Can the Stock Market Survive a Tech Meltdown? | WAYT?

0:17 >> We're back. >> We back. >> All right. Shark Kid, it's great to see you. We are coming at you live-ish. I mean, we're live. You and I are doing this live right now. It's It's 12:00 on the East Coast, Tuesday, November 10th. Josh is doing I don't know what, but he couldn't be here. So, I've got my goat, my chart goat, Mr. Matt Zambonaro. Matt, say how to the people. >> Hello, everyone. >> >> Where am I?

0:44 I'm in a cavern. It feels like I'm in like a back rooms type of situation as John pointed out before we started recording. I'm in Charlotte. RWM is having an offsite. We've got around 50 people in a room just like this behind me. So, here I am in a cavern. I'm excited to talk, Matt. The first half of the year, we had some like bumps, some ups and downs, a few things, but it was like kind of It was getting tedious, no? Same over and over.

1:10 >> right. Yeah, it was same same things over and over 4B, the whole thing. Last week was absolutely insane. This week is coming out with a bang. We have so much to talk about. I'm pumped. The dock is packed. You ready? >> Let's get to it. All right. before we get to the show, and this is going to be guys, you are in for a treat. We This is a Charter Palooza. Charts you've never seen before, fresh. They're hot.

1:35 They tell a story. I can't wait. But first, Matt, we have a sponsor today. Who is it? >> We do. This show is brought to you by State Street. Opportunity is all around us. It's in the tech that runs the world, the energy that powers it, and the financials that keep it all moving. And with State Street Investment Management Sector ETFs, you can invest in the sectors you believe in, all with a single trade. State Street Investment Management has a lineup of 11 sector ETFs that span across the S&P 500, you a way to invest in sectors like technology, energy, financials, and more. Invest where you see opportunity with the leader in sector investing. For more information on investing in sectors, visit statestreet.com/sector ETFs. Before investing, consider the fund's investment objectives, risks, charges, and expenses. Visit visit statestreet.com/im for a prospectus containing this and other information. Read it carefully.

2:23 >> Well done, sir. >> Thank you. >> all right. Before we get into the charts, I want to revisit what exactly the hell happened last week. I think that the audience knows that for the most part, we are very much of the mind that you as an investor are better off keeping your political opinions away from your portfolio like almost all of the time because it's noise. most of the time it just doesn't really matter. But last week, hm, we had an election that actually might matter because what drives the stock market are earnings. And if earnings are going to be impacted in ways that are unpredictable, you're going to get some volatility. So let's rewind before we get to to to to today.

3:14 Most of the time, Matt, I think you would agree that what's printed on the headlines is The stock market is very noisy and most of the time there is no actual meaning in the day-to-day gyrations. And so it's easy to look at a headline one morning, the market reverses course, and then 8 hours later it's a completely different headline and nothing really changed and we laugh at that sort of thing. Okay. Last week, I actually think that the course of the market as well as the headlines made a lot of sense. It was one of those rare instances where you went from red to green and the narratives made sense. So what happened?

3:57 After it became apparent that there was going to be be wave which was going to slow down the AI build out. Immediately, the future sold off and they sold off hard. The Nasdaq 100, I believe at its lows was down around 3%. Okay. I went to bed and I woke up and the futures were were were bright green and of course I I chuckled a little bit, not literally, but of course this is happening and the narrative quickly shifted from wait a minute, actually, don't we all hate the AI trade? Aren't we haven't we been punishing the hyperscalers and questioning the spending? We don't like the free We don't like the free cash flow going negative. We don't like the equity issuance. We don't like the circular financing. We don't like core we've not being able to tap the the debt market.

4:48 Like it's all happening way too fast and if we have an opportunity to to cuz the demand the demand side is not slowing down. So if we have an opportunity to maybe take our foot off of 150 mile an hour gas pedal and we can prolong this over a shorter period of a longer period of time, then that would be good for the market and the market responded in kind, okay? So I thought that the sell off made sense and the recovery made a lot of sense. So then we're talking now we're into Tuesday after hours, Wednesday, okay?

5:19 And then Thursday the market puked and I'm like this part I don't get. Like that that move I don't get. >> Yeah, I mean we were looking at the It was like 10:45. Michael and I were in the office and if you just looked at the intraday price action on that morning, it just looked like someone was getting liquidated all day. >> Thur Thursday? >> Thursday. >> Yeah. >> The market just kept falling. There was It was tick after tick after tick.

5:46 And I mean we ended up actually closing close to the lows of the day. It was a crazy two-day blow up and John, if we could chart on here, it was a two-day blow up that was equal to the tariff liberation day blow up. So here you're looking at the number of stocks in the S&P that were down more than 10% in two days, okay? So this is the Wednesday and Thursday sort of blow up, okay? 57 stocks blew up more than 10%. And if you want to break that 57 down, 32 came from tech.

6:20 So it was really tech that got absolutely crushed. 12 in industrials, and if you want to flip to the next one, John. These are the the actual names. Do any of these stand out to you, Michael? >> Is there any anything in here that's surprising? >> Yes. There's one thing to me. >> Okay. I don't see it. What is it? >> Okay. Nvidia down It was actually a relative outperformer out of all the semis that got nailed on this day. I mean, what are your thoughts?

