#1026 - Sell in May or Chop Away? with Mish Schneider | Netflix, Commodities, & Crypto

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2:05sell in may or chop in may hi everyone welcome to the real vision daily briefing i'm maggie lake with me today is mish schneider chief market strategist at market gauge.com and a member of the rv marketplace hey mish always great to see you great to see you as well and here we are Crazy day, of course, in the markets. Yep. And just about to go into May, and we pulled that question right straight out of your great research note, because everyone is trying to figure that out. Certainly a bearish tone today as we sort of approach that new month. We saw Treasury yields rise after the Employment Cost Index surprised at the upside.

2:43Of course, that jump in yields hurt stocks, the NASDAQ selling into the close, which you never want to see, sort of picking up some selling momentum down 2%, the Dow and S &P down 1.5%. It was interesting because not all of the data was strong. We had consumer confidence that fell. Chicago PMI was well below expectations. But it seems like investors are clearly nervous ahead of the Federal Reserve. What do you see going on in the economy, given that we have these mixed signals? Well, last week was GDP. So there you had the classic stagflation conversation, which you know we've been having for quite some time already as a potential.

3:22And yet the initial reaction was negative and then positive because the market still feels that if the Fed is starting to get concerns about things like recession, number one, or stagnation, number two, or the fact that the yields are so high, the cost of paying back the interest on the debt is really high and that would behoove them to lower. This is what's really confusing the market right now, which is why we say, is it sell in May or is it chop in May? Or I should say continue chop from April into May. So I think right now where we've got a situation is the Fed's probably not going to do anything tomorrow.

3:58My sense is that they will see both doors, more inflation or possible recession, and decide right now to still stay outside. And they should. I think they should. They should stay the course at this point until they have further evidence. And I also, what spooked the market today, by the way, was Yellen, because she came out and had a lot of negative things to say, all the things she was worried about. And I think that also. So here we are. We all thought that AI was going to save the day right until through last week when we had the Microsoft earnings come out and the Google earnings came out.

4:38And I know there's a bunch of earnings coming out as you and I are talking today in the tech space, AMD, SMCI. I haven't seen, obviously, I'm looking at here, but that maybe will help. But it turns out that tech, like everything else, like the EV space, has to find a sense of value. And it hasn't yet. And speaking of value, we started to see a rotation into value. But yet right now, it just seems like the market is totally confused, but not necessarily in a horrific standpoint yet. Yeah. Yeah. That's why you're seeing this chop because you, you know, when you start to see indicators that either side can grab onto, it does make it a little tough.

5:22By the way, I just want to bring up something that is happening in the chat. Doug posted, hey, Mish, nice call on the return of inflation on your last RV visit. Where do we go from here? I just want to say we're going to call out two things, and this is why we love having Mishan. Not only has she been talking about inflation, not just the last visit, Doug, you've been talking about sort of stagflation, being concerned about inflation. We did it at the beginning of the year in January, we talked about it. I mean, you have really been concerned about this. As well as last time you were on, we're going to talk more about tech in a moment, but you also threw out, as you do sometimes when you're just thinking about your gut and you're looking at the charts in your holistic way, a comment about Netflix.

6:04I just want to play a little clip from that. And the only strong feeling I have right now, other than what I told you is to watch as your great barometer for timing, is go short Netflix. I know you weren't expecting that, but I just did a whole article about that today for my daily. I think Netflix is completely overvalued at this particular point at 620. I always love when you say you weren't expecting that. And there's always some of those gems put in. But good on both, Mish, because you're not afraid to be a contrarian. If you're on the platform in the chat, Brian, drop the link to Mish's work in there.

6:47And remember, if you're an ARGUE member, you get a discount in our marketplace. So head over to the platform, and you can find that marketplace under its own tab. And this is why you're a fan favorite, Mish. So I just wanted to give you a kudos on that. So let's break those both up, though, because you got those calls right. Let's start with inflation, though. So we're in this choppy period. Are you concerned about inflation accelerating from here, or is it just a case of it just being sticky and not going down to the level that the Fed would like to see? Because those are two very different things.

