Why Tariffs Are Just The Match

DANO WEIR: It's Friday and you are live with Sonoma Wealth Advisors and we are about to go on the market. What happened in the market this week? Was it the tariffs? Was it everything that was already in place anyways and tariffs were just the match? We're going to find out if in a bear market a balanced portfolio makes sense. We've got some new job numbers to look at. There's a spike this week that no one was talking about. And we're going to see if Gold's run is actually done. My name is Dano Weir. I'm joined by Daren Blonski and Chris Sipes. And we're going to hear from them after this.

DANO WEIR: Alrighty. As I said, I'm Dan Weir. I'm the marketing director for Sonoma Wealth Advisors. Daren Blonski, Chris Sipes, co-founders of our firm.

DANO WEIR: And Daren, this is something you've been talking about for a number of weeks, which is that yes, tariffs are a very convenient storyline for why things may be changing in the economy. But you've been saying for weeks that perhaps we've been building the kindling for this fire for a long time.

DAREN BLONSKI CFP®: That's right. I mean, I think we're long in the tooth. We have been long in the tooth economically. We saw a lot of things happening last year where it was really obvious that every trigger and lever that was being pulled or pushed or however you want to phrase it was being utilized. And I think we're finally at that point where, you know, it kind of gets to this point. I imagine like trying to balance a bunch of plates on your hand and your head and your foot and your knee. And then you throw a shock in like the tariffs and it just. Pushes it where it was already headed anyway. Now, that doesn't mean that the current administration won't start doing the same stuff and printing money and stimulating. And we're certainly starting to see signs of life in the market. And we have moved to that exact point we talked about last week, where this is the point of decision, right? So that 61.8 Fibonacci line on the SPY. And this is that point where we tend to see things go back down if they're gonna. If we move through this line. The probabilities are now to the upside that we attack all-time highs, which I know is absolutely shocking that I'm sitting here telling you that we are on the cusp of exploring the idea that the market might be moving to all-time highs. Pretty wild. Just a narrative back in, gosh, just the early part of April was that the world was ending and things were over. In fact, April 7th was the bottom.

DANO WEIR: Well, speaking of the world ending, Chris, you were out on assignment last week and you had this meme in there. We're going two for two, two weeks in a row with this meme, because I love it so much. I wanted to give you an opportunity. I busted this out last week because I loved it so much, but it's appropriate. It's appropriate because April 7th did feel like the meteor was coming towards earth. And, you know, which one are we going to be right now? Are we going to be the dinosaurs? Are we going to be the humans? I mean, who is, you know, we're kind of in that scenario right now where it feels, is it catastrophic?

CHRIS SIPES CFP®: Right. Well, I think this could be one explanation because if you look at the market, basically, it finished up April. I'm talking about the S&P 500. It finished up April down like 1%. So essentially, flat had you looked at the market at the beginning of April, woke up and checked it again at the end of April and just missed the whole narrative of what happened in between for the month, you would have thought nothing really happened. And, and at least that's what the market is saying right now. And not me confused, you know, the, but the market is at least right now is, is basically saying, Hey, these, these tariffs are a non issue. So I don't know if that's because we're all expecting it to get rolled back quickly, you know, expectations around, you know, the exceptions are changing, whatever it is, the market seems to be looking past these tariffs as. Another one of those, no big deal. We've got another two-week panic drop, and then we're back to, as Daren said, all-time highs soon, which could be very confusing, but I wouldn't be surprised if that type of situation could happen. And I've been watching the markets long enough to know When you feel confused and you think the market's wrong, you're probably wrong. The market's probably hitting it correctly for whatever reason. And so I'm going to go ahead and go with the market and assume that the worst is behind us.

DANO WEIR: Well, Chris, what I'm going to do is I'm just going to look to a major market publication and take their advice that, okay, I should just put everything in gold.

CHRIS SIPES CFP®: Well, I put this in here because of the dreaded magazine cover indicator, right? Which is, you know, as soon as you see it on the magazines, it's time to fade it, you know, get out of whatever it is. Because by the time it's on the magazine covers, it's too late. Everybody already knows about it. It's probably going to change. And Dan, you've been on when we've talked about how that happens with the EA Sports covers, right? Yes. So now in fairness, I did not read this article. I'm not a subscriber to Barron's, but I understand the article was actually bearish on gold for what it's worth, but you know, it's on the magazine cover. I'd say anecdotally getting questions about gold in a positive way from clients like, hey, how do I buy gold? Oh, I already have it. I didn't know that. Right. That's great. Wow. Perfect you know like A lot of people are starting to ask about it, which to me is another sign of like, oh boy, maybe we have reached the end of this parabolic rise in gold. Maybe not, but people are starting to talk about it, which was not the case six months ago. Nobody was asking. Nobody was talking about it. Nobody knew that gold was in quite the bull market.

DANO WEIR: And to clarify what Chris is talking about, EA Sports is a video game company. They make a game called Madden named after John Madden. And they put a famous player like the best player of last year on the cover of the game. This past year was actually Christian McCaffrey, the running back for the 49ers. But there's what's called the Madden curse, which is that as soon as you get on that cover and it happened to Christian McCaffrey, you have a terrible year. He blew up his knee, barely played. So Barron's and Madden are very close.