6:53 >> >> Well, I would expect this to hold up the best, no? >> I don't know. I mean, for me, I was expecting for the name that was at the center of all of this to get fully annihilated when the headlines were to like turn, which the headlines in this case being it's a Democratic sweep, the data center build out is going to get paused. Who's going to get nailed the worst? Wacked off, if you will.

7:19 >> did But it did get wacked off. Yeah, it didn't fell It didn't lose a quarter of its value. I mean, that you know, that's not going to happen. But it fell 12%. It was down 9% the first day, I believe. 3% the next day. No, dude, that's a huge move for the biggest stock in the world. >> Yeah, it's a lot of market cap. It's a great point. Yeah, but Micron, holy hell, 23% Yeah, these stocks got nailed.

7:46 >> All right, this was an excellent chart. And Matt, you're going to have to help me make sense of this. So Rob Anderson from Ned Davis Research Research, they do killer work. They have a chart and they said for perspective And I I understand this is impossible for you guys to see, so we'll we'll try and unpack this. For perspective, this has been the sixth Nasdaq sell off of more than 9% since the 2020 low. And outside of Liberation Day, the max drawdown was around 13%.

8:16 The current semi drawdown at 29% is in line with Liberation Day. But many non-tech industry groups are holding up. So, for example, insurance, I mean, we you know, Berkshire is like the ultimate halo stock, right? Insurance stocks gained 13% over this same time period. And I guess the point is the previous sell-offs, like there was almost there was almost nowhere to hide, certainly during the during the Liberation Day, which is the middle with all the bright bright red underneath. But look at all the rotation in this in this sell-off. So, pharmaceuticals gained 10%, staples ripped 15%, commercial and professional services up 18%. There was plenty of rotation, plenty of places to to make money in the current in the current sell-off.

9:10 >> Yeah. This is different than past ones where past everything got crushed. This one we actually see some sectors that are showing leadership. John, if you want to chart on this six sectors within 3% of new highs, okay? So, these are S&P 500 sectors. And I just said, okay, over the past two years, what do these things look like? I mean, if you look at healthcare, >> Wow, massive. >> staples, you would have no idea what happened last week.

9:38 >> Mhm. >> You know, the the negativity is concentrated in a certain subset of the market, tech, specifically semis. And there's a lot of I mean, there's six sectors within 3% of an all-time high. So, there is some rotation going on under the surface, which you know, I think I I like to see. >> Man, I think it's remarkable. software. Is soft software was 19% of the market?

10:09 >> Yes. >> Right? So, by far the >> years ago, but yes, yes. >> I'm I'm sorry. My bad, my bad. Not software. semis. >> Semis, you mean semis. Yeah. >> Okay. So were were semis the biggest Is that a subsector or an industry group? Was that the biggest one? >> As an industry group, yes. >> Okay. So the fact that you could have the biggest industry group get utterly and annihilated, whacked off, down 30% okay? And the S&P 500 What was What was the max drawdown last week? Was it down 6%?

10:44 >> Yeah, six. >> I'm checking right now. So it was down All right. So right now it's down four. It was It was down 6%. Just goes to show part of the theme that we've been speaking about is how the amount of money in the system is totally rewriting how we think markets are functioning. Now, of course, there is a limit, right? Like Nvidia is falling again today. We'll get to that in a little bit. If if if tech falls I You know what? We'll put a pin in this. We'll come back to this. How How much pain can the market withstand? But because we have more on that later. but just just a really interesting market environment.

11:20 >> Yeah, and it's a market environment where you know, like not everyone not everyone's portfolios are getting annihilated. You know, if you're somewhat diversified within different sectors, you're feeling pain, but it's not like just like a complete knife in the heart. >> Yeah Yeah Well, if you're an index investor, you're you're probably doing just fine. However, for anybody who's listening who owns anything outside of just a cap-weighted index, which is a lot of people, they're feeling it.

11:49 Like even Google Did Google fall 30%? >> Yeah, Google got nailed. >> So Oh, here here's what I wanted to ask you actually. >> right. Yeah. >> So here's what I wanted to ask you, Matt. You know those charts that you make that show forward earnings, and I know we're about to get to a few of those. >> Yeah. >> How is How often are those updated? >> So the reason Forward earnings are updated daily because the analysts are always changing their projections. So, what's great about forward earnings is you can view it in real time and like trailing earnings, it's only really updated quarterly because you only get quarterly reports. Yeah.

12:27 >> So, have analysts taken down their earnings estimates at all? >> Not yet. I was just checking yesterday Nvidia's forward earnings estimates literally hit an all-time high on Friday. >> All right. So, we have so so we have that in the show, but to me that's that's a whole can of kaboodle because you could have a scenario where Nvidia's earnings estimates fall 6% and the stock could fall 40. >> Yeah. >> I'm making that up, but the the point is the the price is so sensitive to earnings growth.

13:03 >> Or you could have a situation where the forward earnings I'm not saying this is this this is just possible. It's probably not likely, but the forward earnings could come down, but if the stock gets re-rated higher because those forward earnings are >> How would that How would that happen? >> Well, let's say the forward >> Why would that happen? >> The the the durability of those earnings out 12 months for whatever reason. You're Okay, LOL. But I'm just saying, right? Like this is the idea. It takes a lot of e to offset PE. Like you could have a 10% fall in the forward earnings estimates, but if the PE goes from 10 to 16, it the stock's actually up.