7:21There are. And actually, I think I'm concerned about a little bit of both, right? Because sticky inflation is not necessarily a great scenario for the Fed either, because we know sticky inflation can get stickier if they start to lower the rates for any reason to oops hit oh sorry i just i thought that was like part of the uh analogy you're making

7:51yes yes i curse yes sorry about that uh well i blacked out completely for a second i didn't see Anyway, never mind. Going back. Yeah, so I think that sticky inflation can get stickier. So that's a concern. And it also would be a concern that it doesn't necessarily get any lower unless, of course, the Fed decides to allow us to go into a major recession. Because then that is the cure for inflation, right? That was the cure for inflation back in the early 80s. So essentially, that's one part. The other part is sticky inflation can get much worse because of all the balls that we still have being tossed around.

8:31Geopolitics, of course, being maybe number one of the balls. But if you haven't noticed, this country has gotten a little bit insane lately, too. And we have an election and we have a lot of spending. And again, we have the Fed actually, the money supply has actually increased, which is a little bit inflationary. but also the big thing is that AI one of the things that we're starting to see in AI is that it requires a tremendous amount of raw material not just water I think we may have talked about the water part last time but energy natural gas and copper right and electricity and then utilities are coming into the equation not just as a flight to safety like typical but also because of the delivery system of these raw materials.

9:19And so we have a shortage of raw materials in many ways. And so this is a nuanced inflation. Yeah, I mean, we're not at 8 % or 9%. We may not even get there, but we're not going down to 2%. And I think that's basically what Yellen said today. And that really people thought, oh, God, that means the Fed's going to go crazy trying to raise the rates. And I don't think so. But as we're going forward with inflation, any of these little triggers that we know have been around us could trigger and could spike it up. And let's not forget also even Russia, Ukraine. I mean, there was a story yesterday that Russia, that the United States was going to potentially sanction Russia's uranium supply.

10:02And uranium went crazy. And then it came off today with the rest of the market. So it's it's everything's nervous. The inflationistas are nervous. The recessionistas are nervous. The stagflationistas are feeling a little more smug, but that doesn't mean it's easy to make money. Hey, everyone, we're going to take a quick break right now to hear a word from our partners. We'll be right back with more of the day's top analysis on the Real Vision Daily Briefing. Today's Real Vision Daily Briefing is brought to you by Chintai, your partner in asset tokenization. Licensed and regulated by Singapore's monetary authority and powered by the innovative Chex token, Chintai offers a compliant, one-stop solution for bringing real-world assets on chain.

10:46Chintai enables the tokenization of virtually any asset, from carbon credits to corporate debt, private funds and real estate, enhancing liquidity and optimizing efficiency for all. The technology becomes largely invisible and seamless to the end user. I can take a selective store of value within a wider portfolio in a fairly liquid form, very efficiently, to anything, whether it's some high value whiskey, whether it's a particular supercar that's a one of three limited edition. Therefore, in this fungible trading of them in a liquid form is the true end game here for tokenization. With billions of dollars in client deals facilitated, explore how you can take advantage of tokenization by visiting realvision.com slash chintai.

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12:34Or that it's a good thing, right? That's a kind of difficult thing. And I just want to underscore what you said about inflation, because it is an interesting dynamic, and this could sort of lead to that chop that we're talking about, because you've got those sort of two different pressures of inflation. Some of the supply chain issues, which may come up as a result of maybe geopolitics or something like that. Let's not forget weather. Eventually, we're going into the summer. You're hurricanes, which we always worry about energy. Those can be temporary, but problematic. And we've seen gas prices rise in recent weeks.

13:07And then you've got those two other larger trends. One are wages. We've seen wage pressure, and that was in the employment cost index today. And that utility, that energy pressure, that's not temporary or because of a geopolitical event, but that's this demand story coming from AI. That's super interesting, not talked about as much. and people are going to need to figure it out, right? Because that's new. We don't know what that looks like. So that is going to be problematic. And Yellen, everybody, by the way, thought she'd be pushing for rate cuts, right? So she's coming out talking about being worried about inflation.

13:42You can see why the market had that reaction. So where do you think, it seems like what happens to stocks is going to be determined by rates. How do you think about the treasury yields here? Well, and one other thing, by the way, Yellen said in the great list that you just recapped is shelter costs. She didn't think those were coming down anytime soon either. Right. So that's a problem. Right. Right. Right. Well, in terms of the rates, I still really believe that this five and a half percent that we've seen in terms of the yields, even though we went back up over five percent today, is probably maxed out at least for now, unless we face something insane, like a giant spike in oil, for example.

