Is Stagflation Coming? What the Markets Are Telling Us Right Now

DANO WEIR: We're live and we're about to go on the market. Welcome to On The Markets From Fermata Advisors and our private wealth arm, Sonoma Wealth Advisors. My name is Dano Weir. I'm the marketing director, joined shortly by Chris Sipes, our managing principal. And we're asking the question this Friday, is stagflation coming? And what the markets are telling us right now.

DANO WEIR: This week we'll be looking at the Strait Of Hormuz. It seems as available as a pop-up food truck right now. Here, it's there, it's open, it's closed. In the event of closure, how does the U. S. Stack up when it comes to oil reserves?

DANO WEIR: How the K-shaped economy can result in consumer sentiment at an all-time low while purchases are at an all-time high. Those two go hand in hand. What price action in Bitcoin and gold could be signaling about this quarter's market potential? And the portfolio tracking that's on pace for its greatest year since 1933. Let's start the show.

SPEAKER 2: The stock market, the economy, your money. What's the latest and what could be next?

SPEAKER 2: Find out now with Fermata On The Markets. Straightforward financial market updates for the brands of Fermata Advisors, Sonoma Wealth Advisors. Fermata 401k and Fermata tax on the markets starts now.

DANO WEIR: He's our one of our managing principals, Chris Sipes. And Chris, I actually track a lot of different things when it comes to the show, including what are trends and what are things that people are talking about. And actually several search analytics platforms are seeing a bump this week in the term stagflation.

DANO WEIR: And we're seeing that in some of our charts as well. So that's the question. Is stagflation coming or is it already here? So since it's such a big part of the episode, what is stagflation for people who don't know?

CHRIS SIPES CFP®: It's kind of one of those things sometimes I tell my kids, it's, you know it when you see it, right? They'll ask me, Dad, what is this? And it's actually kind of hard to describe some things, but it traditionally is thought of as high inflation and stagnant or low growth. So...

CHRIS SIPES CFP®: Think the era that's most commonly thought of for stagflation would be the 70s. And of course, we're nowhere near that right now. But with everything that's going on in the world, I guess that is a worry that is out there. Although if you look at the markets right now, you wouldn't guess that.

DANO WEIR: And something to consider sometimes another way to look at it is to look at the opposite of it or a different version. I think a lot about 2008, where you had no economic growth, you had economic implosion. And for the first time in my life, not everything, but some things went down in price, right?

DANO WEIR: Like houses went down in price. So that's not stagflation. So stagflation would be you've got this economic bombshell. Things are bad economically and house prices. Imagine 2008, but house prices are going up basically.

CHRIS SIPES CFP®: Yeah, that's deflation, which two of the biggest financial crises in US history, being the Great Depression and the Great Financial Crisis, were both deflationary events. And that's because they were credit collapses.

CHRIS SIPES CFP®: We had too much debt built up in the system. And when that credit collapsed, like you said, the prices of everything. Came down. That was deflation.

CHRIS SIPES CFP®: So we talk all the time about inflation, but for the Fed and the monetary authorities, they're trying to thread the needle of that happy medium where you don't have too much inflation, but you also don't get deflation started because either one of them can be bad, especially because they can feed on themselves in a flywheel effect.

CHRIS SIPES CFP®: Once it gets started that deflation can get out of hand and same thing with inflation. All right. Did you do this? Did you do this on Google maps? I wish I could take credit.

CHRIS SIPES CFP®: I wish I could take credit, but this, this meme was pretty funny where they, they showed the Strait Of Hormuz is open on a East Coast market hours, right? So those are the, those are the hours that the East, East Coast, would have, would have the stock market and bond markets open.

CHRIS SIPES CFP®: And it shows the Strait Of Hormuz is also open during those times. So. Wouldn't be surprised to see it closing about right now for the weekend. And then of course it'll be open by Monday.

DANO WEIR: So if you're listening to our podcast audio, somebody on Google maps created the Strait Of Hormuz as its own like business and then gave it business hours. So that's just, that's unfortunately all too true.