CHRIS SIPES CFP®: Yes yeah so you don't want to end up on a magazine cover, so now this is a very busy chart. And this is from UBS by way of MedFaber and UBS had a, an article on how to, you know, look at a bear market. Now, I think that this, this market's really given us all a huge gift here, at the beginning of May, which is if you were someone that was panicking in April because you felt like. Your portfolio was a little too high speed for you, hey, we're kind of back to where we were at the beginning of April. And so you might think about downshifting, right? If you were someone that was like, boy, this is just too much, maybe you're in a portfolio that's a little too racy for you. And now you've been given the gift of, okay, you can reassess. Let's... Let's reassess and get your portfolio created because i think it's easy to forget especially at the end of a long bull market like we've been in and especially the recent ones that that we've been in where you know we get a drop and it's all fixed within a couple of weeks right whether you're talking Covid whether you're talking this most recent panic guys that's not normal for the market and that's what this is showing that Going back to 1945, so Post-World War II era, US large cap stocks, the average drop in a bear market has been, or sorry, the max drawdown on average, max drawdown was 30%. The one we just went through was what, 17, 18% something around there. So not even close to the average drawdown. Now that's not the worst. There's been much worse. In 2008, we got down 50%. But then you go down there to the bottom, even a 60-40 quote-unquote balanced, I would argue that is not exactly balanced. It's just stocks and nominal bonds. And for most people, it's actually just US stocks and nominal bonds. So it's really not as diversified as you might think. Even there, the average drawdown in a bear market is 18%, which is... Which is barely severe. And then you look at the time to full recovery. On average for stocks, it's been just shy of three years. And for the 60-40 portfolio, it's just shy of two and a half years. And so normally when you see a drop in a portfolio, it can be more severe and it can take longer to get back to even. So like I said, think back a month ago. How are you feeling? Were you panicking?

CHRIS SIPES CFP®: Were you really feeling like I'm taking on way too much risk? Well, now's the time. Now that we're kind of back to even here and you're in a little bit calmer of a headspace, make the changes.

CHRIS SIPES CFP®: So that you're not an excelling in the future all right we got the aii sentiment indicator again bearishness close to 60 so people are still feeling fairly pessimistic what's interesting though is you just didn't see a lot of the selling this time so going back to the dinosaur meme and people were like i'm so bearish i'm just gonna buy right and we've all been kind of trained like Pavlov's dogs that when the market goes down, it's time to buy, right?

CHRIS SIPES CFP®: Because it's not long before the Fed or the government or both come in and bail us all out and bail the market out. And so usually, and at least so far with this sell-off, it's been the same thing. Hey, the sell-off was a buying opportunity.

CHRIS SIPES CFP®: And so people are still very bearish. The CNN Fear and Greed Index is all the way up to 42. That's on how people are actually positioned. So 42, which is still in the fear zone, but way, way off the lows of a four that we, that we measured a few weeks ago. And, it's up from a 35 fear last week.

CHRIS SIPES CFP®: So getting closer to the neutral zone, Bitcoin, we've got up to 67 greed, which is up from 60 last week and bit Bitcoin's been on a bit of a run and, you know, It's, it fulfilled, I think it's positioned this, this sell-off as a telltale of what was happening.

CHRIS SIPES CFP®: It was the first to sell off in, in the panic sale and it was the first to recover as we've come out of it. So again, Bitcoin to me just is showing, showing the tip of the spear when it comes to risk and liquidity and everything else.

DANO WEIR: Hold on, Chris, give him a chance. He's going to unmute his microphone.

DANO WEIR: He's going to say something.

DAREN BLONSKI CFP®: I'm resisting the temptation.

CHRIS SIPES CFP®: Just trying to trigger. Bitcoin.

CHRIS SIPES CFP®: Yeah. Well, he's speaking of triggers, treasuries. This I thought was interesting cause it's completely counter narrative. What we heard just a few weeks ago that, everybody was selling the treasuries. Nobody wanted to hold us debt, et cetera, et cetera, et cetera.

CHRIS SIPES CFP®: And it turns out that according to Bank Of America, the flows to treasuries were epic during that time. The highest inflow that they've seen since March of 23, which I believe was the Silicon Valley bank sell off.

CHRIS SIPES CFP®: So still providing that safe haven status in the storm, which is obviously a good thing to see as an asset allocator.

DANO WEIR: For people who don't know, treasuries, these are bonds?

CHRIS SIPES CFP®: Yes, there's treasury bills, they're short-term, there's bonds, there's notes, medium and longer term, but they're issued by the U. S. Government. So they're a debt of the U. S. Federal government, and they've always been considered a safe haven in the past because of the strength of the U. S.

CHRIS SIPES CFP®: Economy, the strength of the U. S. Military, and our credit rating. Basically, the U. S. Has always paid their debts, and so it's always been a safe haven asset in the past. But there's a lot of chatter about that not being the case just a few weeks ago.

DANO WEIR: So you've got many things on the table, but if we're going to be really general for a lot of our conversations, it seems like some of the players are you've got the market, stocks, you've got bonds, and then you've got, at least for right now, gold.