13:40 >> Okay. >> So, yeah. Not Not likely, but possible. >> Okay. all right. Let's keep it moving. What's going on with the Mag 7? >> Okay. All right. So, the narrative coming into this year was the broadening of earnings across the market. So, obviously we know 2023, 2024, 2025, the Mag 7 were all of the earnings growth for a long time. And I think even coming into this year and consensus has been right, it's that the 493 we're going to kind of catch up from an earnings perspective. So, I made this chart that shows the Mag 7's earnings growth year over year for the past four quarters and then the other 493s earnings growth year over year.

14:22 >> So so where where should where should our eyes focus the left or the right for that? >> let's focus on the left for now and let's focus specifically on the boxed in blended estimate. so here we have 32.6% year over year earnings growth expected for the 493 this quarter and then the Mag Seven are expected to grow earnings by 22.6%. So this is the first quarter in the past four where the actual the other 493 are actually expected to outpace the Mag Sevens earnings growth.

14:53 >> And those those big red bars are the difference like for example in Q2 okay got it. Let me ask you this chart off for a sec. How the hell are the 493 expected to grow earnings 32% cuz the analysts aren't dumb. They usually get it right. Where where how? That's a monster number. >> Yeah, it's a monster number. I didn't break it down when I was looking at it. Like I get the headline numbers from Bloomberg.

15:16 >> it but it to me that's a that's a that's a what? >> Yeah, it's a lot it's a lot of earnings growth. I think it's really just there's there a lot of it is I think there's some energy in there because >> All right. >> for obvious reasons, but also it's I do think that there is this broadening in like just the sort of companies that are going to actually benefit from the AI build out are starting to see a little bit of like their cost cutting filter in to their earnings and so you're seeing that kind of in the numbers not just for the hyper scalers but for the other companies in the index.

15:54 >> All right. Well, love to see this. Let's stick with this. What's the next chart? >> Okay. All right. So Michael actually can can we chart off for one sec? >> Sure. >> So Michael we always I mean you you often like me to look at ratio charts one thing versus another software versus semis you know equal weight versus cap weight whatever it is. >> it's all relative, right? >> It's all relative. >> >> And I was thinking, okay, if the forward earnings update daily, I could almost do like a ratio chart of the S&P 493s forward earnings per share relative to the Mag Seven's forward earnings per share to see are the revisions happening at a faster pace for the 493 versus the Mag Seven, right? And so that's the And so can we chart on here?

16:44 John, so that's on the left the 493s forward earnings per share relative to the Mag Seven. And those actually bottomed on August 31st. And then on the right, I have the the price ratio of the 493 versus the Mag Seven. And so the the the ratio of forward earnings for the 493 is up 6 1/2% since that August 31st low. And the the price ratio is up 7.3% since its October low. So what I'm saying here is that the 493 have been outperforming the Mag Seven over the past few months.

17:19 And it's because their forward earnings have been getting revised higher at a faster rate than the Mag Seven. So there's something here. Like it's not just the Mag Seven falling, you know, that there's actual earnings to back up the story of the 493 in the broadening. And so that's why that's why I brought that. >> All right. Well, it's nice. Sometimes the market moves make sense. >> It This one makes sense. They're not going to all make sense, but I like when it does.

17:44 >> all right, it's been a it's been a tough quarter for the hyperscalers. So Amazon got crushed. I think it closed at the highs, but it opened down 9% or so. Google had its worst day in a long time. Meta opened at 750, closed at 650, I believe, something like that. Apple did just fine. how did Microsoft do? I can't quite remember. either way, whatever. >> Microsoft fell, yeah. Yeah.

18:15 >> Okay, so throw this chart on. >> All right. So here we're looking at the average one-day move from the Mag seven stocks that have reported and beat. >> And beat. Okay. So So what's in here? >> And beat. Okay. So you'd think and that's why there's so many positive bars here, it's because most of the time on a beat and this goes back to Q1 2018 the the Mag seven stocks rally. But in Q3 this quarter four of six have beat so far and on average they've fallen 3% the next day.

18:54 So we could chart off like if you were to ask me just if I'm to be complete honest like going to the quarter, what are the things that would get me cautious about the Mag seven? I would say if the companies blow out their earnings and the stocks fall. >> Mhm. >> And just like in the spirit of being honest like that's I don't I don't love to see down 3% the next day when we're seeing these really big earnings beats.

19:24 They're not small. They're still crushing like high estimates. And yeah, so that's my thought. >> I would totally agree with you. There there there's two schools of thought here. Okay. a beat and a sell off the the conventional wisdom would say like yellow light, right? Like that's not that's not awesome. A charitable interpretation, a very charitable interpretation like grasping for straws would be well there's a wall of worry. The wall of worry is growing. People don't think that they can continue doing this.

20:03 Whatever. I would be I would be more inclined to agree with you. Like I I think it's it's pretty hard to spin this as a positive, but let me try. At least let me let me just let me let me let me ask. No, because because I think there's more there's some more stuff important stuff going on here. So which four names beat? >> I don't have them in front of me, but let's think of important. I mean, yeah.

20:24 >> let's just think, let's just think and beat beat what? Bottom line? >> They beat bottom line. Yeah. >> Okay. Well, so without knowing the names, there's no point in guessing which they are. but I would agree with you that this is this is unequivocally a feather in the hat in the cap of the bears. And we need to have a better analogy for giving people the benefit of the doubt. Feather in the cap? I don't know. I mean that what is this Robin Hood?