CHRIS SIPES CFP®: That's, that's some financial, that's some hardcore financial nerd, you know?

DANO WEIR: That's right.

CHRIS SIPES CFP®: Jokes, comedy there. Okay. So look, the market keeps going up every day. Like if you weren't, if you, if you weren't paying attention to any headlines, you wouldn't guess there's anything wrong at this point. Why? Well, one reason could be, that the world was fairly prepared for an energy shock apparently.

CHRIS SIPES CFP®: So in listening to a lot of the, experts in the energy field, We came into this with an oversupply. There was kind of a global glut of oil and energy resources coming into this. So there was some slack in the system when this war started. But not only that, look at this from the EIA, the Energy Institute.

CHRIS SIPES CFP®: They're showing the strategic crude oil inventory. So remember the SPR that was all, you know. The political hot football during the Biden administration, when they were selling down on that during the Ukraine, invasion.

CHRIS SIPES CFP®: And, and, and, you know, we, we've consistently been looking at the U S is SPR and we have not really considered some of these other countries, but, this from Javier Blas, by way of the EIA. And he says the size of the Chinese strategic Petroleum Reserve is mind-blowing. It's larger than the U. S.

CHRIS SIPES CFP®: Japan and all of Western Europe combined. So, you know, supposedly this closing of the Strait Of Hormuz was supposed to have the biggest impact on China, and some of the, the other Asian countries that are more reliant on Middle Eastern oil.

CHRIS SIPES CFP®: But, at least based on these reserves, they, they, they had their homework finished. This is that, that kid that He comes to school with his homework done, right? And- And they came into this, you know, fully prepared for this situation.

CHRIS SIPES CFP®: So it's, you know, I think the global markets are basically looking at it as hopefully a short term event. It'll be over soon. And most of these countries came into it with plenty of supply and reserves that it's not going to impact them. I mean, that's what the market's reflecting at this point, seems like.

SPEAKER 2: This is according to China, though, just to keep.

DANO WEIR: Everything with a green. Who vetted this list? Did China say that they've got the most?

CHRIS SIPES CFP®: That's a good question. I am not sure. I do know that at least if you look at the reaction of the emerging markets indices, which we'll look at towards the end of the show, the market's saying no impact. If anything, the emerging markets have done extremely well, better than... The rest of the world in this crisis, energy crisis.

DANO WEIR: And I forgot to say right off the top, Daren traveling this week and will return to the show next week, although we know that he listens when he's on the move. So hi, Daren. Chris, what's investor sentiment look like this week?

CHRIS SIPES CFP®: Big jump in bullishness this week in the AAII sentiment indicators. We went from 31 to 46 in one week. This, of course, was released on Thursday.

CHRIS SIPES CFP®: And that was for the week ending the 22nd.

CHRIS SIPES CFP®: Bullishness jumped based on the agreements, I guess, going through the system. A lot of bullishness. The bearishness dropped dramatically as well as the neutral, folks feeling neutral. So big jump in bullish sentiment. Now the CNN fear and greed index, that was...

CHRIS SIPES CFP®: Pretty much unchanged this week 66 versus 67 last week those are both greed readings there's one level higher than that extreme greed and then you got Bitcoin at 39 we got over 78 000 this week which was quite the jump in Bitcoin so we we ended the week at 39 fear last week it was a 21 extreme fear and you'll remember what a month month and a half ago we were in the mid-single digits on Bitcoin sentiment.

CHRIS SIPES CFP®: So that has definitely followed the price structure. Now, a couple of topics that we don't have in the deck, but that are big, I think, topics to address this week is, one, we learned today that the DOJ is dropping their case against Jerome Powell. And so it looks like we had the Warsh hearings on... I think it was Wednesday.

CHRIS SIPES CFP®: And he was being held up by... The senator that's skipping my mind at the moment, I think it was Tommy something. And anyway, the senator was holding up his nomination to the Fed chair in May until the White House dropped their their case against Jerome Powell, or I guess the DOJ. Same thing.