DANO WEIR: And we had during this April panic, you had stocks down, bonds down, gold up. Now you're seeing gold down a little bit, bonds up, stocks a little bit even. Am I off there or is that kind of how the calculus is kind of balancing?

CHRIS SIPES CFP®: Well, yeah, stocks have been even in the sense that they've come off their lows though dramatically. Basically the day that they paused the tariffs since then, the market has just uh... Down quite the terror And that's, that's both domestic stocks and global. And again, global leading, leading the charge out of that, that bottom.

CHRIS SIPES CFP®: So we might still be seeing that rotation where, you know, the foreign stocks are going to start to cycle in a little bit here. Less than six months into the year, so it's too early to tell, but so far that's been the case. Now, this is where I get confused because with all the tariffs, you know, the structural changes, we're basically, you know, proposing making changes to the global trade system.

CHRIS SIPES CFP®: Obviously, there's all this news about shipping containers not showing up and, you know, all the orders that need to be in before Christmas, you know, for Christmas need to be in now. And that none of those orders are being made and, you know, prohibitive tariffs on China, especially.

CHRIS SIPES CFP®: But yet the market's like, nah, no big deal. Not a problem. Right. And maybe this is why, you know, this is from Torsten Slock at Apollo. And, you know, there's been a few meetings between the administration and leaders of some of the U. S. Large U. S.

CHRIS SIPES CFP®: Companies, which they're probably saying, hey, we're on board for this whole reshoring things to the U. S., but you got to give us some time, man. And 90 days is not going to be long enough. And there's a lot at stake, right? Because if you look at the revenues of the S&P 500 from China are significant.

CHRIS SIPES CFP®: Some of our biggest companies derive a lot of of revenue from China. And even more so, some of them derive a lot of their products from China, Apple probably being the best example of that. And so you get all these articles coming out about, an iPhone is going to cost four grand, right?

CHRIS SIPES CFP®: People are three grand, whatever the number is, it's prohibitively expensive. It's just not going to happen.

CHRIS SIPES CFP®: And so there's a lot of exposure. And I think the U. S. Companies are going to the administration and saying, look, we've got to have a plan that's going to give us more time to adapt to this new structure.

CHRIS SIPES CFP®: And it looks like, according to the market, they're getting what they want. Now, I can't speak for the small companies. There's probably no exemptions for the little companies that don't have lobbying dollars. They don't have stock. Prices that are correlated to people's 401ks and such, they're probably just out of luck. But the larger companies have a lot of pull in terms of their say in what's going to happen moving forward.

DANO WEIR: And just as an example of how pervasive the Chinese influence is, not a political statement, I'm just giving an example. The one that everyone is focusing on as tech. They're focusing on the TVs and they're focusing on the iPhones. I was giving my son a juice box this week, and it's a major known juice brand that all of us drank as kids.

DANO WEIR: And I just happened to see like printed in the most dot matrix font, you know, apples sourced from China. And I was just like, you know, it's so so it is. Not just your television and it's not just your Apple Watch. It is across many, many, many sectors that are being impacted by this.

CHRIS SIPES CFP®: Absolutely. Yeah. It's a very tangled web. Now, we got the durable goods numbers. Now, durable goods, you would think like cars, refrigerators, ovens, things that you buy that are going to cost you quite a bit, but they're going to be durable. There's something you use over many years. It's not your son's juice box.

CHRIS SIPES CFP®: And wow, look at that spike that we got this month. U. S. Durable goods, new orders month over month is at 9.2% compared to 0.83% last month, so less than 1%, and 0.8% last year. It's higher than the long-term average of 0.35%. So that tells you that people were front running getting these goods in prior to the tariffs taking effect.

CHRIS SIPES CFP®: Let's stock up. Let's try to ride this storm out, you know, and hope for some relief on the tariffs before they get there. Now, I was telling Darren that we were looking at getting some air conditioning installed and the HVAC contractor. Just threw it out there. Hey, so, you know, I won't. Well, actually, I shouldn't name the company.

CHRIS SIPES CFP®: I don't want to get sued. But this company that provides. Air conditioning equipment, just raised their prices on pretty much everything 30% due to the tariffs. And I'm like, Hey man, I pay attention to the markets. The tariffs haven't even kicked in yet. What are you talking about? You know, he's like.

DANO WEIR: Hey, you're talking to, I know.

CHRIS SIPES CFP®: Don't you watch my show? I'm offended. Yeah. But look, they, they had already put in place the price increases, which obviously is going to flow to through the contractor, which is obviously going to flow through to me.

CHRIS SIPES CFP®: And you know, at least for us, we were like, well, that doesn't make any sense anymore. I'm not going to pay 30% more.

CHRIS SIPES CFP®: So, you know, it's just, I'm sure there's examples of like that, things like that all through the economy, which this week on, on the animal spirits podcast, they were talking about the whole, did you guys see the Amazon thing where they were going to put a line item for the additional cost of the tariff. So they're like, you're good, cost this. And then there's a line item, tariff cost this, and then your total.

CHRIS SIPES CFP®: And they actually had a great idea. They're like, look, that's probably a smart way to do it because then if the tariffs get removed, they can remove that line item and the price can go back down. Otherwise, you're going to get what you got during COVID, which is all these companies just raising prices, blaming it on supply chains and everything else. Never lowering the prices back down. Right.

