This Week the Market Ran on Oil and Inflation

DANO WEIR: Happy Friday. Happy summer. It's definitely hot enough to be summer. My name is Dano Weir. We're about to go on the Markets. Welcome to the show. Joined shortly by our managing principal, Chris Sipes, taking a look at the market this week, which we believe was running on inflation and oil.

DANO WEIR: The market whipsawing on Iran headlines and then a hot inflation print that kind of put the Fed in a weird position. This week, we're going to look at how oil and inflation sent the S&P into fits this week. Plus, projected AI spending now has surpassed the railroad build-out of the 1800s and the Louisiana Purchase.

DANO WEIR: Perhaps that's why the Mag 7 are down 2.6% year-to-date. We've got a list of 10 market triggers that historically have indicated a market peak. Just a brief spoiler, we have triggered seven of them so far. And what were the results of the SpaceX IPO? Let's get into all of it right now on The Markets.

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DANO WEIR: Managing Principal of Sonoma Wealth Advisors, Chris Sipes, joining me. Darren Blonsky on assignment. He will return next week. Chris, why was this quote important to you this week?

CHRIS SIPES CFP®: Yeah, this quote was from Abraham Lincoln, and it is, The prudent, penniless beginner in the world labors for wages a while, saves a surplus, and invests it in tools or land. And that's from a new book coming out from Meb Faber called Investing in America. It will be out July 4th and it goes over, 250 years.

CHRIS SIPES CFP®: The, the history of the United States from a financial perspective and, seeing pictures of the book. There's a lot of cool, you know, graphics and everything in there. And just, you know, you know me, Dan, I love reading. I love, history. I love finance. And so I'll be on the list to get this one. The other book that.

CHRIS SIPES CFP®: We really enjoyed this year was investing in us financial history, which is by here on my shelf, Mark Higgins, highly recommend that one. These are neither one of these things are like paid advertisements or anything. I just really enjoyed, enjoyed that book from Higgins and, I'm looking forward to the one from Meb. So he's got a lot of cool quotes in there.

CHRIS SIPES CFP®: And, so really, really neat history of the U S. And looking forward to reading that one.

DANO WEIR: Meb, a friend of the show, he's been on one of our specials before. So definitely looking forward to that. And all too often, I think what both those books are getting at is the headline is the headline, but behind the headline is a money issue.

DANO WEIR: That's actually the thesis of our other podcast, It's All Money, which is that, you know, trying to find the finance in everything because ultimately, you know, money affects everything.

CHRIS SIPES CFP®: Yes, that's right. And boy, until Thursday, everything was about inflation. The mood in the market was pretty sour. We had a downed helicopter, etc. Then Thursday, you know, going about my business and I look at the market and it jumped. I'm like, whoa, what's going on? And it turns out we've got a little meme here from the Babylon Bee that Trump sets a new world record by winning war with Iran 27 times in one year.

DANO WEIR: Now, if you don't know the Babylon Bee, it's satire similar to the onion. And I came across this one on my feed this week and just made me laugh because that is what it is felt like, which is that it's like, well, isn't this, isn't it just, just like Ukraine and Russia?

DANO WEIR: It's like there, no one actually wants to declare the start or the end of this thing. It's just sort of a conflict that we waded into and maybe eventually we'll wade out of. And it's just specifically this week, it just really felt like, you know, the S&P itself was just a meter on how much we had or had won or lost that war.

CHRIS SIPES CFP®: Yeah. Yeah. Well, it's interesting that this announcement came after a couple of really bad inflation prints, which we're going to see here soon. And we all know from 2022 that everybody hates inflation. It's a real, it's a real, you know, it upsets society for sure.

CHRIS SIPES CFP®: It's going to put, put any politician in a pickle. And so, you know. We'll see. We had a real strong runner for the other meme we were going to use, which was from the Peanuts cartoon of Charlie Brown trying to kick the football and Lucy just pulls it out from under him. I'll get it.

DANO WEIR: I'll get it. Give me a second. You vent for a second. I'll pull that up.

CHRIS SIPES CFP®: I couldn't help but laugh at that one because I love that Charlie Brown episode. And we've used that a lot as a reference for value investors, thinking that Thank you. Now's the time for value investing versus growth investing. That football keeps just getting pulled. And so we'll see if this, let's hope that this time is the real one, that we do have a deal imminent around the corner.

CHRIS SIPES CFP®: The market definitely seemed to like that news. And really, the market kind of has been pricing all the way along that it would be resolved soon. So, yeah, here's the meme. It's got Charlie Brown label is wall street. Trump's holding the Iran deal, imminent football. And, Charlie saying, I think he really means at this time.

CHRIS SIPES CFP®: So the market definitely bought into that yesterday. And, and we got a good little pop in the market, really kind of flat on the week, essentially. Even with the rally on Thursday and today. So, but as we'll see in the charts at the end, market's looking pretty strong. Across the equity Markets. And so, you know, no bad news priced in at the moment.

DANO WEIR: Chris, I'm sitting here at my house in Petaluma and I'm looking at my high school yearbooks, which a lot of students have in their hands right now. Maybe some of your kids or grandkids have them.

DANO WEIR: Chris, do you remember in the back of yearbooks, they would have that like current events, you know, part they would plug in with like pictures from the year? You know, if it was your 1995 yearbook, it was like, here's the Summer Olympics in Atlanta, right?

DANO WEIR: This year's for kids in high school and others, it's going to be AI. It's going to be Claude. It's going to be ChatGBT. It's going to be, you know, when we look back in 10 years, you're going to see those logos in your yearbook because that is we have entered our AI era.

