🔴 Why Stocks, Bonds and Gold Are All Rallying (w/ Chris Verrone)


Welcome to real visions trade ideas today. We’re sitting down with Chris Varon a partner at strategist great to have you back It’s great to be here So there’s a lot of stuff going on in the markets after the Fed had a little bit of a dovish Pivot last week. We saw gold stocks bond all rally Could you take us through what you see going on here and why they’re all trading and sync Well, let’s first talk about how unusual it is historically to have gold Stocks and bonds all making new highs at the same time We went back Really 40 or 50 years that’s only happened one other time in history where all those are firing at the same time I think it speaks to the idea this is still a very liquidity driven market and liquidity indicators or liquidity barometers are gonna be our best tell For when something is changing, I think when you look at that Backdrop here. We do continue to like stocks. I Recognize we’re back up into the levels that we failed at for the better part of the last 18 months But I think there’s a couple key differences this time around. It’s a number one The new high data is expanding so participation in this move is actually been better than we’ve seen over the last year and Secondly speaking of liquidity. A lot of the liquidity indicators are reaccelerating money growth as an example has turn back up So we like the backdrop for equities We’ll see what it means for the other two, but I think generally we’re okay here and in terms of the last time this happened when all three were moving in sync were there any Abnormalities and the marketers or anything that you could relate to today. Yeah. It was another easy money QE period it was summer of 2016 you had bond yields at 1:30 to 10-year yields. You had gold just starting to base and it starting to turn up So I think maybe the message here and this is maybe the difference from the last 12 months were back in this environment where? Liquidity is easy central banks are easier than they have been in some time. And I think it creates a bid for risk assets I think again that important picture for us is money growth Reaccelerating means there’s more excess liquidity out there to flow under risk assets I think we’re still very much in the same environment that we’ve been in for the last number of years But it’s funny because you’re talking about risk assets but then in some ways going into bonds and gold is a little bit risk off and yeah, I think it’s reflective of when there’s excess liquidity everything goes up and historically it’s not a very Very frequent occurrence or very common background I guess you go back to the nineteen late nineteen forties late 1950s as Maybe another period where we saw bond yields at similar levels and stocks also working But it’s been historically rare and there’s no question about that What’s maybe more interesting is what is gold trying to tell us though about the future. Is it inflationary? Is it deflationary right? I don’t think we know the answer to that yet But what I think we can say is after six or seven years of total and difference of really a pretty devastating bear market gold Something they’re starting to change and that has our attention Do you think it could be on the one hand that the stock market is looking at a three to six-month range? Where it’s like, oh yay easy money And then on the other hand, you have the bond market and gold looking at maybe a six to 18 month range I think that may be more evident and gold The message that at some point there will be a bill that’s due for all the easy money. That’s out there I also find it compelling that when you’ve looked at gold historically it has worked both in deflationary and Inflationary environments gold worked in the 30s. It also worked in the 70s, so I’m not yet. Sure Whether the conclusion is there’s more Deflationary trend in front of us or maybe gold is starting to price and a change in inflationary pressures moving forward But as someone who looks at pictures and charts, I don’t particularly care what the reason is. I want to own it This is a major trend change in gold Tactically it’s probably overdone. We’ve seen some very aggressive flows the last couple days, but I would use pull backs opportunistically I think this is the start of a change in gold for the first time in 20-plus years. It really resembles that late 9899 period where gold started to bottom yeah, actually I’m so gold right now has broken out of a five-year base more Yeah. Yeah so over the long-run let’s say actually let’s say through the end of the year. Where do you see that potentially going? I think in the near term next several months, you’re gonna get a Consolidation phase here and I would not shock when you see coal actually trade back down to that 13 25 13 range looking out longer-term 1750 1800 maybe a run back at the old highs. I think over the next number of years is where gold likely trades This this break it to us is very reminiscent of what we saw in the late 90s early 2000s were after really a decade plus of underperformance gold started to begin to work I think we’re in that early phase here and to equities Where do you see that going specifically with the S&P 500? You know, it’s funny. We’re always asked in our business You know what the price target is and I I find targets to be a little silly. I think it’s hard enough to get direction So the direction in our view or the trend as technicians will call it is still op I think the trend in stocks have still up we basically have spent the last 18 months in a 2,300 Call it twenty nine hundred range a simple projection from that breakout. We get somewhere on the magnitude Maybe thirty three to thirty five hundred. I think that’s a fair range Over the next 12 months now one of the push backs You could certainly offer as well as some peas at new highs but small caps are not sure, and Russell to is about 10% below prior highs and Intuitively, that sounds negative It sounds bearish it’s actually historically not as significant as people would suspect we’ve seen that three times in history or the SPS at a new high and small caps are at least 10% below a new high in 1985 1991 and 1998 and all three of those instances small caps, ultimately