DANO WEIR: So the number of times I'll be at a unnamed grocery store and like cheese is on 50% sale and I'll go, Oh, the old price. Nice. Yes.

CHRIS SIPES CFP®: Yes. Yeah. So to your point, Dan, all the, all the things that would be affected. And again, why I'm saying, Hey, the market must be saying this is not going to happen, at least not in the way proposed because look at.

CHRIS SIPES CFP®: You know these everyday items that we all use and buy the percentage of the of that item that is made or imported from China in some way right and so if you add 150 to that cost or whatever the tariff amount is going to be i mean you're you're it's it's a massive tax it's going to be a massive price increase or you're just not going to have the goods at all you know, that's the other, the other thing, if it cannot be produced here, then, you know, how's that going to work?

CHRIS SIPES CFP®: So the fact that this is so impactful and yet the market's like no big deal, hopefully I'm not beating a dead horse here, but it's like, okay, something's, something's not adding up, right? Something is not adding up. Somebody in the markets or money, many people in the markets must know what's going on behind the scenes.

CHRIS SIPES CFP®: To say that, hey, this is just not the storm. It's not going to hit us the way it looks like.

CHRIS SIPES CFP®: And I've got just that chart, Chris.

DAREN BLONSKI CFP®: I was saving it, so it's coming. I'll tell you in just a minute, buddy.

CHRIS SIPES CFP®: Good, good, good.

CHRIS SIPES CFP®: Now, it's not just us in the U. S. Or we Americans that have to worry about the trading partner status, but China is also a trading partner for many. Countries.

CHRIS SIPES CFP®: And this is from Kevin Gordon at Schwab. Of course, this chart's from the Financial Times, but he says, of the countries in this chart, 14 of the countries have larger exposure to China versus the US when it comes to trade, meaning that they do more trade with China than they do with us.

CHRIS SIPES CFP®: And so if there's going to be hardball played, you'd think there's some leverage there as well. I've got... It's mommy and daddy are fighting again. I've got to pick a side. I've got to pick mom or dad's side here. Well, dad's the one that gives me all the money and so I'm on your side with him.

CHRIS SIPES CFP®: I get all the toys and money from dad, so I guess I'm going with dad.

DANO WEIR: The U. S. Sends me bombs, but China sends me stuff from Timu. Which one matters more in my country?

CHRIS SIPES CFP®: Yeah.

CHRIS SIPES CFP®: It's a complex trading system, and it's not as simple, of course, as what it might sound to implement tariffs across the board. Now, what's the two-year treasury saying about interest rates? The two-year treasury in this chart is the purple line and then you've got the Fed funds rate in orange and you can see that they tend to follow one another.

CHRIS SIPES CFP®: And there's a lot of market commentators that would say, hey, we don't even really need a central bank to set interest rates. The Fed funds rate, they could just follow the two-year treasury.

CHRIS SIPES CFP®: And that's the market's best guess of short-term interest rates and what it should be. And so you can see that we're a little tight now at 3.6 versus 4.5 on the Fed funds. And so would not be surprised to see a drop on the Fed funds rate. And because, you know, I'm sure that the Fed looks at this type of information.

CHRIS SIPES CFP®: Although after today's jobs numbers and such, it looks like there's three cuts priced into the market for this year instead of four. So fewer cuts. But keep an eye on this short term rate versus the Fed funds to kind of know where they're going with interest rates, most likely.

CHRIS SIPES CFP®: Further signs of the markets calming down. This is the spread between. High yield bonds or think, you know, companies with poor credit, the, the, the cost that they have to pay to borrow money versus a treasury, which is the U S government.

CHRIS SIPES CFP®: And, again, that's considered, credit risk free for the U S government. So basically what, what does, what does the, what's the extra costs for a company that does not have good credit is a good way to say it. And that started the spike. But has come off of its highs.

CHRIS SIPES CFP®: Just like the volatility index, we got back down to like 22 on the VIX today. We haven't closed yet on the market, so we'll see what it ends up at. But really these indicators of stress and panic have all but subsided at this point when you're looking at the fixed income market or the volatility index.

CHRIS SIPES CFP®: And here's why it matters for things like mortgages. Because, you know, basically all credit is kind of priced off of that, that treasury rate, that, that short-term Fed rate. That's, that's sort of like, think of that as the hurdle rate.

CHRIS SIPES CFP®: Because if you can lend your money to them and, you know, know, you're going to get your money back at a certain rate, then you're going to want a higher compensation to, to lend your money to anybody else, basically. Including mortgages. And on top of that, you have a larger spread on mortgages right now than you have historically.

CHRIS SIPES CFP®: You can see we kind of averaged, I would say during most of the 2000s, we'd average somewhere around like one and a half percent, meaning that your mortgage rate would be about one and a half percent above the 10-year treasury. But now that number is more like two and a half percent.

CHRIS SIPES CFP®: And so the kind of the crazier the markets are, the more, the higher that spread, the more mortgage money is going to cost you if you're going to go borrow to buy a house.

DANO WEIR: So they're basically doing less loans. So they're trying to make more per loan.

