidence barometer.

CHRIS SIPES CFP®: Because when the rates sold off like they did, that was the market saying, time out this isn't going to work we're losing confidence and we're losing it very quickly so it's like a panic button when you see interest rates rise that quickly that is a lot of selling pressure in the treasury market to the point where.

DAREN BLONSKI CFP®: You know things can get sloppy quickly when it happens that fast well and no one's really i haven't seen anyone like showing proof of this right?

DAREN BLONSKI CFP®: But there's a lot of speculation last week that when we increased the tariffs on the Chinese they were dumping the treasuries on the market there was also some belief that the Japanese were dumping their treasuries onto the market because they had to stabilize currency and that was really creating the movement up and that's where you know Chris you and i have said this many times like the market is stronger and more powerful than any president and i look to no other mechanism than the markets they keep any individual political actor in line because it only goes so far before it really gets ugly and and it's been historically true at least in recent history that most presidents have lived and died by the economy as Clinton says it's the economic stupid the economy stupid i think was the actual quote so Yeah, interesting week.

DAREN BLONSKI CFP®: I think in general, though, things kind of calmed down a little bit more. I think the market started absorbing the information and adjusting to the new realities that were in this like tariff war, this cold war with China. You know, if you look at historically, all wars start first in currency and they start economically and then some kind of scuffle breaks out. And that's hope for cool heads.

DAREN BLONSKI CFP®: It's hope for calming. It's hoped that it doesn't lead to that because I don't think anyone stands to benefit from an actual skirmish. But that's what you're seeing. When you look at the MAGs, though, so the MAGs are those stocks that are those dominant ones that drove the market higher the last couple of years. And those MAG7s, this is an index ETF that just tracks those. And you can see it.

DAREN BLONSKI CFP®: We had a green move last week, but a lot of volatility with that big green candle there. And then you had that move down this week. So NVIDIA, you know, really coming under pressure again, coming back in under 100.

DAREN BLONSKI CFP®: Now, what's interesting, if you look at the chart of NVIDIA, it's a classic blow-off top chart. It looks exactly like a blow-off top would look, much like Cisco did back in the day.

DAREN BLONSKI CFP®: But what's crazy that i've been thinking a lot about is this idea that the gold chart is actually starting to look like a blow-off top which to me is just interesting brings all kinds of economic macro theory questions to the surface but one theory i've heard floated out there is that the u. s government like i said earlier is going to dump a lot of gold onto the market to crush the you on.

DAREN BLONSKI CFP®: So if we were to really get in a battle with China, if we dumped all our gold onto the market, then that would just destroy their currency. I don't know if that's true.

DANO WEIR: So you're saying that the United States purportedly has a hoard of gold somewhere. Let's say Fort Knox, although some people wonder if it's actually empty. And we've been holding that. It's not for sale. And you're saying, boom, we just dump it out there and say, hey, this is for sale now. And that causes the the price of gold, which we're seeing here very high, to potentially fall, which then could hurt China?

DAREN BLONSKI CFP®: Yeah, you're seeing like a month ago, they were talking a lot about audit all the gold in Fort Knox. And then, you know, Elon was going to stream it live. And then all of a sudden, like that just went away. No one was talking.

DANO WEIR: They don't want to go in there.

DANO WEIR: You don't want to see what's in there.

DAREN BLONSKI CFP®: Said no politician, I want to show that empty room on live stream TV.

DAREN BLONSKI CFP®: But yeah, that's the theory is that purportedly we have a stash of gold and that one of the ways we would keep China at bay would be to sell the gold because China is the biggest gold, I guess, miner manufacturer. Word on the street is they're going out buying tons of gold everywhere.

DAREN BLONSKI CFP®: They're actually buying this slurry gold, which is one of the ways you mine gold is it's this microstopics slurry. And then you refine the slurry into bars and they're out there just filling up ships full of slurry.

DAREN BLONSKI CFP®: So they're one thought. Is that, oh yeah, we'll just dump all our gold onto the market and just crush their currency if they got too out of control. So again, it's all conspiracy. I don't think the world's that simple, right?

DAREN BLONSKI CFP®: But it is an interesting time to really look at what's going on under the hood economically and how much that impacts all these headlines, how much it impacts our day-to-day lives. And let's just hope cool heads prevail here.

DAREN BLONSKI CFP®: Well, I think that's where we're going to leave it with charts this week.

DAREN BLONSKI CFP®: And as always, we'll be back next week to wrap it up and see what gets delivered to us next week.

DANO WEIR: Thank you guys so much for joining today. And thank you for listening either on our podcast feed, which you can find on Apple Podcasts and Spotify. Please subscribe there. Live on our various social channels, including YouTube. So wherever you're listening, please subscribe so you don't miss future episodes of the show.

DANO WEIR: We are Sonoma Wealth Advisors. We're a registered investment advisor in Sonoma, California, across Northern California, a few offices. We work with people around the country. You can learn more about our free wealth analysis.

DANO WEIR: That's right, Darren. I'm hitting the free wealth analysis at sonomawealth.com. Find out how we can provide personalized insights for you, your portfolio, your investments, your family, your plan, and more. So guys, thanks so much for being on the show and we'll see everyone next week.

DAREN BLONSKI CFP®: Take care.

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