20:52 But but it's a feather in the cap. There's there's just there's just really no no doubt about it. >> Yeah. It's I mean also I mean you could spin it and say that it's good to see some discipline in these names and like a little bit of selling. Again, I'm grasping for the straws. Right? LOL. >> That was balls and strikes. This is this is one for the bears. >> Right. Right. okay. We can move on.

21:12 yeah, I guess we'll do this really quick. I speaking of the bears okay, I want to give credit when it's due to the short sellers because even though they're wrong most of the time some of these people are doing really great research >> For sure. >> and I just wanted to highlight this company that here, John, can we kind of like just tweet on here? okay. So, this is Culper Research. They tweeted this on May 13th.

21:40 >> of them. Never heard of them. What what's their name? >> We're Culper Research. Never heard of them either, but that 's why we're putting them on the map right now. Okay. So >> Research. >> credit to them because they said CEO Wong and this is May 13th before any of this news dropped CEO Wong has walked alongside Mega Speed at every step and seems to have a close relationship with Mega Mega Speed's Alice Wong. They partied together in June 2024, same month as the Apex and Alibaba pledge, then dined together in May 2025 just after US trade restrictions.

22:14 they nailed this one and May 13th stocks down like 20%. So, credit where it's due. And I don't know how they figured this out or came up with this, if it's just a picture and they thought that she was looking at him a certain way, I don't know, but credit where it's due. >> So dude, Nvidia made an all-time high in the a month ago. >> Wild. >> Isn't that crazy? So I don't know the last time Nvidia went from an all-time high to a X month low in whatever, like 25 trading sessions.

22:49 The stock is right now off almost 30% now. There's obviously no way to handicap what happens from here. Is is this is this the type of thing where Congress is going to get involved and he'll be indicted and removed. I mean I I'm who knows? But outside of Elon Musk, I would think that Jensen is number two for key man risk. Like if if Elon God forbid got hit by a missile, SpaceX and Tesla would fall 40% overnight.

23:25 I don't quite think that Nvidia is is that reliant on a single person, but he means a lot to the company. Like if if something bad happens, this stock is going way lower. >> Yeah, like some companies the CEO is like the persona of the entire company and without them the company changes and the image and the investors' feelings toward the company change. >> Mhm. >> Tesla, SpaceX is one of them. I think number two or three in that case is Nvidia. You don't really feel that with like Microsoft, right? Also over the weekend, were you like interested in this news coming out? Like I kind of just saw >> The the Jensen one?

24:03 >> the Jensen one. Like what was your take when you saw it? >> Interestingly, this is not brand new news. Now, I think what's new is that Jensen emailed his team. Like he knows that he was he was caught, but this story came out last week. I'm scrolling, so just bear with me. Ja Ben shared this with me and Josh. What day was this?

24:38 >> You mean like it was leaked almost? Like is this >> Didn't the The New York Times ran this story, but it might have been Hang on. I know that this is not great podcasting, so forgive me. can I not find it? >> All right. Well, when Michael finds it here >> Was Was this Was this 2 weeks ago? Okay, whatever. The The market didn't seem to care whenever the New York Times reported on this. And And now now it does.

25:10 >> So they they had So this was out there at one point before this. Like this is not an issue that had been made. >> The New York Times ran this headline a week ago. let's do some Nvidia some Nvidia fundamentals. >> Yeah. Okay. Michael, you want to You want to do this one? >> No, these are all you, Cook. >> Okay. All right. So here we're looking at Nvidia's stock price since ChatGPT was launched versus the revision higher in forward earnings estimates. So the forward earnings are up 3,246 %, so they're up 30x since the ChatGPT launch. And then the stock price is up 9x, so it's up 944 %. So essentially the earnings growth is tripling. The forward earnings growth is tripling the stock price growth. And John, can we skip a chart here? We don't have to do this next one. I Okay.

26:03 Now this is Everyone Whenever I post anything on LinkedIn or I say anything publicly about forward earnings of Nvidia, instantly everyone is, well, the forward earnings are inflated, XYZ. And maybe they're right. I don't know. But all I have is the data and the numbers in a spreadsheet, okay? So I looked back and I said, Hold on. Let me take the forward earnings from a year ago and align them with what actually happened over the past 12 months and see how accurate are. And do that for every point since 2021. And it's not bad. And actually, the the the actual trailing 12-month earnings have come in above the estimates.

26:44 >> Hm. >> Almost every single quarter since 2024. So maybe these lines converge over the next 12 months. Again, I have I have no foresight into that. I'm just saying that the track record is good. Yeah. >> You know, not not to blame but the point cuz this is probably interesting to nobody, but like where are these analysts uploading their estimates? Is there like a repository? >> So like for example, like Bloomberg or FactSet, they like are monitoring the estimates like every single day. And they're like the aggregator of the estimates. And I think it's just a blended average of all of the consensus estimates that they get. And some of it's top down, some of it's bottoms up.