CHRIS SIPES CFP®: That's right. And the build-out is on par with some of the largest...

CHRIS SIPES CFP®: Infrastructure build-outs in US history, you can see the only one that exceeds the current projected spending for Meta, Amazon, Microsoft, Alphabet, is the Louisiana Purchase that happened in 1803. And this is measured as a percentage of GDP. So the Louisiana Purchase was 3%.

CHRIS SIPES CFP®: And we're projecting 2.1 in the current year for the AI build-out, which is already exceeding what the U.S. Railroads did. Which was 2% in the decade 1850 to 1859. Some others of note here, the interstate highway systems were about 0.4 and the Apollo space program was 0.2.

CHRIS SIPES CFP®: So just to give you some relative indicators on how much we're spending here, which is obviously feeding into the price increases that we'll see coming up because a couple of things can drive inflation rates, you know, of course the money supply is considered one of them, but, but also growth and demand for money in the, in the economy.

CHRIS SIPES CFP®: And there's a lot of that right now, is listening to, Meb's, show this week with Jim Grant. And he was talking about being in Columbus, Ohio, talking to some financial advisors for an event there.

CHRIS SIPES CFP®: And, one of the advisors mentioned that that a client had sold farmland for $300,000 an acre to a data center. And you probably don't know a ton about Ohio farmland prices, Dan, but that's a lot. That's a lot more than the going rate.

CHRIS SIPES CFP®: And so these data centers are going up everywhere. And so that's just the beginning, obviously, buying the land. And then you've got to source all the materials, employ all the workers. This is a massive. Massive boom to the economy in the short term.

DANO WEIR: I think what's of note on this slide, Louisiana Purchase and the Apollo space program, those would be two federal spends, right? This AI spend is private.

DANO WEIR: And so I think it just speaks to a general shift as we are going to talk about the SpaceX IPO later. The federal spend these days is going to a lot of programs, to Overseas support, to those types of things.

DANO WEIR: The federal government could not, if the federal government could handle a space program in the 60s, the federal government could not handle an AI build out today.

CHRIS SIPES CFP®: Yeah, yeah, true, true. Although they are talking about taking equity stakes in some large U.S. Companies and already have. So we'll see where that that takes us. Ok, so now this is from Morgan Stanley. And, um... The title of this was Too Many Red Flags, and it was posted by Patrick Saner.

CHRIS SIPES CFP®: But Morgan Stanley, Bank Of America, has a—sorry, I said Morgan Stanley. This is Bank Of America. Seventy percent of their signals, and these are signals to watch for market peaks. They have a list of different signposts and when those signposts were checked off.

CHRIS SIPES CFP®: Currently they say about 70% of the signposts have been triggered as of May of 2026. And they've got different things on here like, a 10 year Z score of MNA deals, low PE underperforms high PE by two points, two and a half points over the last six months. Different things.

CHRIS SIPES CFP®: One of the, one of the things though you'll notice is, obviously missing is the conference board consumer confidence. Over 110. Pretty much all the priors had that checked off. And as we've talked about, this rally being one of the weirder rallies in that consumer sentiment is the lowest reading basically in 50 years.

CHRIS SIPES CFP®: So to me, one of the significant ones that is not triggered here. However, when it comes to market sentiment, things like the SpaceX launch today, It seems like the average person is pretty risk-on in the Markets, risk-on in betting, a lot of risk-taking when it comes to financial matters at the moment.

DANO WEIR: I think the consumer sentiment, we've said this on the show before, specifically around AI, I am my lifetime and I'm only in my 40s. But in my lifetime, when I was younger, stuff that was new was cool and you wanted it. And the only people that want AI are the people that are selling AI.

DANO WEIR: The average consumer is not sitting around that I've noticed, just really jazzed on it. There's a select group of people who are really leveraging it and who are really excited about that. But I just cannot place in prior to this in my life a new technology. It just had no sizzle for it for the average consumer. No one's really pumped on it.

CHRIS SIPES CFP®: Yeah. Yeah, no, that's a good point. We've talked about that before. And my kids that are 11 and under, they have a very sour sentiment around it, which is interesting because when the internet was coming out back in the 90s, gosh, that was amazing. I didn't know too many people that were not looking forward to that.

DANO WEIR: I can just give you an example. This is a personal example.

DANO WEIR: It would have been in the year 2000. I'm in high school, and there was a commercial for Intel. And the commercial was like, hey, when you get your Intel Pentium II MMX chip in your PC, here's who you're going to be. And it was like younger people who were all dialed in, they were making music on it and it was, they were getting their homework done.

DANO WEIR: And I just remember thinking like, yeah, I cannot wait to spend $2,000 of my parents' money and get that thing. Right. And then when I get to college, I'm going to have this thing and then I'm set, you know, I, I'm not in everybody's heads, but I've not experienced, I've not seen that from the interactions I've seen just as an example.

CHRIS SIPES CFP®: Yeah. Yeah, exactly. That's, that's a good way to capture it. Now, sentiment, you know, we talk about this a lot where sentiment follows price. We had a sell-off in the market over the last week or so.

CHRIS SIPES CFP®: So the Thursday release of the sentiment indicators bearishness rose up to 47%, not near the one-year high at 52%, but getting up there. The bullishness had dropped to 30% in the Markets. CNN fear and greed index dropped to 28 fear versus 53 neutral one week ago. And then the Bitcoin.