CHRIS SIPES CFP®: That's one way to look at it. Yeah. Yeah. You know, I've heard from clients this week that there's several institutions that are not even offering home equity lines. Anymore. And then, you know, the ones that are, are requesting that you go ahead and make an initial borrow.

CHRIS SIPES CFP®: You know, they're, they're definitely not being as aggressive as they were previously. Which I guess makes sense with houses at all time, I valuations versus income and such. They're probably just not wanting to take on a ton of, ton of risk at that level. But, we got the unemployment rate numbers today.

CHRIS SIPES CFP®: No change. We basically stayed the same. And I think this is kind of counter-narrative as well, given the pessimism of people. A lot of people saying they don't think that the job prospects are as good six months from now as they are today. They're worried about losing their job. We've got all the supposed cuts to the federal government, which we'll see here in a second. I think that's also a fallacy.

CHRIS SIPES CFP®: The underlying economy, at least so far in the statistical numbers, are really not showing any of those signs of stress yet.

CHRIS SIPES CFP®: Going to the point of how much is going to actually be cut by DOGE, if you look at the betting markets, this is showing that right now the highest probability of cuts from DOGE is going to be less than $50 billion.

CHRIS SIPES CFP®: So that's the betting market's opinion of what will end up being cut. Obviously, a far cry from the... The $2 trillion in cuts that were thought when we started the year. So don't think that's going to happen. I'd be very, very surprised, and it looks like the betting markets agree with that.

DANO WEIR: Does this mean I'm not getting my $5,000 DOGE dividend? I was promised a dividend.

CHRIS SIPES CFP®: Yeah. I guess not.

CHRIS SIPES CFP®: I wouldn't take that to your payday lender yet.

CHRIS SIPES CFP®: Go ahead and hold off there, Dano.

CHRIS SIPES CFP®: Now, interesting, the one-year change in active housing inventory for sale. So darker means more, more inventories coming up.

CHRIS SIPES CFP®: And so this is from Resi Club. It goes by Resi Club. So why does this matter? Well, it matters for housing prices. We talked a few weeks ago about Zillow. Saying that they expect about a 1% drop nationwide in home prices this year. And of course, real estate's very local.

CHRIS SIPES CFP®: So that's going to be more so in certain areas, I would guess, more so in these darker areas where there's more inventory, the old supply and demand, the more supply that you have, the lower the price. So a lot of the states that had some of the highest home price appreciation.

CHRIS SIPES CFP®: Are showing up here in the little darker a little bit darker area but you notice not much of the the map is light so it seems like there's there's finally some loosening up happening in the in the residential real estate market which is also reflected here in the month supply now the orange line is the new homes so new construction versus existing home supply in the purple.

CHRIS SIPES CFP®: Now the purple, the numbers only go back to, I think, 98. So we don't have as long of a data set. But you'll notice that up until the pandemic, those months supply really kind of mirrored one another.

CHRIS SIPES CFP®: And then with the changes that we got in COVID and the low, low interest rates and a lot of homeowners locked in. Probably generational lows in mortgages, that just locked up, that absolutely locked up the existing home market.

CHRIS SIPES CFP®: And then you see the separation go from there where the new homes, we've got seven months supply, which has actually come down quite a bit off of its highs, while the existing homes are starting to loosen up just a bit, still low relative to the historical values, but getting closer to normal. Now, from what I understand, under three months is very tight supply, likely to lead to higher prices.

CHRIS SIPES CFP®: Between three and nine months is kind of stasis in pricing. And then over that nine months is considered to be excess supply and will likely lead to lower prices. So when you take kind of an average of these two. You're probably in the hay prices are going to be pretty flat and stable range based on this supply projection.

CHRIS SIPES CFP®: And then this is new houses for sale, median number of months on the market. So how long is it taking to sell those new houses? Again, ticked up a bit from that extreme stress that we saw coming out of COVID. But really just returning to, I would say it would be pretty normal levels in terms of how long it takes to sell one of those properties.

CHRIS SIPES CFP®: So I would say look for more stable home prices over the next year, flat to maybe down just a little bit based on the supply numbers here, which might be welcome news to those that are thinking about trying to get into a home, despite the fact that the... The prices are still very high relative to incomes.

DANO WEIR: And I think the so what here when it comes to the housing market and on our other podcast, It's All Money actually just had this week had a sit down with six realtors from Sonoma, Napa, Marin County, and you've got interest rates, you've got landlord restrictions in California, you've got a lot of things which ultimately are slowing the velocity. That's something that Daren's talked a lot about.

DANO WEIR: So that Maybe it's not as flippity flop, swippity swap. I put in this, I flipped a house in two weeks and made X, Y, and Z. It's a little bit more about, you know, I actually wanting the residence instead of seeing it as just some sort of investment, some sort of flip, some sort of, you know. Quick buck, making it more difficult to get in and out of houses, perhaps providing some more stability is how I'm reading it.

CHRIS SIPES CFP®: Yeah, I think so. I think if you're going into it as an investment and the price appreciation is the biggest part of your equation, you might be disappointed if you're buying at this point.

CHRIS SIPES CFP®: I would put it that way.

DANO WEIR: Daren, it's your time to shine, my friend. What do you got?