CHRIS SIPES CFP®: And so that was that happened today where they they dropped that case against Jerome Powell. So But funny enough, Polly Market still doesn't have Warsh being sworn in in time. There's only like a 30-some percent chance, I believe, that he gets sworn in on time in May. So there's some potential soap opera fireworks coming here in a few weeks at the Fed. That would be interesting.

DANO WEIR: What happens if he doesn't get sworn in on time?

CHRIS SIPES CFP®: I am not sure. I saw one theory today that Trump would put in. A temporary chair until he is sworn in.

CHRIS SIPES CFP®: I don't know what that means, if that's part of the strategy.

CHRIS SIPES CFP®: Powell has talked about staying on at the Fed as a governor, which would be, I think there's only one other chair that's ever done that before. And so anyway, it's pretty spicy for anybody that likes to follow those types of things in the financial markets. But the market didn't have the greatest reaction to the Warsh hearings this week.

CHRIS SIPES CFP®: He was talking about shrinking the balance sheet and such. And we got a little sell off in the markets on Wednesday when that happened. So, I mean, I think you probably don't listen to much of anything of what they're actually saying in these hearings. You know, once they get in, they're going to do what they're going to do.

CHRIS SIPES CFP®: And it seems like the market just bounced back right after those hearings were over. So, so that was one topic. The other topic, I don't know if you saw this, Dan, we talk all of the time about insider trading and the better betting markets and how, you know, all through this war. Now, did you see, the one, the Maduro, arrest?

DANO WEIR: Yes, I did. Yes, I did. I almost included it in the slide deck because I was just so not even beside myself because I'm actually not even surprised.

CHRIS SIPES CFP®: Do you feel like you know enough about it to explain what happened to people that haven't seen what happened?

DANO WEIR: Yeah, I don't have it sourced here for a slide, so please, this is just extemporaneous. But essentially, a Black Ops member who was involved in the Maduro extraction placed several bets on Polymarket like two weeks before the extraction. As to whether Maduro would or wouldn't be in charge by the end of like June or something and walked with 400 grand. And now they have rung him up on federal charges for it.

DANO WEIR: And it just like causes like a mind-blowing number of questions to be asked because that is what Congress does all the time.

CHRIS SIPES CFP®: Like all the time.

DANO WEIR: So you have people, you have people who are like, wow, this is totally unethical. And maybe first off, I don't even, is it illegal? Like how, under what federal law is it illegal that you like where this isn't the NBA, this is life, you know? So how is this illegal? One. And then two people are saying, well, Hey, you're going to arrest this guy.

DANO WEIR: Why don't you go arrest the entire Senate. Like, you know, so people are saying it would have been okay. It's just, it's, it just, it raises a very interesting set of questions and in a really weird reality where I feel like I'm living in back to the future too, like all the time. So, yes, I did see that story this week and it was very, intriguing.

CHRIS SIPES CFP®: I'm not, you know, like we've talked about, I'm not, I'm not sure how I feel about all the gambling. I'm not a gambler myself. I don't. I had a brief stint with it in college and realized it's very easy to lose a lot of money. And I hate losing money. So it was, it's not fun for me. I, you know, I'm not the type who's going to go and, and do it.

CHRIS SIPES CFP®: But, yeah, it's kind of in this situation. I mean, it's not, first off, the guy's going to have his neck on the line. He, he, you know, bet that they were going to do it. You know, I, I don't know, man. It's, it doesn't. It doesn't seem right that, that they're coming down that hard on, on a service member, you know.

DANO WEIR: It doesn't seem right that he did it and it doesn't seem right that they're doing this. Like it's just, yes, it's all right. This is not how we're supposed to be operating. Like none of this is how we're supposed to be operating.

CHRIS SIPES CFP®: Yeah. And if he would have bet that like, it didn't happen and then they went in and screwed it up, then you're like, yeah, I mean, is he going to throw the fight?

DANO WEIR: I mean, this is like the boxing thing. Like he's, he threw the fight like on purpose.