CHRIS SIPES CFP®: Bitcoin indicator is still at 12 extreme fear, which is unchanged from last week. Bitcoin just can't seem to get out of its way. Michael Saylor at MicroStrategy, or I guess they're called Strategy now, having some interesting comments this week. Do you remember when he posted something about sell a kidney if you have to, but don't sell your Bitcoin? Did you ever see that? I did, yes.

DANO WEIR: I did, yes.

CHRIS SIPES CFP®: So this week, apparently he clarified that saying, you know, I don't want you to sell your Bitcoin, but that doesn't mean our company won't. Because Strategy had sold some. So I guess make sure you read the fine print there. But anyway, sentiment follows price. And as long as we're in the low 60s, you're probably going to keep seeing that in the Bitcoin space. So it seems.

CHRIS SIPES CFP®: Seems like the maximum hype definitely passed. I wonder if that's going to kind of translate to the SpaceX IPO today. Obviously, a lot of hype. Man, I get so many people asking about it. Literally every conversation for the last month has been about, has been asking about SpaceX. Similar to what Bitcoin, you know, has been. I was just going to say. Near its peaks, right?

CHRIS SIPES CFP®: Last summer.

DANO WEIR: I mean, last summer, that's what we're getting questions on, you know, it's up near 120. And, you know, it's just so let's let's give Darren his due because he's not here for this episode, although I know he listens when he's not, you know, Darren, we'll give you an opportunity to speak to the state of Bitcoin next week.

DANO WEIR: But will we remember this episode, Chris, and say, hey, remember that episode in June 2026 when we were saying is Bitcoin over and SpaceX is the thing? You know, I'm going to I'm going to earmark this.

DANO WEIR: Segment right here and see if we play it later and if it's a completely different story could be could not but i just i find these moments when quote the the narrative is down done or we're off that now very interesting because suddenly it can change very fast that's.

CHRIS SIPES CFP®: Right that's right just i think it's just good no matter what the investment is the more hype that's around it the more you should be you know careful right And, you know, the famous Buffett quote is that you pay a high price for a cheery consensus. And I definitely think that's true. So, all right. So total returns year to date, this from Charlie Biello.

CHRIS SIPES CFP®: You know, a lot of times, Dan, when the changes in the market environment are happening, it takes a while for people to realize that the... You know, the tides are shifting, right? And sometimes that might take two or three years. And I don't think the average person would guess that emerging market and small cap are doing so well this year and that the mags are doing so poorly.

CHRIS SIPES CFP®: You know, the narrative still seems, at least to me, who's probably granted overly, you know, in the weeds in this area. But definitely not getting any questions about any of those areas that are doing really well. And I just think that the shift could be happening. And it might be one of those things where, you know, the quote unquote, they always talk about the quote unquote smart money.

CHRIS SIPES CFP®: You know, the ones that are in first, they're starting to, they've already shifted in that area, right? And then it gets more consensus and then you get the hype. Where everybody piles in at the end of the curve. And so I just think it's of note that year to date, keep an eye on some of these areas that have been really showing some strength, not for a long time.

CHRIS SIPES CFP®: Emerging Markets have been dead money for over 10 years, really since their peak in the mid 2000s, right before the great financial crisis, when they had their own acronym. The BRICS, Brazil, Russia, India, and China. Everybody wanted them at that time. They were the emerging Markets.

CHRIS SIPES CFP®: All the growth was there. Nobody cared about the United States from an investment perspective. Of course, they peaked right then at maximum hype and they were dead money for really until the last couple of years. But now we're starting to see some strength there. And I just think it's good to kind of take notice of... Possibly some trend changes there.

DANO WEIR: I think this time I'd like to make a football analogy as I love to do, which is that as a follower of the NFL, I have all kinds of predictions that I lay on my friends, right? Because I have things that I think are going to happen. And then when I'm right, you know, I do shove it in their face.

DANO WEIR: But more importantly, I just want my team to win. You know, that's probably the most important thing. So I think as that applies to investing, you know, what you're saying about FOMO and what you're saying about you know, predictions and are people crowing about their international stocks?

DANO WEIR: You know, are you in it? Are you, do you want the return? Are you in it for the performance? Are you in it for bragging at the barbecue? Because those are two different things.

CHRIS SIPES CFP®: Yeah, exactly. Now, there's good reason why the emerging Markets are doing so well. It's earnings, earnings expectations and earnings continue to be revised higher in many Markets.

CHRIS SIPES CFP®: And you can see here the consensus 2026 earning, earnings, growth in the first chart. So EM is the yellow line there. And then you've got the U S and the dark blue, which is still showing strong earnings growth, expectations, Europe in the kind of lighter blue UK and green, and then Japan and purple.

CHRIS SIPES CFP®: And then you've got 2027 expectations and they.

CHRIS SIPES CFP®: In the combined 26 27 you can see why EM is is leading right now and that's because earnings are growing and they've been growing faster than the us so so anyway it's stock prices over the long term tend to follow earnings right and that's why we talk so much about valuations and fundamentals and Yeah, they might not matter in the short term, and they are absolutely a terrible timing tool.

CHRIS SIPES CFP®: However, over the long term, the returns tend to follow the earnings and the earnings growth.

DANO WEIR: I do want to say something to our live stream viewers right now, whether it be on X, Facebook or YouTube or LinkedIn. Something new this week is we are taking live comments on the show, Chris.

DANO WEIR: So as people are watching the show and enjoying it, if you have a question about anything we say, about any slide you see, drop it in the comments. We will see it and we will respond to it live. So that's brand new and we would love to interact with you in that way. So just drop any questions you have in the show as it goes.