14:27And even oil has been really kind of tame. So I think what we really have to watch out for is if we don't see necessarily the yields go down, but they don't necessarily go up and we're stuck between four and a half and five and a half, which would just put us in a range bound like we are in so many things right now, like the dollar, for example. Then I do believe that the stock market, the pockets of the stock market that are very interest rate sensitive, we're already seeing tons and tons of companies making new 52-week lows because they can't handle the inflation. They can't handle the interest rates.

15:07They don't have great earnings growth or good balance sheets. And those will be where bottom picking is such a great, fun thing to do in a risk-on environment will be a terrible idea in a risk-off environment. And you'll have to really play very carefully the type of stocks and it won't necessarily be, oh, growth stocks just ignore everything. Like I said in the beginning, they also have to find an evaluation that makes sense because they too, look at what Zuckerberg said. He basically, I think was so honest. He said that in order to be competitive, they're going to have to spend a lot more money in R &D, which means more costs, which means an impact to the bottom line.

15:50And I think that's going to be the case, whether it's a Microsoft or a Google, Meta, obviously. It'll be interesting to see what happens with Amazon. I think that was reporting today too. It is actually out, yeah, after the close. And it's down. Right now, we'll see. I'll see if Brian's paid attention to, since you and I, as we talk, can't multitask. We can multitask, but there's a limit. Yeah, exactly. But I think what would be fun, this would be a good time in terms of the stock market. You know, my modern family has never failed me, right? Four weeks ago - Yeah, let's look. Do you have charts?

16:21Are those the charts we have? What is that? Yeah, that's the six charts. And I don't want to spend a lot of time, but let's go. Yeah, let's pull them up though so we can look at them while you talk. Yeah, because it's been so obvious just watching. These are weekly charts. I've actually almost stopped watching daily charts because when they chop, you can get a lot of fake-out breakouts and a lot of fake-out breakdowns. So the weekly charts kind of give you a little bit of a step-back opportunity to take a breath and say, you know, this is a really good time to be patient. So if we start, you know, with the very top one, which of course is granny retail, that was our heads up.

16:56And by the way, you know, the consumer confidence, as you mentioned, was just horrific today. So people are starting to get sour on things, but nonetheless still spending money just in different places. But XRT broke down from a channel it had been in for a few weeks. And then once it broke down on the channel, I started getting cautious. And then look where it held, that green line, which is the 200-week moving average. And then, you know, it had a nice little pop last week. But you can see now that the close today were challenging that 200-week moving average. So if that breaks down and the number is around 71.50, I think we're going lower.

17:35I mean, you can't fight the retail sector because it's so huge as part of the GDP and obviously what drives the economy. And then the small caps, not as interesting, interestingly enough, but also broke down after granny, held the 200-week. Today, even though it couldn't get back through that channel low, it's still not anywhere near that 200-week moving average. That could be a bright spot. Forget the biotech is just broken down and has continued to be. It's the only one that's trading under the 50-week moving average, let alone the 200 week, which is blue. So Biogen actually looked a little more interesting today.

18:13We've been watching Moderna, even Pfizer, maybe some of these stocks bottom. But right now, we're not seeing very much here in the IBB. But look at the semiconductors. I mean, that's still the queen, if you will, sister semiconductors above the 50, above the 200. But touching on that channel breakdown. So that tells me that 220, if we can't get through 220, and I think Amazon now is up on the day after the report, so it must have been better. I think it was up. I think it was, we have to check on that. Yeah, after hours, I'm looking at it and it's 181. Oh, is it saying it's originally? Yeah. Oh, okay.

18:51It's trading at 181. So maybe that helps. Yeah, down today after hours. Okay, good. But here's my biggest concern. If we move over to the lower middle, that's the transportation sector. And that, in the face of everything rallying last week, was continuing to sell off. And what makes the family so interesting is very often we get different parts of it leading and showing that there's a bottom in place or topping and showing that even though everything else hasn't caught up yet, it might. And transportation, I think, is really where you have to keep your eyes right now besides the retail sector, because that is telling us right now, It was the first one to weekend coming into this week.

19:30It's weak now. It's going to be challenging about 63, which is a big level. So tomorrow is going to be an interesting day because if that continues to drag down and we have some good earnings and it doesn't matter to the market and we have the Fed meeting tomorrow, you know, this is a really what I've been telling people and I'm taking my own advice, by the way, is to be really cautious. I mean, the Netflix, I just want to say something about Netflix, is you guys have been my muse. You know, when I get these like feelings like, oh, my God, all of a sudden, short Netflix. A lot of it has to do with how wonderful it's been to talk to Real Vision for the years.