27:26 Like some of it's it's like like for example, you know, people talk about like the S&P 500's forecast at the end of 2027, but they'll literally just like aggregate all of the the actual stock price and like estimates for all of the 500 stocks in the index and they will back into an S&P 500 index value at the end of 2027. That's like a bottoms up. And then there's a top down where like, you know, Matt Maley talks about his year-end 2027 forecast and it 's just a number on a screen and then you average those. Like I think the ones that you were looking at here are just bottoms up for all of the different analysts. Yeah.

28:02 >> All right, let's talk let's talk value. I mean, obviously value has been dead for a long time, but it it's it's making a comeback. so Mike Zaccardi tweeted value versus growth. And we're looking at the this is the 1,000 I believe. IWD is the Yeah, it's a 1,000. all right, it's at a three-year high. Perhaps hard not perhaps, unbelievably so, this this this is unchanged since mid 2020. So value and growth have tracked each other over a six-year period. Obviously, there's been, you know, they've been tracked, but they're in the same spot, I should say, after a six-year period. They just won of their best value outperformed growth over a six-day period by the widest margin since 2000. So, this was like I don't know, a dot com unwind type of event. Not literally, I mean it would right that would you know, but that that was that was pretty bad.

29:00 >> Yeah, we're breath-resting in the value versus growth ratio. There's something there. I do buy it. I know like I know. But I listen to Josh whenever he looks at this and he says it's just it's it's usually a fake out. I just don't really have like the number of years to feel like oh okay, I can tell this is the one. >> I think it's very simple. If the AI trade has peaked, then you're sure value will continue to outperform.

29:32 Has the AI trade peaked? I don't know. You don't know. And I was just I was just talking with Ben about this. One of the greatest things about the stock market, it is the ultimate leveler. This is the ultimate level playing field. If you were to ask Stan Druckenmiller his opinion about the stock market over the next week and you were to ask my wife her opinion about the stock market over the next week, I don't know. I guess I I I'm I would probably respectfully give the edge to the greatest investor of all time.

30:09 But nobody knows. >> Yeah, right. >> Like literally, and I know we have to continually remind ourselves of that, nobody knows where the stock market is going to go. So, do I think that this is the peak of the AI trade? Do I think that it's all going to come crashing down? No, I do not. but that is just my opinion and who knows. >> Right, but you're saying in other words like the AI trade cannot coexist with this ratio continuing to move higher for value versus growth. It would be like very difficult for both of those things to be true at the same time.

30:38 >> Correct. >> Yeah, yeah. I think I completely agree with that. >> So with that said, we did some work, or you did some work on what is actually even value anymore? Like what's inside the value index? So let's let's take a look. >> Okay, Michael, I know you didn't ask me for this, but I was imagining what you would ask me for, and this is what popped into my mind, okay? So this is the just a very simple pie chart of the sector allocation within the S&P 500 value index.

31:04 So the the largest sector, this kind of surprised me, is technology. >> It looks exactly like the S&P 500 index. >> Yeah, and financials are 15%, healthcare is 13%, industrials 10.8 discretionary, and then like staples are only 8 and 1/2 %. >> You know, no no shade to the fine people at S&P. Try that for a sec. Did you know that they are able to split stocks? So they could put let's just say I'm I'm using well, let's just use stock XYZ, okay? And stock XYZ has a 6% It's a big stock. Has a 6% weight in the index the S&P index.

31:45 They could put 4% of it in growth and 2% of it in value. It's very It's like very weird that way. They could be in both indexes. >> Whoa. >> Oh, right, because it's based on market cap, I think. There has to be Yes, there is some index construction. I was like trying to figure out like the actual underlying constituents and what can get you in here. Like I I was I was going to start this segment by just saying like what gets you in here in the first place.

32:09 >> Yeah, we probably should do some work on that, but whatever. >> it's it's like it's like tricky. It's difficult to even describe. >> I mean it's got to be defined somewhere. There's not There's not There's not There's not a mystery. But anyway, whatever. Let's Let's Let's just So what's So next chart. This is interesting. >> Yeah, so this is the top 10 holdings in the value index, okay? And then their year-to-date return. >> Okay, so respectfully >> Yeah.

32:35 >> In what universe I guess this universe is Tesla a value stock. How? How, Swy? Apple's forward PE has never been higher. Do you know why? Cuz it's it's it's probably the rest of it isn't the growth index.

33:05 >> Right, right, right. I see. So their universe, they're only using the S&P 500 as the starting universe, I was seeing. So it's just not a lot of stock There's like not enough stocks in there to put together something that is like all value, that is going to be diversified. It feels >> there's there's there's all sorts of different value indexes. But I guess the point is chart back on. What's interesting, another interesting takeaway is that you've got 1 2 3 4 5 6 7 of the top 10 are outperforming the overall index. Oh, no, that's the value index, my bad. All right, whatever, same thing. They're outperforming the S&P.

33:42 in some cases beating the out of it. Like Intel even still Intel still up 60%. That's interesting. >> Yeah, it's wild. >> all right, next chart. So so we looked at Micron, which is by far the largest stock in the iShares MSCI USA Value Factor. Is this Is this IW D? >> What's that? VLU VLU E, you see? >> No, no, no, no. Oh, it's it says it right there.

34:14 My bad. It says it right there, you dumb bald bastard. All right, so point is watch your value. Like if you're thinking about I want to own value stocks or I want to own a value index, be careful Not be careful. Which one you pick matters quite a bit. >> Yeah, the next chart tells that story. Like look at the value these different value ETFs and their returns year to date. VLU E is up 37% year-to-date.