CHRIS SIPES CFP®: That's right. And you know, Dan, that I never watch any of the shows or read any of the comments afterwards just to avoid feeling. Self-conscious later. So if you post something there and expect me to answer, I guess Dan will have to let me know. So tech is contributing more than half the expected EM earnings.

CHRIS SIPES CFP®: So that's another thing I think is kind of interesting on the EM side of things is that it used to be that emerging Markets were primarily commodities driven Markets and they tended to do well in times when commodities were doing well. So it was very boom bust. That doesn't seem to be the case anymore.

CHRIS SIPES CFP®: You can see here that tech is contributing about 58% of the earnings per share growth. Now, concentration is the one area where you'd have to say, okay, that's a little slippery there because most of that growth is concentrated in just a few companies. In Taiwan, Semiconductor, Samsung, SK Hynix, they make up a large portion of that earnings per share growth in the tech.

CHRIS SIPES CFP®: So just like here in the United States, the tech and tech earnings abroad are also very concentrated and are also driving the indices abroad. So tech is not a U.S. Only story. This is a global story and it's driving growth in many of the other Markets.

CHRIS SIPES CFP®: I just think that most investors wouldn't know that because we all have something called a home country bias, which is prevalent around the world. Live in the UK, chances are you invest in the UK. And if you're in Canada, chances are you're investing in, you know, gold miners and, and things like that, oil companies, you know, because you're, you're familiar.

CHRIS SIPES CFP®: It's, it's, we all want to invest in what's familiar to us. It feels safer. But there's a whole world out there of opportunities in terms of different companies that offer, that can offer these earnings growth as well. So EM, EM makeup, largely tech. And, you know, don't leave it out in consideration of your portfolio.

DANO WEIR: It's like the World Cup for investing.

CHRIS SIPES CFP®: Exactly. Exactly. Which kids are not happy about AI, but they are stoked on the World Cup, which was something I was not when I was a kid. Never, never got into watching soccer till my kids started playing it. And it is fun. And so be looking forward to the, to the, to the match tonight. Although I don't know any, I don't know much about like the rules and stuff, Dan. So it's not like football where, you know.

DANO WEIR: They'll have to tell me what's going on instead of me yeah my son my son also has gotten a little into it and he's asking me questions i go man i play football with my hands okay i don't know yeah so.

CHRIS SIPES CFP®: Interesting chart from goldman sachs and Jim Bianco here and Jim Bianco says since the war began on February 27th the S&P 500 black in the black line is up 7.34%. But the S&P 500 without AI stocks, which is blue, is effectively unchanged. So the entire S&P 500 index rally since February has been driven by the AI stocks. But look at what happened on Friday, June 5th. That was last Friday.

CHRIS SIPES CFP®: Remember that? That was the absolute bloodbath in the Markets across the board. The S&P 500 was down 2.6%, its biggest daily loss since last October. But the S&P 500 without AI was up 0.02, call it unchanged. So the entire sell-off on Friday was AI stocks. The quote-unquote normal world did nothing on Friday, not according to Jim Bianco. So, hey, this is where possibly the fundamentals can come into play.

CHRIS SIPES CFP®: Like Those areas that were priced for perfection and driving all of the growth in the Markets over the last few years and investors really bid that up and piled in, now we're seeing a little more volatility. And while we're seeing strength in the small caps and some of the forgotten areas of the market, days like Friday when you get reminded of how quickly risk appetite can change.

CHRIS SIPES CFP®: You feel comfortable, a little more comfortable knowing, you know, I've got some of these areas in the market that are not tech to help pad my portfolio in times when tech is selling off. So we'll see if that trend continues. But interesting stat from Jim Bianco of looking under the hood a little.

CHRIS SIPES CFP®: What might be driving those changes or one of the drivers driving those changes in the market environment is inflation. We do. Now it seems like have the return of inflation. This from Bespoke, a huge part of that obviously is the oil Markets and due to the war, the tightness in oil.

CHRIS SIPES CFP®: So according to Bespoke, they said this is the biggest two-month drawdown of crude oil ever from the Strategic Petroleum Reserve, which is now at just 2.4 million barrels above the 2023 low. So, you know, we drew it down very, very low in order to, you know, help offset the, the Ukraine War when that broke out.

CHRIS SIPES CFP®: And here we are again. So, so oil is tight. That is driving the inflation. This from Morgan Stanley showing, inflation is on the rise again, like in 2021, the last time the Fed let the economy economy run hot. The analog versus the 1970s is worth noting. So in yellow is the 1970s.

CHRIS SIPES CFP®: And notice that while we think of the 70s as a, as a, an inflationary decade, it really came in two waves. Kind of having PTSD here, Dan, because it feels like this is looking at one of those COVID charts. So the, you know, the infections rising and falling and rising back up again. Remember those?

DANO WEIR: Yeah. Oh gosh.

CHRIS SIPES CFP®: Yeah. Gosh, we were tracking those like.

DANO WEIR: Crazy a few years ago thank goodness that's and those when those when they were happening felt to me like the department of homeland security color meter remember that during 9 11 we're just sitting there living in it's an orange day you know just waiting on waiting on a print from the government what's my stress level today yeah and my apple watch is telling me my heart rate is rising so i better do some breathing exercises here the but but nonetheless you know the.

CHRIS SIPES CFP®: You the inflation tends to come in waves for whatever reason. And there's not one reason guys, there's always several reasons for anything that ever happens in life or in the Markets. It's a confluence of events. It's never, you know, one thing that you can put your finger on. But here we are, you know, history rhyming. If it doesn't repeat, it definitely rhymes.