CHRIS SIPES CFP®: So yeah, I mean, you bet that they would do it. So, I mean, I don't know. And like you said, is it, is it illegal? I don't know. It's probably not ethical for sure, but, but it seems like a double standard to say the least. Anyway, just a little side sidebar there. Nothing to do with the markets, but no, nothing.

DANO WEIR: Well, but it is a market. I mean, it is a market. It is a market.

CHRIS SIPES CFP®: Yeah. And it is getting more and more like how, how are we, as a society going to kind of deal with these. Things as you see under the hood, like what's going on and where do we draw the line? Right.

CHRIS SIPES CFP®: Anyway, so moving on sentiment, this is the weirdest thing. You know, we got the sentiment indicator again today. All time lows. Meanwhile, the S And P is hitting all time highs. We look at the retail sales. This from Charlie Bielo. And let me just read what Charlie says. He says us retail sales. Hit another all-time high while consumer sentiment is at the lowest level in history.

CHRIS SIPES CFP®: Watch what they do, not what they say. And this is one of those indicators. It's like, how does this make sense? Well, a couple of ways. One is that most of the spending, over half of the spending is driven by the top 10% in income. And so whatever that top 10% is doing, matters more than the rest, right?

CHRIS SIPES CFP®: Because, because they're driving so much of the spending. It's a concentration in who is doing the spending. And a lot of that top 10% is receiving their money either directly or indirectly from the markets. So the markets keep going up, people keep spending more, that keeps driving the markets higher. It's, it's like a virtuous cycle that keeps going.

CHRIS SIPES CFP®: Despite the fact that most people, you know, when you get asked on these sentiment indicators how they feel about the future they're very pessimistic and why are they pessimistic well a big part of it is the expectations around inflation so this is using the the mean expected change in prices during the next year that has jumped up to 7.7 percent this from Danny Diane and it's You can see on this chart that it's the highest we've been since 2022 when consumers were expecting, I guess if you take out earlier in April of last year with the tariffs being put on.

CHRIS SIPES CFP®: But essentially people are expecting higher food prices, higher gas prices, higher prices across the board based on what's going on in the Middle East. So inflation is the expectation.

CHRIS SIPES CFP®: For most consumers in the market.

CHRIS SIPES CFP®: Now, we've talked about why that affects markets. Well, for one reason is that affects the expectations for interest rates, the cost of money. What is the Fed going to do when it comes to the cost of money? And here you can see the betting odds on the number of rate cuts in 2026.

CHRIS SIPES CFP®: We started the year with an expectation of two cuts. And we have now dropped to zero cuts is the highest expectation with one cut about a 26% chance. So expectations have completely flipped with the changes in the Middle East. As inflation expectations have gone up, not only for consumers, but the market in general, we are seeing those chances for our rate cut drop. So the cost of money likely to be higher.

CHRIS SIPES CFP®: And that is sort of controversial, but the monetary authorities tend to raise interest rates to try to destroy demand to try to reduce inflation. So it's kind of like a convoluted sequence of events, but they're trying to reduce the amount of demand so that inflation gets cooled down. Because once inflation expectations take hold, once people think, well, It's going to be more expensive later.

CHRIS SIPES CFP®: They start setting their prices higher. Like your local restaurant, think of this. If they... If you have a salmon dinner or whatever, and they raise the price from $15 to $20 or $30 or whatever that price is going to be, it's not like when inflation comes back down, they go back and drop the price on that salmon dinner, right? I mean, it just doesn't usually happen. And that applies to most goods across the board.

CHRIS SIPES CFP®: So those inflation expectations are headed higher.

CHRIS SIPES CFP®: This from Bank Of America, the average spot. Inflation. And this is related to food producers. So let me just read from Tracy Allaway at Bloomberg. She says, here comes the food inflation costs for food companies jumped 7.9% year over year in March versus 4.2% in February. This is basically just from the higher fuel costs.

CHRIS SIPES CFP®: We're still waiting for the impact of higher fertilizer, plastics, et cetera. And so that has not been incorporated in these prices yet. But remember that when the producers, who the manufacturers, whomever is making that product, when they have to pay more, typically that is a precursor to the consumer having to pay more down the line. So the expectations around food jumping year over year.