CHRIS SIPES CFP®: You're on mute. I think you're on mute, Daren.

DAREN BLONSKI CFP®: Yeah. All right. So I think we have to pull up this chart, Chris, because regardless of whatever else is being said out there and what's going on politically or economically, you say, well, why is the market going up and why do things seem to be looking better? Well, guess what? Our good old friend liquidity is back.

CHRIS SIPES CFP®: Looks like a Bitcoin chart.

DAREN BLONSKI CFP®: It does look like a Bitcoin chart. Sadly, this is just M2. And what is M2? Well, it's the money supply. So that's how much dollars are floating around out there. And you can see we've ticked up. So we started off today by saying, you know, why tariffs are just a match? Well, what was really happening going into...

DAREN BLONSKI CFP®: The basically end of last year is liquidity was drying up. It was being pulled out of the system, and now liquidity is coming back into the system. And so naturally, you're seeing the market respond. So that's one argument you could make for why the market's doing what it's doing, regardless of what's going on with the tariffs.

DAREN BLONSKI CFP®: And I think that's an important indicator when it comes to understanding market dynamics and what's happening out there. With all that being said, we've had a pretty nice green environment in the markets. This is one week. Performance. It's been a good week in the markets. We've had all our big dogs actually doing quite well, Microsoft, Nvidia, Amazon, Google, Meta.

DAREN BLONSKI CFP®: Apple is struggling along a little bit here, but all in all, it's a positive week for the S&P 500, which is the largest US-based stocks. When we look at this in a chart, we take a look a little deeper under the hood. So this is a very, very messy chart. So let me just... Start by cleaning it up and then we'll add some complexity to it as we go here.

DAREN BLONSKI CFP®: Because I think if we have less complexity, then it'll make some more sense. So what you're looking at at the moment is the S&P 500. And the S&P 500 represents the largest 500 US-based stocks. Each one of these candlesticks, we call them, represents price movement during that period of time. We're currently looking at the daily chart, right? And so this is each day.

DAREN BLONSKI CFP®: So this is generally 6.30 a. m. Pacific to 1 o'clock Pacific. And what you can see here is that this was the bottom right here on April 7th. And we've bounced all the way up. And now we're at that point where I talked about last week. Like this is the point. This is the point where it's either going to roll over and go down.

DAREN BLONSKI CFP®: So magically, we're going to get some really negative news and the market will say, oh, that's the reason why we're going to roll over right here and go back down. Or we really need to start thinking about all time new highs. We are only 7, 7, almost 8%, 7.82% off of the all time high right now. So we're pretty close to we can move there very quickly. As you've seen, we've moved quickly.

DAREN BLONSKI CFP®: But now that move is over. It's either over or we're on to all-time new highs more likely. If we confirm and we close out the market here in 14 minutes above this level and it finishes strong, that's looking good for us going into next week. Now, there is a lot of resistance right here, right along this 575, call it, change on the SPY chart.

DAREN BLONSKI CFP®: And that's going to be resistance too. On this market. But I think odds are getting more and more favor that we're actually going to take a run at the all-time high. Now, if we do take a run at the all-time high, we're going to have to contend with 590 in the SPY. So maybe you see something like this and it kind of slowly trades up and then here and then.

DAREN BLONSKI CFP®: Trades along here and builds up, then maybe goes up. I don't think it's going to happen immediately. There'll be a lot of resistance and people taking profits off of this move here, if that were to happen. But it's something that's now on the table, squarely on the table. And what I would expect, if this is not it, we're going to see some type of event right here next week. It'll be some, I don't know, you make it up.

DAREN BLONSKI CFP®: Pakistan bombs India or India bonds Pakistan. And then the market goes, oh, that's the reason why the... We're going to go down. But really, it's just a really important technical level. And so the buyers start getting exhausted and the sellers step in. Where would support be? Well, right down here. I mean, we could do something like this too, very easily, and go retest this support range, which is somewhere in the 540 area.

DAREN BLONSKI CFP®: So I don't think it's over yet by any means, but we are seeing some thawing of the tariff battle happening. Now, I have this big red line on here just to overemphasize it for everyone out there, but that's really been the support line we've been working through. We tested it. We moved back up. When we look at this on a monthly chart, it's a little more...

DAREN BLONSKI CFP®: Let me get rid of these fib lines here. But when we look at it on the monthly chart, I mean, that bottom handle to me says this month, or I guess we're two days into May, right? In April, it sold all the way down to $482 and then went right back up. And that tells you there's a lot of buyers stepping in there. It tells you there's a lot of support here.

DAREN BLONSKI CFP®: It tells you a lot of support at this $481 that ended up being on the SPY chart kind of support area. When you get these long candle wicks, the market likes to work back to test them eventually. But the fact that that got bought up so quickly, I think you need to be really careful about betting against this market at this juncture.

DAREN BLONSKI CFP®: Because The structure of that market very much tells me the uptrend is still intact. And we just had a quick little correction. And here we go again. Now, saying that, that doesn't mean that we might not enter into some type of recession, right?

DAREN BLONSKI CFP®: And certainly oil, I want to talk about, is screaming at us saying, hey, something's not right here. We talked about this whole area going into the end of the year, where the supply and demand was getting tighter and tighter, and then it broke.