34:44 IVE is up 14%. So that's like a greater than 20% spread between those two. It matters what you choose. You got to look at the actual constituents. >> Dude, I could have sworn that Micron was the biggest waiting in the Russell 1000 value. Did they Did they maybe just did a reconstitution that I missed? I don't know. >> Yeah, I was looking today like I was looking through the stocks. I I don't see MU in there. So they might have taken it out. Yeah.

35:18 >> Interesting. Interesting. okay. All right. We're about to We're about to blow some faces off your body. So if you're not sitting down, I suggest you take a seat. So if the tech I might not want to use a B word. If tech stocks peaked, okay? If that was it, what might this mean for tech stocks going forward? And more importantly, what might it mean for the rest of the market, the 493?

35:52 So I had my chart goat Matt look at what happened when the dot-com bubble burst and the findings are amazing. Matt, take it away. >> All right. Okay, so we're looking at here the number of stocks over time up 50% or more from the dot-com peak. And then conversely, the stocks that were down 50% or more from the peak.

36:22 And if you look 24 months in to the dot-com bubble from the peak >> 24 months from the peak >> From the peak, yes. We had 129 stocks in the S&P 500 over that period up 50 up more than 50%. Okay, that was literally more stocks up 50% than we had down 50% at the time. And so like obviously in the world. >> for one sec. But so before you you you finish your thought, the dot com bubble and its aftermath had such an impact on an entire generation of investors, right? You have people that are shell shocked understandably so, not casting judgment. If I was invested in stocks that fell 90% I would probably be singing a different tune. I I wasn't there.

37:16 but this idea that every stock just got killed is not true. But any thing that broke the link between price and market cap outperformed dramatically after the dot com bubble, which is why you've seen for the last 10 plus years literally so many value investors desperate to return to the wet dream that was the bursting of the dot com bubble.

37:50 When if you were just all if if you just didn't own five stocks you were a genius. Back to you. Chart back on. >> Right right right. So well said Michael. Okay, I wanted to point this out. Look at the on the right hand side of the of the chart, okay? You could see the stocks down 50% or more surge and the stocks up 15% or more tank. That's like kind of the capitulation into the actual low where people just had enough and that marked the bottom.

38:25 I just want to point that out. Like that's like you're looking at the capitulation in the red line here. >> And of course of course all this stuff is is only a parent with the benefit of hindsight. >> Absolutely. It's not that simple or easy. You could I could have stopped the chart 16 months in and showed people at the time and they would have been like oh that looks like a capitulation too. >> The next >> chart shows the path of tech and comm services versus the rest of the market. And this is unbelievable.

38:59 What are we looking at here? >> Okay. Would you ever have believed this to be true? So tech and comm services, as we all know, got annihilated during the tech bubble. Everything else was actually up from the dot com peak to the absolute low of the dot com bubble. And >> Wow. >> I guess the point being is like when people say it was a tech bubble, it was it was a that's the right name. It really was.

39:33 >> So tech and tech tech and comm services from the peak to the bottom from March 2000 to the bottom in October 2002, that group fell 70% the rest of the market was up 3% and in fact like before the puke at the bottom, the rest of the market was up almost 40% I mean really one of one of the one of the finer charts I've seen. And then all right, let's finish up quick. Let's look at the the the the share of stocks that were down 20% during the dot com bust.

40:08 >> Yeah, right. So here all the way to the left, you're looking at tech and we had 99% of stocks within the tech sector that fell into a bear market at some point during the dot com bust. But if you look all the way to the right, like staples, financials, utilities only like a third of the names in each of these sectors actually fell 20% during the dot com bubble. So I guess my point is like there was a lot working during this time period. I mean it it the the chart dramatically falls off after tech and comm services.

40:40 Like materials is the third ranked sector on this chart. Only 45% of material stocks fell 20% during the dot com bust. >> Let's end with the last one. So this is >> the inverse. So this is the number of stocks or the percentage of stocks that were higher at the low than the peak. And there was I mean, Staples is probably not surprising at all. But look how much was working. Like 50% of financials and discretionary were higher at the bottom of the market than they were at the top.

41:15 And so chart off. So in conclusion, if today follows the dot com bubble, and it of course it won't. Of course it won't. But there should be plenty of other areas of the market that work unless we experience like a massive global recession, which we didn't. In fairness, we did not. The the dot com bubble did not lead to a massive deep recession. It was a stock market recession.

41:46 It was not an economic catastrophe. >> Right. Let's talk about the Nasdaq catch up trade here. >> Yeah, so so let let's let's be optimistic and let's assume that this is not that that we will not look back a year from now and say oh I can't believe we thought that Nvidia was a value at 14 times forward earnings. >> Right. Let's really hope that that's not the case. Right. >> And by the way, after today's sell off, where is Nvidia? Is it 13 times forward earnings?

42:14 >> It's got It's probably lower. I mean, I'm the dumb ass that called it the fattest pitch in the market last Tuesday. So that's how you do it. okay, let's >> fatter today. Let's keep it going. >> All right, so last Wednesday the equal weight S&P 500 made a new high and the Nasdaq was 10% off its high. So I was just looking like that's kind of I mean, I I bet you that's rare. >> All right, so the equal weight S&P all time high >> Yeah.