CHRIS SIPES CFP®: When you look at how various asset classes tend to respond to inflation. This is... Kind of where it comes into your portfolio. Like how should I think about this from an investment perspective? Well, if you think that inflation could be coming, the traditional just stock bond mix might not do as well in that type of environment, in a stagflationary type of environment or even a high inflation type of environment.

CHRIS SIPES CFP®: So this from Apollo showing when inflation goes up, returns in public markets tend to go down and they've got it broken down between cpi under three percent in the orange and over three percent in the green so you can see it's not like they tend to lose money and they just don't go up as much inflation is a headwind for for those asset classes in the traditional stocks and bonds so at the bottom there they've got the S&P 500 on the left you, and just eyeballing it when inflation's low returns are around 10%.

CHRIS SIPES CFP®: When inflation's high, they're closer to six.

CHRIS SIPES CFP®: Then you've got high yield, which is kind of the poor credit quality bonds. When inflation is less than three, again, those high quality, those high yield bonds, rates have been close to 10% when, after inflation, they're a little over six. Higher inflation.

CHRIS SIPES CFP®: And then you've got investment grade, which is also bonds, but higher quality bonds. And you can see the returns there are lower in both cases. But so from a portfolio construction standpoint, you know, incorporating assets that can be, that can perform well in a, in a higher inflation environment might be something to consider.

CHRIS SIPES CFP®: And so far this year, that has been a very you big help for portfolios that do incorporate that. So what you're looking at here is the performance of the quote-unquote permanent portfolio. That is a reference to a portfolio construction that was popularized by a guy named Harry Brown in the 70s, where he came up with this quote-unquote permanent portfolio.

CHRIS SIPES CFP®: You have 25% in stocks, long-term bonds, cash. And commodities. Sometimes they say gold as an example. So it's just a very simple portfolio, but the allocation is evenly split between those four areas. And this, according to Bank Of America, is delivering its best year since 1933. It's up 26% year to date in its third largest outperformance versus the traditional 60-40 allocation in a century.

CHRIS SIPES CFP®: That's according to Bank Of America. So now you can see we're coming out of a kind of unusual period where that balanced permanent portfolio type of approach underperformed pretty much everything. You can see those three kind of recent drops and also kind of just the muted performance, which isn't very normal. And so these things tend to... Ebb and flow over time. So it wouldn't be...

CHRIS SIPES CFP®: It wouldn't be surprising to see this portfolio kind of as a harbinger that, hey, maybe inflation is starting to be sniffed out by the markets a little bit at this point.

CHRIS SIPES CFP®: All right. So Darren's not here. We're going to dive into, these are more just the trends rather than the actual candles. So this is not as technical, but it just gives you. Kind of an idea of what the various asset classes are doing as of right now when you're laying on a simple 50-day moving average and a 200-day moving average.

CHRIS SIPES CFP®: The 50-day is a little more sensitive. That's the gray line. And it's a moving average of prices. So it's meant to kind of smooth out what that price has done over the last 50 days. Then you've got the 200-day, which is less sensitive. That's the bottom line here in the green.

CHRIS SIPES CFP®: And that one that one is a less sensitive more kind of steady in terms of the the actual trend so you can see we're looking at just kind of cap weighted indices here as represented by the the spy and we've had a big jump after we went under the 200 day moving average just briefly we then we saw the things start to cool off in the Middle East Market jumped right back up above that 200-day and above the 50-day.

CHRIS SIPES CFP®: Now, we've gotten a little extended here. And like Darren likes to say, usually it works a lot like a rubber band where you get it stretched and it wouldn't be surprising to see a snapback. Whenever these indices get kind of far away from their trends, you tend to see snapbacks.

CHRIS SIPES CFP®: And that's in both directions. So when they're on the way down, when they're on the way up. So it wouldn't be surprising to see a little bit of a pullback after we got this extended run in the S&P here the last couple weeks. Then we take a look at the Q's, the NASDAQ, which is kind of your more large cap growth tech space.