DAREN BLONSKI CFP®: Down and we saw that broke down and now we're going to close this week out below this really important what was support level is becoming resistance so i think it looks more to me like oil's headed down i noticed that Saudi arabia has cut their oil production quite significantly trying to hold up the price at 58 if we do enter a recession oil is one of those things that goes down because oil is in everything that we consume as Americans and as a general public around the world.

DAREN BLONSKI CFP®: It's a critical, critical infrastructure and or product derivative. It's a core product that has many derivatives.

DANO WEIR: Daren, this is counterintuitive to me as the average person who, if I'm just casually following the world, I know that Donald Trump gets elected president. Donald Trump has said he wants to drill baby drill, and he's more about oil than he would be about green initiatives. It seems like oil would be doing extremely well, and I should have bought it a month ago. So how does that how is that narrative wrong?

DAREN BLONSKI CFP®: Well, we actually talked exactly about this right at November 8th, right around that time. And we talked about how the you know, this idea that, oh, Trump won. So therefore, I should buy a bunch of oil and how wrong that could be. And the reason for that is if you have regulatory structures that are becoming more and more less regulated, which is what we've seen so far.

DAREN BLONSKI CFP®: If we have a pro-business environment, it's a supply and demand issue. All of a sudden, it's a lot easier to get supply coming out of the ground, for one. And then second, I think you've certainly seen some thawing-ish in dealing with Russia. It doesn't quite seem to have the powder keg that it had.

DAREN BLONSKI CFP®: And if oil coming out of Russia gets opened up to the world, that puts more supply. The interesting thing that... I think gave the market some pause this week is that Trump came out and said, look, if any of you are buying any of Iranians oil, we're going to tariff you to the moon. But it kind of fell on deaf ears because China is one of the biggest consumers of Iran, Iranian oil.

DAREN BLONSKI CFP®: So what are you going to tariff them more like? And we're seeing the fine in that tariff battle happen. We're certainly seeing concessions. But I think what this speaks to overall is that you have a market that is well overdue for a recession. If we look at our, not necessarily well overdue, because I don't think we can be overdue for a recession, except that recessions are a normal part of the market behavior.

DAREN BLONSKI CFP®: And I think... The policymakers have tried to remove that from the market, but I don't know that that's a necessarily healthy thing, right? You think about in a garden, right? If you have plants and they need to go into a period of dormancy, if you're growing Apple trees, speaking of apples, because you talked about apples earlier, and I have lots of Apple trees on my property.

DAREN BLONSKI CFP®: And so I grow apples and they need to have a certain number of months and days where they're actually in dormancy, right we're a cold dormancy to really do well. And the economy is not really much different.

DAREN BLONSKI CFP®: Like we, from a health perspective, need that dormancy and there comes and goes these seasons. And we haven't allowed those seasons to really happen for a while through various economic triggers and buttons to put, we've pushed. But this whole yield curve that has happened where we had this inversion of the yield and you can see below this green line is called an inversion.

DAREN BLONSKI CFP®: And every other time we've had this massive inversion like this, and then the reinversion happened, we've entered into a recession. So I'm in the account that we're probably going to hit some type of recession. I don't know if it's depression error or what it is, but the yield curve is telling me just a steepening in the yield curve where that always precedes a recession and has historically.

DAREN BLONSKI CFP®: So I don't know why this time would be different. With oil going down, with that happening. I think that's more likely. Now, that doesn't necessarily mean the stock market's going to go down, right? Because the powers that be can print money, print, baby, print. And they just keep printing and pushing it along, right?

DAREN BLONSKI CFP®: We certainly saw that during COVID. So you have to be really careful. One thing we're keeping an eye on, though, is this 10-year government bond. And you can see we found support right here on this end line last month. And then we're up here, kind of elevated right now, I would say. This is looking like what's called a bear flag, right?

DAREN BLONSKI CFP®: So it looks to me like it's getting ready to go higher, that we're going to see higher interest rates, not lower interest rates. And this presents a particular quagmire that the Federal Reserve and U. S. Government's in is we've seen these cracks in the dam of a potential slowing economy. And yet they can't really start lowering rates because inflation, because the tariffs are technically more inflationary.

DAREN BLONSKI CFP®: I realize there's a lot of debate on that issue. But if they lower rates down, then we enter and we have a, we have raising prices, but we also have a potential recession. We call it stagflation, right? Where, and we had that GDP number. It came out earlier in the week, said, oh, wait, things aren't as good as we thought they were.

DAREN BLONSKI CFP®: And we still have this, you know, rat in the Python analogy of like everyone trying to pre-buy ahead of the tariffs like we saw. And so once that's the binds done, then what, right? So. My basic look on things is we come into summertime and we kind of start seeing things slow down more. And I think things might get kind of weak going into September.

DAREN BLONSKI CFP®: And then I think October, we're going to see a lot of stimulus coming out. We're going to see the Trump administration getting ready for the reelection and the Democrats obviously trying to undermine that. But they only really have five more months to really kind of get things together. Before they got to go back on the reelection campaign.