CHRIS SIPES CFP®: And so we've got CPI heading back north here. And when we look at the consumer price index, which we got the updated number this week over the long term, this going back to the 50s, you can see that we had some, you can see those two peaks in the 70s where we were having a lot more volatility in the CPI. That came down. Kind of starting in 1980.

CHRIS SIPES CFP®: We were pretty much sideways in inflation for many years, experienced massive deflation during the great financial crisis, which is typically what happens in a credit bust. So when everybody that owes everybody else is losing money and they can't pay each other back, you get deflation. And the deflationary death spiral is just as dangerous, maybe even worse than the inflationary death spiral.

CHRIS SIPES CFP®: Both the great financial crisis and the Great Depression were deflationary, debt-driven, debt-bust-driven spirals. But inflation is something that we don't want to get out of control either. We recently experienced that in 22. And so we all kind of remember that. It's starting to see it everywhere.

CHRIS SIPES CFP®: Haircuts, fees that you're paying for everything seems to be just going up.

CHRIS SIPES CFP®: Dramatically and importantly that number is going up faster than the wage accelerations which is when people tend to really notice it if you're getting wage increases along the way it softens it a bit but if you're not and your wages are not keeping up with that change in inflation it's very very painful so 4.2% and and trending up is not a good place to be we got the producer price index, which is kind of more on the wholesale side so the producers what are they paying and boy a huge spike there ppi x food energy this is from Charlie bielo by the way just a comment from Charlie bielo ppi x food energy and trade jumped by 0.8 month over month in may in the history of this series there have only been three other months with stronger gains sorry that was from Kevin Gordon at Schwab, not Charlie Biello.

CHRIS SIPES CFP®: Charlie Bello says this is the highest since November of 22. So obviously some very painful prints on the inflation front. So no wonder we want to get a resolution to the conflict in Iran kind of as soon as possible, because whether or not that's the main driver that I think is, that is, I think what most people are going to blame it on. And here we see the reaction of the...

CHRIS SIPES CFP®: Credit Markets to these high inflation prints. This is the two-year treasury rate in dark blue versus the target Fed funds rate. That's the one that the Fed controls, the Fed funds rate, which we have a Fed meeting next week. Basically, when these inflation numbers came out, it erased any chance for a Fed rate cut this year. In fact, market is pricing in more of a chance that there's rate hike.

CHRIS SIPES CFP®: Than a rate cut, given that they don't want inflation to get back out of hand. You don't want the Fed to get behind the eight ball. And typically, when that dark blue line is above the gray line, that means the Fed is too loose.

CHRIS SIPES CFP®: You can see that happen at the beginning of 22, you know, back when they said, you know, inflation was going to be transitory, the famous line. The Fed was considered too loose and they were really too loose for quite a while. And inflation just jumped very quickly as well as the, the, two-year treasury rate was jumping quickly.

CHRIS SIPES CFP®: The market's measurement of the cost of short-term money. And you can see that that is starting to take place now. So poor Kevin Warsh, he's really coming into a quagmire here. So definitely would not want to be in that guy's shoes at the moment.

CHRIS SIPES CFP®: With what's happening in the inflationary world, which can also lead to other rates. Now, so far, thankfully, things like the 30-year treasury rate have been pretty remarkably calm despite this kind of crazy market situation that we've had here recently. And so the 30-year treasury. Remember that all credit Markets are going to kind of run off of what's happening in the treasury Markets, short, medium, and long term.

CHRIS SIPES CFP®: And the mortgage market is no different in that people look at, okay, what can I lend money to the government, the U.S. Government for? What's the price that they'll pay me to lend to them because they'll pay me back? So that's kind of the base rate in the fixed income Markets is like, okay, that's my starting point.

CHRIS SIPES CFP®: Now, if I'm going to loan to somebody else for something like a mortgage, I'm going to need a little bit more compensation to take on that extra risk. And so this mortgage rate, luckily the spread between the treasury rates and the mortgage rates has been pretty tight. There hasn't been much of a spread there, thankfully, because that's kept the mortgage rates rather capped.

CHRIS SIPES CFP®: But that could change at any moment. The more people feel like risk off is needed, like the compensation needs to be higher to compensate them for the extra risk, you could see that mortgage rates... Really bake in a higher needed rate here to lend that money, which would obviously have an effect across the board in the housing market.

DANO WEIR: It's just anecdotal, but I happen to be on Zillow today, and I looked at my neighborhood in Petaluma, and not the whole town, but just my neighborhood, which is a pretty sizable area. Chris, there was one house for sale, and it was just...

DANO WEIR: I thought it was very interesting in that, you know, we're at summertime, like this is classically like, you know, when houses sell and people are buying and, and it's just with the stodgy rate like that, it just seems to have kind of locked up that part of the economy.

CHRIS SIPES CFP®: Yeah, I think, you know, seven, we all, we all like have a round number, you know, kind of psychological note in our mind. Now, apologies for the blurriness on this chart, but hopefully you can get the point here. And that is that different asset classes respond differently to different environments around growth and inflation.

CHRIS SIPES CFP®: And given that we might be entering a different environment around the inflation side of things, and we've already shown that growth is really kind of off the charts in terms of the amount of money that's... Blowing into the economy at the moment via the AI build out.

CHRIS SIPES CFP®: It's good to know like what type of assets tend to perform well in these different areas, because we've been in a long, a long period of time where we had low inflation, you know, remember back when the Fed was targeting 2% and they couldn't get to it on the, on, on the low side, like they were, inflation was running at like one, one and a half. They couldn't hit the two. Percent.