CHRIS SIPES CFP®: Those also have seen a big jump off the bottom. I saw a stat earlier that I think this is the largest jump since June of 2000 during the tech bust. In June of 2000 is the last time that we've had a run in the momentum stocks like this. And so a big, big jump in the queues. And again, very extended beyond its 50-day and 200-day.

CHRIS SIPES CFP®: So it wouldn't be surprising to see a little bit of a pullback there. But that was kind of the big story this week too, is that the tech company is really showing a lot of strength. Earnings jumping. NVIDIA had a big jump today. And we all know the market's very... Concentrated in those areas. So what they do, it drives the market.

DANO WEIR: And just something, another moment to reiterate something we say all the time, which is that when it crossed that 200-day moving average, here come all the headlines, S&P 500, NASDAQ crosses major barrier, heading towards the floor, all those things they like to say. Remember how you felt in that exact moment. Were you saying to yourself, no big deal, like I'm good, but this, this, and this, you know, I know where I'm headed.

DANO WEIR: Or were you losing your mind? Because if you remember how you're feeling in that moment, you've got a second life here. You got that one up mushroom and you're, you got a second chance here to reassess and say, am I really in the right portfolio? Am I really in the right allocation? If I was feeling nauseous three weeks ago, you know, I got another chance here to reevaluate it, Chris.

CHRIS SIPES CFP®: Yeah. Yeah, absolutely. I think that's a great way to look at it.

CHRIS SIPES CFP®: It's tough though. And I get that for people to kind of shift directions when we've had so many of these, Dan, especially recently, where every time the market drops, it snaps back and it does so very quickly that it's easy to get comfortable, right? And just be like, well, it's only going to be a week and then it's going to snap back and we're going to be good.

CHRIS SIPES CFP®: We've got a Pavlovian response now to dips. In the market where really, especially since COVID, every time we've seen any type of weakness, the market just snaps back immediately. We get a V-shaped recovery. You barely even knew it happened. But historically, that's not the way that the markets go forever. So I would caution against getting comfortable in that way.

CHRIS SIPES CFP®: It may be like the dog that's trained most of the time and then Then the one time you're telling it to do something, it just runs off. And it's like, well, okay, it can happen, you know?

DANO WEIR: I just noticed we got a message from Darren who is listening, who says, of course he threw the fight. So I think he's talking about our, our dear friend in the Venezuela operation.

DANO WEIR: Hey Darren.

CHRIS SIPES CFP®: All right. So, we take a look at the U S small caps, the, the Russell 2000, still continued strength there. And in here you see the trend lines looking a little healthier where. Anytime you get those parallel ski tracks up, that's a little bit better. And we've continued to see strength in the small caps. It's about time.

CHRIS SIPES CFP®: They traded sideways for many years. And so seeing a little strength in the small caps is not a bad thing. Those also jump back. But notice how we checked in with that 200-day moving average and then just really popped back. So that's a good strong. Strong signal from a technical standpoint.

CHRIS SIPES CFP®: Then we look at the IFA, which represents the developed markets. So think Japan. Japan makes up the biggest part of IFA. Think Europe, Canada, Australia, etc. That chart is still looking pretty strong. We've had a lot more volatility there as of late, which makes sense given the...

CHRIS SIPES CFP®: You know, energy concerns and such. But nonetheless, that market still seems to be in a pretty good uptrend at the moment. And the market, at least from the equity side of things, seems to be saying, you know, not too much to worry about at the moment.

CHRIS SIPES CFP®: Of course, this could change at any minute. And you can't bank on that. But when you look at the prices and how they're reflected today, it's hard not to see some strength there. Emerging markets, same thing, like we were talking about earlier, Dano.

CHRIS SIPES CFP®: Maybe that information is correct. Maybe it's not. I trust that the market sees through. And so we've seen nothing but strength from the emerging markets here this year, especially. And so doesn't seem to be any pending energy crisis there. The emerging markets index, about 30 plus percent of this is China.