DAREN BLONSKI CFP®: And I think then they're going to want to stimulate the economy. Now let's talk about gold because you mentioned gold earlier. And one of the things I've always in awe of is the serendipity of how the charts move and they turn around at very specific times that you can kind of see coming.

DAREN BLONSKI CFP®: And at the same time, it makes perfect sense when they turn around, where they turn around and then magically some piece of news gets extrapolated and attached to that. And we talked about this $3,500 being the top a few weeks ago. And sure enough, for last month, that was the top. And we've seen a sell-off in gold ever since.

DAREN BLONSKI CFP®: Now, you could also argue that the reason gold's selling off is because there's been a thawing of relational dynamics when it comes to the tariffs and China and U. S. Getting along and realizing, oh, yeah, we're all buddies. And I mean At the end of the day, the politicians only go as long as they can. And I think the bond markets this time really started screaming in that, put Trump back in his place.

DAREN BLONSKI CFP®: And the market is an incredible, you know, if you don't like Trump, you love the market. So the market will keep him in place. If you like Trump, then you like the market too, because he wants to stimulate the market, right? It was funny this week how Trump came out and said, oh, this is the Biden market. Last month, it was like, oh, this is the Trump market.

DAREN BLONSKI CFP®: Politicians like to use it. And that's not pointing fingers at Trump in particular. He's particularly boisterous about it. But every single politician says they do what the market does.

DAREN BLONSKI CFP®: And where Trump is right, he stated this week, is that The politicians inherit the economy and the market they get. And their political lifeblood is in some ways just a random luck occurrence. Because the markets are going to do what the markets are going to do, regardless of what lunatic we have trying to run this country.

DAREN BLONSKI CFP®: Whether you think that's Biden or Trump. That's not pointing in anyone's direction.

DAREN BLONSKI CFP®: But like Chris said earlier, Bitcoin has really been the front tip of the spear on risk, right? We've seen it that way. It's performed that way.

DAREN BLONSKI CFP®: Came down first and now it's bouncing and we're seeing that move pretty strongly we're seeing lots of strategic Bitcoin reserves getting added i believe Arizona this week just voted to have a strategic Bitcoin reserve we're seeing lots more corporations come on board and put some of their treasuries in Bitcoin so you know i know i know Bitcoin got kind of weaponized politically right where it used to be this very liberal kind of like cyberpunk thing and then in recent last six months it got kind of like pulled in by the Republican Party and Trump's group and so now like people who flavor more on the liberal side tend to push back against you and say oh no this is not good blah blah blah but you know i'll just say again like the the market doesn't care about any of our politics right like it just doesn't and anytime we try to project our politics onto the markets onto any type of asset, we're making a royal mistake on our portfolio.

DAREN BLONSKI CFP®: And that's just the reality of it. And that's where it becomes so difficult to run programs like ESG or environmental social governance is that the market is just much bigger than any of our political beliefs. And I think we're learning that as Americans, right? That the world is much bigger than any of our stances on anything. And there's a lot of people with a lot of different opinions out there.

DAREN BLONSKI CFP®: And the market I look at it as this great aggregator of opinion. It brings all the opinions that are existent in the ethosphere together and then creates a price. And that's why I follow price versus trying to get too attached to whatever fundamental drivers out there. Because at the end of the day, price does what price does and the news follows. And that's how it works.

DAREN BLONSKI CFP®: And so we're seeing Bitcoin move up and we're getting to the point now, I think 99 is going to be resistance. If we break through 99, I think we attack all-time new highs. I think what we tend to see is these periods of time when they break out, it really breaks out. And if you go back over weeks and you can see where it will kind of trade sideways and then it just breaks out.

DAREN BLONSKI CFP®: So if we break out here, hold on to your seatbelt, folks, because it's going to rip. It goes back into $100,000 per Bitcoin. The thing is to remember with Bitcoin is it's not like any other asset. There's a fixed supply. There's only 21 million. That's it. So the dynamics of it change really quickly. Whereas if Apple's getting bought up, bought up, they can split the shares. They can put more shares out there.

DAREN BLONSKI CFP®: There's lots of things they can do to keep price in line. That's not true with Bitcoin. That's not true with gold. There is a fixed supply of gold and there is a fixed supply of Bitcoin. Like it, hate it. I think it's now hit. The point in life where it's a reality for all of us and an accepted asset. Well, I think we're going to leave it all there for this week. Thanks for joining us. And we'll be back next week.

DANO WEIR: Thank you so much. Yeah. Thank you so much for checking out the show. I hope you were able to get some perspective on many different factors in both the market and the economy, which were already going anyways, whether it was the inversion of the yield curve or perhaps the activity of oil.

DANO WEIR: There were already indicators that perhaps an economic slowdown was already upon us, and tariffs are just the match. Just the thing to kick off and just the narrative to say, well, here's the reason why. And the goal of our show is to look at the data objectively and try to present what we're seeing and let you draw your own conclusions.

DANO WEIR: So thank you so much for checking out the show. We are Sonoma Wealth Advisors. You can learn more about us at sonomowealth.com. Take our free wealth analysis. Wherever you're listening. Right now, whether it's on YouTube, whether it's on Apple Podcasts or Spotify, you can subscribe and that way you won't miss future episodes. Thanks so much for checking out On The Mark.

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