CHRIS SIPES CFP®: Now we've been over two percent really since the pandemic and they can't get back down there. So this from Rodrigo Gordillo at Resolve Asset Management, he put out a poll that said from 1990 to December of 2020, so that's a 30 year span, which was the best performing asset class? And of course, most people, I think, guessed gold actually, which I'm surprised.

CHRIS SIPES CFP®: I thought most people would guess equities, but most people... Guess gold. But he said, long-term treasuries by a landslide. I use this chart for most of my career to help explain to investors that bonds should now be used for safety, but rather a return driver if you allow yourself to go for duration.

CHRIS SIPES CFP®: But of course, that cuts both ways. From 2021 onward, it has had an equity-like drawdown, which we'll look at in a second. But notice the Oscillation and Stocks. And gold in the first chart and independently, all independently have suffered deeper troughs.

CHRIS SIPES CFP®: It's part of the journey and the goal should be to use them all in risk balance in his opinion, especially if you can't predict the future, which I would submit nobody can. But if you look at that time period from 1990 to 2020, gold and stocks really had a similar outcome, although they took two totally different paths to get there.

CHRIS SIPES CFP®: But both of them were nowhere near as good of the returns as the long-term treasuries. Now, that happened to be a low inflation environment. Now, if you go to the next slide, which is possibly showing a shift in that environment, remember how I started the show off saying, hey, it takes us a long time to realize there's a new trend underway.

CHRIS SIPES CFP®: Sometimes three to five years before we're like, you know what? That seems like something's going on here. So since 2021, I'll read what Rodrigo says here. He says, You know, from 2021 to now, gold has taken the lead. Equities being a second, but pretty close, but gold's definitely beating them. And then you've got long-term treasuries just...

CHRIS SIPES CFP®: Getting absolutely gut punched and in a huge drawdown since 2021 with that rise in inflation, rise in interest rates. Remember the teeter-totter, if rates go up, bond values go down. And boy, did they ever. So that shift in inflation just really rocked the changes in how those asset classes performed in a big way. And so listen as the market is telling you something.

CHRIS SIPES CFP®: Try not to predict the future. Be balanced. All these things make sense in the long run.

DANO WEIR: All right, before we get to this one, should we take a look at the SpaceX IPO real quick?

CHRIS SIPES CFP®: Yes.

DANO WEIR: So SpaceX did IPO this screenshot as of a few minutes ago. Chris, your thoughts on first day performance from SpaceX?

CHRIS SIPES CFP®: Not surprising. They released the price last night, I think, at $135, which was expected for the IPO.

CHRIS SIPES CFP®: You know, it's not out of the ordinary for them to pop initially. A lot of hype.

CHRIS SIPES CFP®: My one question would kind of be like, who was selling? You know, if people were buying on the open market, who was able to sell? Because If you were part of the IPO, most of the brokerage houses had a soft lockup where they're like, sure, you can go ahead and sell your shares. But if you do, don't ever plan on participating in an IPO again.

CHRIS SIPES CFP®: Different ones. Schwab's was 31 days, I believe. And so somebody asked me, well, who's able to sell their shares? I'm like, that's a great question. I don't know. I'm not sure where there's a coming from. Some shares were traded here. I'm not sure if this shows the volume of shares traded, but we got a pop there from 135 to 160. And we'll see what happens as the hype plays itself out in the Markets.

DANO WEIR: In the gist of what we did, a client event on this, and we did a couple of on the Markets about this. The gist generally, our take being, yeah, maybe. You know, we saw that 2%, over 2% investment, over 2% of GDP is going to be private investment in AI.

DANO WEIR: And SpaceX has rolled into that for a number of reasons, one of which is their AI company, but also it's believed that orbital data centers are going to be a solution instead of building on Ohio farmland. So we shall see. But for... First day about just about as expected, right, Chris?

CHRIS SIPES CFP®: Yeah. Yeah, I think so. I think it would have been, you know, awful, obviously, if it came out and then tanked the first day.

DANO WEIR: Yeah.

CHRIS SIPES CFP®: But, you know, typically when they're bringing those things to market, they, obviously, they don't want that to happen. They want to leave some on the bone there to create hype for future IPOs, you know, so that people want to participate. Can you imagine they brought it in at too high of a price and then it tanked on the first day? And like, what's that going to do for, you know, future IPOs?

DANO WEIR: So I throw in a slide towards the end of the show sometimes just that I see in my feed that I find interesting because I come across these things, which are, I call them the vibe slides. They're just things that are an indicator of, you know, the era that we're living in and we're living in.

DANO WEIR: An era of high leverage and we're in in living in an era of gambling legal crazy i can't believe it gambling on the weather so i found this story this week Chris have you ever heard of a flex loan i have not thankfully okay so this is a story this week called about a flex loan a new type of payday loan pioneered by advanced financial in Tennessee allows residents to borrow up to $4,000 at a 279.5 interest rate.

DANO WEIR: This is a product that the company lobbied Tennessee lawmakers to create.

DANO WEIR: And in one case, the loans only stop growing when they're fully paid off, when the lender declares default, or when they sue you. And they do sue. The one report had them as the biggest plaintiff in all of Tennessee, the number of people they sued. One woman borrowed $2,050, made every payment on time, paid back over $6,600 and still owed $3,000.

DANO WEIR: And the company sued her for $6,000 and she lost her house. Now, I did further digging. I did further digging on this, Chris. This company invented this loan because the other half of their business was a sports betting business, which was failing. And so they created these predatory loans to try to. Prop up their failing sportsbook business.

DANO WEIR: So I just, I, I just find it interesting and it's, it's the, it's the dregs of finance. It's not things that we encounter in our business and yet it is out there in the world. And it's just an indicator of, you know, this is happening. And, you know, this is 2026 is things like this.