42:43 >> Nasdaq 100 in a 10% correction. >> Correct. So I am saying okay, like when has this happened in the past and how long does it then take for the Nasdaq 100 to catch up to the equal weight? And so that's what I'm showing on this chart. Is every time this has happened in the past and then the actual number of trading days that it took for the Nasdaq 100 to catch up and make a new all-time high in the same way that the equal way had just done.

43:08 So we are now three trade three full trading days since this happened on Wednesday. And if we flip to the next chart we can see okay this is the actual returns from past signals of when the Nasdaq is 10% off a high but the S the S P 500 equal weight is making a new high. So after three months okay the Nasdaq is up 8.1% on average if you don't include the tech bubble. Okay the tech bubble skews it so much.

43:38 >> Sure sure sure. >> over a 12-month period after this happens with again stripping out the tech bubble the Nasdaq 100 is up on average 21% 21.6%. So I guess my point is typically what happens when the equal weight is leading the Nasdaq 100 it's not the the equal weight catching down to the Nasdaq. The Nasdaq historically catches up to the equal weight and subsequently makes a new all-time high and the forward returns are actually very strong. So if that's the playbook for this same for this past sell-off you know what we would theoretically expect on average is a 21% gain since last Wednesday a year out in the future.

44:27 >> All right do me a favor. So the average to get for the Nasdaq to get back to new highs ex the tech bubble is 113 days. So why don't you put this on your calendar 113 days from now which is what five months or so give or take. >> Yes. >> So we'll revisit this in the spring. >> We'll re okay sounds good. I'll update the bar on the chart and we'll see where we're at.

44:54 >> We'll see what happened. I like it. all right, so we're recording this, like I said, it's Tuesday around noon, and we got we got a hot print today, huh? I I haven't had a chance to look at the numbers. I'm at an offset with 50 of my co-workers. so I have not had a chance to dive into this, but the two-year is ripping. So what happened? I mean, obviously inflation is still reflationing. >> Inflation's inflationing. What's weird about this report is that there was no number last October because of the government shutdown. So there's no year-over-year CPI. Like you literally can't calculate it.

45:33 >> So did they did they use September and November or they just didn't show it? >> They like took the well, Bloomberg created an estimate where you take the average of September and November. But people are focused on the month-over-month number. And month-over-month, yeah, came in hot both for headline and core. And I think what's important is looking what matters for investors is looking at what this means for Fed funds futures. so John, if we want to chart on here. So you look at the dark blue line here. We're looking at the Fed funds futures, you know, before and after the CPI release. The dark blue line is before CPI.

46:07 And the projection out to early 2028 was Fed funds rate rising to 4.37%. But then after the inflation print, now the number has been revised higher to 4.54% expected by the market. >> That's a that's a that's a big move, no? >> Yeah, it's like it matters. it definitely matters. And that's like the repricing that we're seeing today. Stock market fell. this next matrix that I made is really what I want to spend the time on here.

46:36 So actually we could we could chart off for a second. So something that I learned that Tom Lee had taught me at Fundstrat was that like >> out Shout out to Tom. >> Shout out to Tom. Like you know, he taught me that like in a lot of these economic releases, the actual signal is in the the reaction to the And so, for example, the best case scenario for today, I think he would say to me is like, a hot CPI report and the market actually finishes positive because that's the market's way of saying this either was priced in or this is something that we're looking past. And so I said, okay, how do I almost quantify that? Like how do I actually go put numbers behind that and see, okay, like what is what do returns look like when we see a hot inflation print, but stocks rise on that day on a forward basis, right? And so that's what this matrix is showing. So the way to read this is look at the left of the matrix first.

47:39 Let's say when stocks fall on a cold CPI, good news, the S&P 500 is higher on average by 5 and 1/2% over the next 3 months. And so you could do that for all the different grids, but the grid that really matters here is is the one in the bottom right, which is when stocks rise. >> I love it. >> When stocks rise on a hot CPI, which is which is obviously bad news. >> Hot Matt, how did how did you how did you what's hot versus cold? Just above or below estimates?

48:07 >> Above or below the median estimate provided from Bloomberg. Yep. And so when stocks rise on a on a bad report, so we don't have the it's again, we're recording this intraday today. We don't have the close price today, but let's say stocks actually finish up on the day, the the average forward 3-month return from past instances of that is 6.2% and 91% of the time >> Wow. >> the market has been positive has been positive. So I guess the point is like, you know, we want to get like so hyper fixated on the numbers and the categories and like shelter and stripping things out and like I think it's just like taking your cue from what the market is telling you is just going to be more productive when trying to figure out what's going to happen.

48:49 >> Well, the equal weight market is up 20 basis points. >> Like that mat like I you know, I should run this for equal weight and see what it is honestly. >> S&P's No, you know what? Unfortunately, >> 2026 is broken a lot of this stuff because the market is so top heavy, and it's so it's so AI hot or cold. Like today's the the the index moves today, again with Nvidia down 6%, has quite literally nothing to do with CPI.

49:17 Like nothing at all. So what was there anything in the data that was noteworthy or did you not look at it? >> Like I I just looked like if you look back at these instances of like a really hot CPI and stocks were up, you do see like some some meaningful lows where that happens. So >> just meant my bad. I just meant was there anything in the inflation report that was interesting? >> I see like I don't even dig in too much.