CHRIS SIPES CFP®: If China seemed to be struggling, it tends to drag down this index. And if China's doing well, it tends to pull this one up, sort of like the tech stocks in the US. You see that here. So, all right. Then we got bonds, which is, you know, the bond market is meant to be more sanguine. And Lizanne Saunders, I heard her do a interview with the guys at Excess Returns.

CHRIS SIPES CFP®: Podcast, which I really enjoy that one. But anyway, she had this great analogy between the stock market or the equity market and the bond market or fixed income market. She compared it to her dogs and she said she had this older dog. I forget what his name was, but he's like 13, 14 years old. And then she had a younger dog who was like a year, a year and a half.

CHRIS SIPES CFP®: And she compared the the older dog to the bond market just not much gets them riled up it's it's hard to kind of get them get them off the floor and go bark at something or get excited about something they just kind of there's not a lot of reaction in an older dog whereas you take your younger dog and like every every single thing gets them interested you know our our dog chases the flashlight it cracks me up but my two-year-old will take the flashlight and put it on the wall and the dog you she can keep the dog occupied for 30 minutes just running all over the place trying to chase a flashlight it's hilarious that keeps them both occupied actually so but anyway the bond so the bond market that's that's another reason why you want to look at the bond market for signs of something happening and typically if something bad is happening the bond market is at least historically it typically has gone Yeah.

CHRIS SIPES CFP®: Has been good for the bond market. So bonds typically, you know, interest rates drop, people pile money into bonds because they are considered safer and more stable and all of that. Now you could argue that as that has not been the case, really in the post COVID era. But nonetheless, not much going on volatility wise in the bond market. And this is the ag, the aggregate bonds.

CHRIS SIPES CFP®: So this is kind of the, call it. I think it's around six duration, six or seven on the duration of the aggregate bond market, meaning like the average kind of length of the cash flows in the bond market. Then if you look at the TLT, which is the longer term treasuries, I believe this one's around 20 or so duration, maybe a little bit more.

CHRIS SIPES CFP®: So this is longer term. This is, you know, think investors that are trying to match liabilities that are very long-term. And again, not much to see there. It's just really been sideways. We've been camped out in this range in the rates market for several years now after we saw that big washout in 2021 with the rise in interest rates. A rise in interest rates kills bonds.

CHRIS SIPES CFP®: A lowering of interest rates is good for bonds from a principal standpoint. And we've just been kind of sideways, principle-wise, and people have just been clipping the coupons. And so not much in the way of volatility there. Gold. I think we all know why gold took off over the last few years now. That makes more sense. But I will say this chart, to me, looks a little ugly.

CHRIS SIPES CFP®: We got a big drop in gold.

CHRIS SIPES CFP®: It took the elevator down, as they say. We got a little recovery, but noticed that it got close to that 50-day and could not get above it and just kind of curled over. That's kind of an ugly look. And you're starting to see a curling over of that 50-day, too.

CHRIS SIPES CFP®: Now, it's way too early to tell that direction overall, but we saw kind of the mania. In gold and silver towards the, I think it was the end of last year, beginning of this year. That's kind of where you can see that spike there. We started getting a lot of phone calls about buying physical silver.

CHRIS SIPES CFP®: That was the top.

CHRIS SIPES CFP®: So it was brief, but fiery and people kind of looking into it. But we'll see where gold goes from here.

CHRIS SIPES CFP®: Interesting to see that sell off there so you know we before the war happened we just kept asking like what what is going on with gold why is it taking off so much you know and you had you had central banks buying and but the markets was were seeing around the corner and and then kind of sold off on the news of the actual war so who to thunk it right so Then we, last but not least, we'll take a look at Bitcoin.

CHRIS SIPES CFP®: Like we talked about, we've seen a little strength there recently. Hopefully that trend continues. Those trend lines are all out of place.

CHRIS SIPES CFP®: We've got the 50-day well below the 200-day. We've been in a pretty confirmed downtrend in Bitcoin for quite a while here. Sideways since what's that early 2024. So going on a couple of years.