CHRIS SIPES CFP®: It's terrible, terrible.

DANO WEIR: So part of the reason why, we do this show for free, we offer education. We try to, to. Clue people in on things that we see in the market and, you know, provide financial education so that you don't end up with a 279% loan.

CHRIS SIPES CFP®: Yeah. Ooh, that's awful.

CHRIS SIPES CFP®: Okay. Let's talk, let's talk some of the asset classes, here, and we're just using the 50 day, simple moving average and the 200 day simple moving average to give you an idea of what the trends are in that asset class. This is not... Precise candles.

CHRIS SIPES CFP®: This is not meant to be interpreted as actual technical analysis in any way possible, but just to know what's kind of going on in the different Markets. So first off, we've got the S&P 500 above its 50-day. We did kind of check in with that last, I guess it would have been last Friday, which is healthy. You want to see those check-ins. It looks like the trends are are healthy here.

CHRIS SIPES CFP®: We've got, we've got the market heading, heading in the, in it up into the right. You know, we got a little bit away from that 50 day moving average at the end of May, which I think May was like one of the best, you know, months on record for the S and P in history. And it's, in terms of the quickness that it, that it popped.

CHRIS SIPES CFP®: And so, you know, it got a little ahead of itself. Healthy correction. We're back on track here. Same thing with the NASDAQ, very similar. You know, there's not really a ton of difference in these Markets. Saw a chart today that the top eight companies in the NASDAQ, the S&P, and even the MSCI global are basically the same.

CHRIS SIPES CFP®: So a lot of these charts are going to look similar when you see that. And then we've got the the small caps again, the kind of the big story this year, at least so far, talk about the Charlie Brown football. Boy, a lot of small cap investors are just wondering like, is this real?

CHRIS SIPES CFP®: You know, because we had prior to this, I think it was five years of sideways movement and we got a pop in 2020, it going into 2021 when the blue wave hit and everybody was stoked about, you know, the reopening and the vaccine and, you know, all the hype. And then we went nowhere for five years.

CHRIS SIPES CFP®: And now the small caps are showing strength again. And that happened again today. So relative to large caps, if you look out longer term, there might be a lot of ways to run on that theme. We've got the developed Markets, the EFA, MSCI EFA, also looking strong.

CHRIS SIPES CFP®: You know, Back above its 50-day moving average, no weakness seen here. Obviously, the trend lines are up and to the right. So developed global looking strong, developed emerging also looking strong. Same kind of story. We had that get a little bit of ways away from the 50-day moving average, got stretched a little bit.

CHRIS SIPES CFP®: Had the pullback and now we're kind of back on track there. A lot of strength in the emerging Markets. We really haven't been below the 200-day moving average. We got close to checking in with it, it looks like there, maybe in March there with the war starting. But really, since about last year this time, I would say we have not been below the 50-day moving average in the emerging Markets.

CHRIS SIPES CFP®: So some real strength there. Now we look at aggregate bonds. These are kind of considered the core U.S. Bonds, kind of medium term. So I think the duration on these are somewhere in the seven, five to seven range. So bonds can go short term all the way out to 30 years or more in some cases. And so this is kind of the...

CHRIS SIPES CFP®: This is kind of the plain vanilla, right in the middle of the yield curve, kind of core benchmark for the bond market in a lot of ways. And we've been sideways, which isn't a terrible thing when you've got interest rates in the 4%, 5%, 6% range, depending on the bond, maybe some a little bit above that. But with interest rates kind of in a more normal state, having the bond market from a principal standpoint.

CHRIS SIPES CFP®: Kind of trading sideways isn't a terrible thing. They're meant for stability, they're meant for income, and we've kind of been sideways for the last three years. And so that coupon is being paid, and that's kind of largely what you should expect when you go into them. And then we've got the long term as measured by TLT. So this is longer than 20 year.

CHRIS SIPES CFP®: Bonds, a really common benchmark in the market for long-term treasuries. So this is not corporates, this is treasuries, US treasuries. We had that massive sell-off culminating at the middle of 2023. And we've really just been trading sideways since then with the 30-year rate right around 5% at the moment. And so the coupons are a little healthier.

CHRIS SIPES CFP®: Even despite the inflation that we've seen here recently, the uptick in inflation, bonds have really held pretty solid, all things considered. So keep an eye on rates because the market's going to tell you likely what to expect on the inflation front.

CHRIS SIPES CFP®: Gold, another area where you will be affected by inflation. Talk about hype, Dan. Remember coming into 2026, gold, we did a few shows on it, how well it was doing. Everybody was asking about it. Clients wanted to know if they owned it.

CHRIS SIPES CFP®: I remember doing some memes from the Austin Powers gold thing.

CHRIS SIPES CFP®: And boy, we've seen quite the sell-off there, which is interesting given that that sell-off really started when the war kicked off.

CHRIS SIPES CFP®: Narrative violation, but potentially one reason why is one, these asset classes tend to be forward-looking. Was the war baked in towards the end of 26? Who knows? But the other reason being that if you've got other options in this quote unquote safer category that are actually paying a higher interest rate, a.k.a. Bonds, treasuries, tips, et cetera, if you can get a decent return there.

CHRIS SIPES CFP®: Remember, gold does not have cash flows. So people have an alternative that might be a viable alternative. And maybe some people are selling gold to go into some of these areas. Maybe it's just a healthy correction. Look, it hadn't been below its 200-day moving average since, what, the beginning of 24. So a couple of years of just absolute.