20:06I don't know, something about you and I that just kind of. But Netflix was my first clue when I thought about it, that it was overvalued. You know, growth stocks being overvalued and we're seeing that all over the place. So I don't think even if semiconductors hold, we're going up to new highs anytime soon. But it would make the case for the chop in May as opposed to the sell in May. And I hope all of that makes sense. Yeah, no, absolutely. So let me circle back. I love Ralph just said, you have any thoughts on and then listed like every asset class. Ralph, we love you. You look at everything.

20:38We're going to rifle through a few of them now that we've sort of set the table on what Mish's sort of macro thinking is. But I just want to circle back on utilities. So are you bullish utilities, even though you worry about some of the value? I think Keith just walked by. Tell me, said hi. Even though we worry about some of the valuations in AI and maybe in tech, do you like utilities because of that trend? Well, you know, it's interesting because utilities tend to be very interest rate sensitive. So here we are now. Now, utilities are acting well in the face of the potential of higher yields and certainly what we saw today.

21:17But yeah, I am very much, because it cleared, since a year ago, it cleared the 200-week moving average so far this week. That is showing it's in an accumulation weekly phase, just like I'm showing you these weekly charts here. So just from a pure technical standpoint, we now have a pretty good risk point if it broke down under the lows of this week and started to test the highs of last week, you can say false breakout. But right now, if it holds, yeah, I think what it's telling you is twofold is one, the typical flight to safety. Yeah, two, it's not really caring very much about the interest rates.

21:55And number three is, like I said, this delivery system of the raw material, even though silver and gold came down a lot today, what it's really telling you is that we still have a short supply and these utility companies carrying the delivery system to get things to generate, especially in the big supercomputer areas, is a positive for utilities. So yeah, kind of a unique experience. Yeah. And a unique thought if people are afraid to go straight into AI and also depending on your timeframe, right? If you don't have a really long horizon and you can't stand the sort of volatility while we figure out who the real winners are there.

22:32You mentioned gold and silver. How are you feeling about that? Because I believe you were bullish last time we were on. Of course, we've seen or have been for quite some time, and we've seen what happened now with the move in gold. How are you feeling about it here? Well, right. And the last time I was on, it actually then ran to new highs. Right, right. Like right after that, straight up. Right. It's been coming off. Well, you know, it's interesting because people have very short memories and people are very fickle, right? So while it's going up, all the people that weren't paying attention were jumping into silver and gold.

23:04Gold's going to 3 ,000. Silver's going to 40. And whenever that happens right now, what the metals are really saying is they're coming off into support. And I like to look at silver even more than gold at this point, because so many people started accumulating gold. I mean, the whole story that you could buy it in Costco and all that other stuff. Silver may be a little bit more sane to be looking at. So silver ran up to about 28 for like a nanosecond. It was almost at 30. And now it's down at 2660. And it really broke out from 26. So to me, all this is saying right now is all the week-alongs were shaken out, that it's still in a long-term upward trend, just getting a pretty good correction, which commodities do.

23:52Remember, commodities tend to be volatile. And number three is that unless this really breaks down to under 24, I have found over the last several years when it really looks like crap, it's usually been the buy. Because it's when people throw their hands up because none of the fundamentals for the metals have changed. They're still well undervalued compared to equities. They're still undervalued in terms of commodities versus equities in general. There's still all these problems that we talked about in the beginning that don't look like they're going away. and we have seen inflation coming up a little bit.

24:26So I'm waiting now. If anything, I would be looking to add if we hold this$26 in silver, which means wherever gold is, whether it's a$22.80 or$22.50, or if it holds$2 ,300, it probably means that that would be it for the gold as well in terms of correction. We're going to take another quick break to hear a word from our partners. We'll be right back with more of the day's top analysis on the Real Vision Daily Briefing.

24:54I just want to point out, Christopher, and you are very much vibing today, Christopher in the chat saying the market looks spooky, went fully hedged 30 minutes before the close. We'll see what tomorrow brings. And we know Christopher brings a lot of experience and spidey sense as you do, Mish, to this. So both of you, when you're saying you're cautious, people should pay attention. So we've got a few people asking about Bitcoin. If we're kind of in this risk-off environment, what does that mean for Bitcoin? And if you look at Sol, I mean, Mish has a crypto product and some folks at MarketGage that do crypto.