CHRIS SIPES CFP®: You know, similar pricing, you know, over the last couple of years in Bitcoin. And so that's why we're always talking about diversification as a strategy, because kind of no matter what asset class you're in, you got to be prepared for sometimes they don't, they, they go all over the place, but at the end of the day, they go sideways, you know, sometimes for, for quite a while, we talked about it with the small cap stocks.

CHRIS SIPES CFP®: I think that was a five-year sideways, just treading water. And here we are with Bitcoin for a couple of years.

CHRIS SIPES CFP®: So diversification can cut down on that risk by not being concentrated in any one of those asset classes. So it's another reminder. Right. So that's that's all for this week, Dan. In terms of the charts, hopefully I got them all. I think next week, Darren, I'll be back and able to do the do the candles for those that missed the candles.

DANO WEIR: Can we ask the question that we. Started with? Is stagflation coming? Is it heading our way in your opinion, Chris, or are we already in it?

CHRIS SIPES CFP®: You know me, Dan, I try to not believe in my own opinions too much because the market's just so humbling, right? And rather, I always advocate for building your portfolio and your financial plans around the idea that you don't have an idea, right?

CHRIS SIPES CFP®: You have no idea how things are going to go. So build it, build it out. Way. But having said all that, yeah, I would lean on the side of inflation is probably, at least in the short to medium term, the most likely outcome is where I'm guessing.

CHRIS SIPES CFP®: Wars tend to be inflationary.

CHRIS SIPES CFP®: We've had a cut down in the labor force through immigration policy that tends to be inflationary. We've got, you know, loss of this you know fertilizer and things like that so there's a lot of a lot of inflationary things happening in the world i that's that would be my.

CHRIS SIPES CFP®: My best guess as to where the direction is heading in the short to medium term.

DANO WEIR: Not that anybody asked me because I don't have a license. I'm just a marketing guy. What do you think, Dan? As the resident guy who watches the narrative, gosh, I'm seeing a lot of things that remind me of 2008. Just when it comes to layoffs and closures. Economically bad landscape out there for a lot of different reasons.

DANO WEIR: That's too much to go into at the end of the episode. And then conversely, I don't know, just from a money supply standpoint, that they're ever going to stop the printer. And whenever they have a problem, they just fire it up again, or they do something, you know, they tweet something or make some change to make the market, you know, have that V-shaped recovery immediately.

DANO WEIR: So those two things right there, Chris. That's it right there. You know, you've got economic prospects not looking good and then you've got inflation just keep on going because we're just going to print our way through it. So, yeah, it feels like a reality to me.

CHRIS SIPES CFP®: Yeah. And it's why it's important to understand there's a lot of risk everywhere. There's a risk to every investment. There's even a risk to having money in cash in the bank because the hidden risk there is a loss of purchasing power.

CHRIS SIPES CFP®: The best way to lower your risk is to spread your bets, right? And not take any one direction too seriously, right? Where you're betting on one specific outcome. Okay, so I should bet on Venezuela keeping Maduro and I should bet on Venezuela not having Maduro. Yeah, yeah. I guess if you have some... Inside track that that's going to happen and you really believe in yourself and your team that you're going to execute on that.

DANO WEIR: Bet the over and the under. Can't lose.

CHRIS SIPES CFP®: Surely didn't work out for him in that, at least so far. So it didn't pay off, which fast money hardly ever does, right?

DANO WEIR: That's right.

DANO WEIR: Thank you so much for checking out this week's episode. Thank you for making it this far. To the very end, we appreciate you. Hope that you found some value in this, some education in this, some insight in this.

DANO WEIR: Our show is on the markets. We are Fermata Advisors, the Fermata Advisors family of brands, including Sonoma Wealth Advisors, our private wealth brand. You can learn more about us at sonomowealth.com. Learn about our firm.

DANO WEIR: Learn about how we help our clients. Book your wealth analysis so you can meet with someone like Chris and find out how we can address your specific situation and how working with an advisor can help build a financial plan for you and for your family for the future.

DANO WEIR: Wherever you found this show, you can subscribe. You can tell a friend. You can listen to past episodes. Thanks so much for checking it out. Darren will be back next week and so will we.

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