CHRIS SIPES CFP®: Indomitable strength. So it's not all that uncommon. Now we've seen a little bit of a turnaround here. Who knows if gold is finding a bottom or if we're just getting ready to send that 50-day across the 200-day, the dreaded death cross of the technical market. It's too early to tell, but gold really showing some weakness here so far year to date.

DANO WEIR: Rubber band.

CHRIS SIPES CFP®: Yeah.

CHRIS SIPES CFP®: And finally, Bitcoin, you know, my son's been asking me this question here a lot, Dan, I probably should have prefaced the asset, you know, rundown with, do you want the good news first or the bad news first? My son's been asking me that a lot lately, which, you know, strangely gives me a lot of weird anxiety.

CHRIS SIPES CFP®: I guess I'm like, oh, tell me the good news. So we went with the good news first and we worked our way down to the bad news. And we've got the iBit ETF from iShares here, probably the most traded one, I would guess, of Bitcoin.

CHRIS SIPES CFP®: And you look at those trend lines and looks like down the ski slope we go. We'll see if we're finding a bottom here. Hopefully the pain train is nearing an end on the Bitcoin side of things. But so far, those trend lines are... Are not looking good, Dan.

DANO WEIR: Yeah, I think if, you know, if Darren were here when he returns next week, you know, it... This and gold are a good example of do you really believe in the asset? Do you really believe in the fundamentals of it? Do you really believe in the way that it fits into your portfolio? And as he does with Bitcoin, and if that's the case, then you aren't sweating anything right now, you know, because you know that it does this.

DANO WEIR: But if you're, as we've said, you know, summer's coming up, we're going to start ragging on the barbecue indicator and the barbecue people. If the whole goal is to be able to brag at the golf club that you made X amount on Y asset, then you're going to be feeling some pain right now in either of those.

CHRIS SIPES CFP®: Yeah. And you can also take the approach of, let me own some, right? Let's have some in the diversified portfolio. There you go. We've always said with Bitcoin, it is so volatile that you need to know what your capacity is for that volatility and size. Your investment appropriately. Some people that, that sizing is zero and that's totally fine. Say, Hey, it's just not for me. It's just way too volatile.

CHRIS SIPES CFP®: You cannot go into Bitcoin without expecting, you know, 50, 60, 70, 80% swings plus or minus. Like it just, it, it is all over the board and you, it's always been that way. So it's not like it's been false advertising. You, you got to know when you're going in. So size appropriately. And just know that that's what's going to happen. All right, last chart is the commodities chart.

CHRIS SIPES CFP®: Inflation, what's an asset class that tends to do well in inflation while you're looking at it here? We got a spike in the commodities index, Bloomberg Commodities Index in 22. We've surpassed that here, but on the plus side of things, it does look like we might have hit a peak. Let's hope. That we hit a peak there and that we're going to start heading back down.

CHRIS SIPES CFP®: We didn't hit the long-term peak, which we saw in 2007. A lot of people would say was what sparked the sell-off in the great financial crisis when oil hit 140 a barrel at that time. Relative to the other Markets, a lot of people would say that that was one of the main contributors to the sparking of the GFC.

CHRIS SIPES CFP®: So anyway, I remember commenting on commodities in 2020 in one of our first shows that we ever did about how low the commodity index was. I believe that 2020 was the low, the historical low, and relative to other financial assets. Remember when oil traded negatively during the pandemic? You know, energy hit, I think 3% of the S and P overall.

CHRIS SIPES CFP®: So, keep that in mind, you know, when you hit extremes, you know, hitting extremes, it should be something that kind of sends the flag up of, is this time different? Are we going to start seeing something, you know, that is the rubber band stretch so far that we're going to start going the other direction.

DANO WEIR: And never hurts to contact your advisor if you want to get another look at what's going on with your portfolio and your risk. I want to throw this up on our screen here. Chris, we were nominated for an award this week.

DANO WEIR: So I don't know if you heard that news or not. But we were nominated for the Sonoma Index Tribune is hosting. Let me get a better version of the picture here.

DANO WEIR: They have their annual People's Choice Awards. There we go. Local newspaper here in the Sonoma area. And Chris received a nomination for Best Financial Advisor. So we're notifying our friends and clients of the award. If you're interested in voting, you just go to peopleschoice.sonomanews.com. Search for Financial Advisor.

DANO WEIR: You'll find us on there, peopleschoice.sonomanews.com. That link is also up on our website, sonomowealth.com, if you want to find it. Voting is available now and Chris, I think, you know, we got to win, right? I mean, that's, that's the goal. We're going to walk away winners with that one. And then you could throw the pizza party.

CHRIS SIPES CFP®: You got it. Pizza and sardines.

DANO WEIR: Hey, thank you so much for checking out our show on the Markets from Fermata Advisors, our private wealth arm, Sonoma Wealth. If you have found our show for the very first time, subscribe wherever you are, whether that's YouTube, Spotify, or Apple Podcasts. That's how you ensure you get future episodes of our show.

DANO WEIR: And also on those channels, you can find our other podcasts, including It's All Money. We just dropped a new episode this week, a deep dive on what Trump accounts are, whether they are or aren't a good fit for your grandkids versus 529s or custodial Roths. So find that episode out now. Thank you so much for checking out On the Markets, and we will see you next week.

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CHRIS SIPES CFP®: This content was produced by Fermata Advisors, LLC, DBA Sonoma Wealth Advisors, DBA Fermata 401K, DBA Fermata Tax, The opinions expressed by Fermata Advisors, LLC on this show are their own. Information presented on this program is believed to be factual and up to date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed.

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