49:41 You know, I'd rather just look at the market, so so I didn't really go there. Yeah. >> Okay. All good. I I got nothing. All right, let's move on to make the case, Matt. What do we got? Go ahead. >> All right. So everyone's trying to figure out who's going to win from AI. I tried to pick a company that is at the forefront of like actually providing the data to all of these LLMs. And I chose MSCI. So that's what I want to make the case for.

50:11 And I want to start with a chart because Michael, I showed you this chart last week and I think both of us were kind of blown away. Like look at the base in MSCI's price. The stock hasn't really gone anywhere since early 2022, late 2021. >> This is going to 750, Matt. Why why don't I own this stock? >> This this what I'm thinking too. >> I'm a coward. >> Like we'll look at this. I'll make the case, but it's like I got to open up my brokerage account and actually make a decision here. Like this stock looks unreal. And if it breaks out, I think above let's just use 700.

50:46 This thing could go to like $1,000 really quick. that's my take. And can we flip to the next chart, John, which shows like these are some fundamental metrics. I'm not an expert on MSCI, but I just wanted to see at a high level like how's the business doing. So, pretty good. not bad. you know, revenue has tripled since 2015. you know, the operating margin is stair stepping higher. Hit 56% over the past 12 months. They reported they've already reported Q3.

51:20 And so the business Yeah, sorry. >> look Yeah, no it looks phenomenal. You know it So I I have a question for you about where you would put the stop. But before we get to that, let's talk about this idea that data is somehow in danger from AI because these names, a lot of these data providers, FactSet and there was some other going on there, but a lot of these names got killed as if rating agencies were not like a government regulated type of entity.

51:51 >> Right, like as if you could just like ask Claude to make you like a compliant index that's just going to do everything that Standard & Poor's has spent decades doing. >> Right, and they're not going to sue them into the Stone Age. No, there's going to be partnerships obviously. >> Right. Yeah, I mean I Yeah. >> So the narrative that narrative is obviously debunked. You know, Price did it, but investors came to their senses. The only one of the tricky things about the stock is it's it's a little bit messy.

52:24 I'm not quite sure where you would put your stop. Is it Is it like a like a a weekly close below 515, which is quite a bit lower than it is today? >> You know what I would do? John, can you put the price chart back up? I would draw a diagonal trend line that is the ascending wedge from the 2022 bottom to the recent low. And I would draw that and on a break and retest and then getting rejected by that trend line, I would sell it. So I wouldn't even actually I wouldn't actually probably even set a stop. I would just have to monitor the position.

52:59 >> Yeah. Yeah, I think I think that's all right. I I know if I'm going to buy this. I I'm also going to feel like a dumb if it goes to 800, which I mean it's going higher. It looks it looks it looks very good. All right, let me let me got I got a quick make the case for you and then we're going to get out of here. >> Okay. >> John, the reveal, please. Okay.

53:23 So the orange line is the S&P 500. Okay? >> Okay. >> We're looking at the last 12 months. And the purple line is an industry group, I suppose, a subsector maybe, whatever whatever it is. It's one of those things. And the conversation around mid September or early October, you see that spread where the purple line was like significantly underperforming?

53:54 >> Yes. >> The S&P. Many questions were asked about what does this mean for everything? And as you can see, it has since ripped. It is now outperforming the index over the last year, but back in October, these were legitimate questions and we spoke a decent amount about about this this trade on the show. Do you have any guesses of what the purple line represents? Chart off. >> >> Okay.

54:25 When I looked at it first, I thought healthcare. you said it's an like it's industry group on the sectors. >> focus on this. We would not have looked at healthcare and really been worried about anything, right? Like this was this was the type of of category that that dramatic level of underperformance, what does it mean for everything? You have 5 seconds. >> Software. >> No.

54:55 Any anymore? That's it. You lost. XRT. >> Oh. I don't look at these. Okay. >> You don't? >> You love retail. You you you love the retail stocks. Nike's down, whatever. Yes, yes. Okay, retail, XRT. Got it. >> Okay. And you know, I didn't know that about you. >> Yeah, I don't really look at them. Like I don't you know, they don't interest me at all. >> They don't they don't matter. >> Well, you know, I bought them all in college and they never worked. Then I sold them and then that's it.

55:25 >> The truth is, if you look at XRT or even equally discretionary relative to the S&P, the S&P equal weight, it's been going down until the right for years. So when people say like, -oh, retail consumer stocks are crashing like the economy's about to roll over, no, dumbass, it has nothing to do with anything. >> Right. Yeah, no, those stocks are broken. But I guess they're they're ripping a little bit. I don't know. I might feel a little foolish out there.

55:55 >> so if the breakdown doesn't really matter, then I guess the recovery doesn't matter either. so all right, Matt, you did some incredible craftsmanship. I can't wait for the world to see your work. where do people find you, Matt? >> Thank you, Michael, for having me. I really do appreciate it. they can find me at chartkidmatt.com. and then if you're interested in our charts, you can go to exhibitAforadvice.com if you're a financial advisor and and get the charts in your brand.

56:25 >> All right, thank you everybody for watching. We are back tomorrow. Ben and I have Animal Spirits in the morning. We've got a fan favorite on TCAF. we've got Ask the Compound on Wednesday. Thank you very much for listening. Hope everybody is weathering the Nvidia sell-off. We will see you next time. >>