caught up and made new highs of their own So I think we need to be careful Extrapolating too much Beyond this divergence between small caps and large caps. I think ultimately the markets probably okay here What other indicators are you looking at for the S&P 500 to see that rally? Yeah I think the knock on this market over the better part of the last 18 months was the participation had been pretty narrow and had been a certain type of stock like a Fang or large cap tech that had been driving the whole move I think it’s important Participation runs out beyond just that last week we had about 50% of the SMP make a warm-up high It’s a good indication that least tactically your start to see more stocks participate in this move. We’ve seen some improvement consumer discretionary Particularly restaurants hotels we’ve seen some improvement in biotech for the first time in a while So some groups that have been neglected over the better part of the last year starting to get back into the fold We like that the more stocks the better that are participating in this and you know It speaks to this idea and you’ll hear very often. Oh, it’s bearish or negative that REITs and utilities and staples are going up I disagree entirely It’s hard for me to look at anything going up and say that’s bearish It’s it’s bullish if you own those groups, and I think the leadership we’ve seen from some of those Bond proxies or rate sensitive groups very much speaks to the idea That this is an environment where there’s still a reach for yield And as long as 10-year yield to trade 2% you’re gonna have people reaching into the equity market define Bond, like returns or bond like yield so I still think it’s a very dominant thesis here Okay, and speaking of bond like returns and fondling yields. Where do you see the bond market going specifically the ten-year Treasury? It’s anyone’s guess and I think anyone who told you they’re looking for higher yields Which has basically been everyone over. The last decade has been wrong, right? So I want to preface that very humbly I think at the end of the day there were some signs or there happened some signs over the last few weeks of a blow-off in Bond yields here. I think it’s notable that despite Tenure yields back to 2% You haven’t seen things like copper make a new low you haven’t seen Emerging markets take another leg lower So there are some I’d say leading indicators Even global economic surprises have start to turn up here some things we would look to for some forward information where bond yields go Haven’t confirmed this last leg lower and yield so it wouldn’t shock me to at least see bond yields start to stabilize Somewhere in this 2% range now Let’s remember bond yields were 132 in summer of 2016 and they traded to 2:00 To 3:30 in the fall of 2018. We give him back about a hundred and twenty basis points of that move So we’ve already seen half of the go away It’s a pretty good correction over a relatively robust period of time I suspect we’re getting close to some kind of interim low In bond yields here. What do you see is the biggest overall? risk to the stock market going up and the bond market continuing to climb and And gold climbing probably something we’re not thinking about as it always is and you know We’ve been saying in our client meetings. It just strikes me how often people want to talk about what they perceive to be the same risk, whether it’s us-china trade or Washington or brexit these very well-known things. I doubt it’s any of those It’s something we’re not thinking about and there’s a really good index. It’s called the policy uncertainty index It basically measures how much quote uncertainty is out there It actually works the opposite you would expect when it spikes when you’re at peak uncertainty It’s actually been consistent with stronger than average forward market returns when everyone is uncertain or uncomfortable actually want to be buying stocks That act that index actually spiked pretty sharply over the last couple days into the 99th percentile of all observations So when you get those big spikes in stress or uncertainty, it’s actually a good time to be buying stock so I think the contrarian view here is Try to move away from all the noise in things that are on for castable China trade is Unfocusable Breck’s it’s probably unfocused Apple and instead just focus on the message of the market you take for instance some of the emerging markets US and China is where everyone focuses yet Brazil’s that new highs Indies at new highs Russia’s at new highs Australia acts well There’s some really good things going on around the world that have not gotten the attention that they probably deserve because of our very myopic Focus on something that we can’t forecast and that seems like a waste of time to us Do you think that earnings season could hold up we had? Especially when looking at comps from this year to last year. Do you think that that’s might be a weak point? So I I can’t speak to what the numbers will look like that’s outside of how I look at the world but I would say it does seem to be a very consensus view to be worried about earnings and second half of the year and It just has always struck me, you know, we’re basically in the business of human behavior And there does seem to be a growing consensus that Because of things like tariffs or trade or a weaker data Second-half earnings will be weaker than the consensus expects. That seems to be a well-known story So I might be inclined to position on the other side All right. Can you summarize your view on stocks bonds and gold in 30 seconds? Yeah, I think the trends doctors up. We spent the last 18 months in arranged participation is broadening out we welcome that Bonds, I think we’re in the ballpark of some type of a blow-off in yields I’d be surprised to see 10-year yields much lower from here a gold I think is the start of a major trend change. It’s been Basing for the last five or six years good breakout up of 1,400 Tactically use weakness here opportunistically 1325 1350 will hold a support longer term We’d like it to challenge the old highs over the next couple years great Chris. Thank you so much So Chris is bullish on equities specifically He’s his potential for the S&P 500 to reach a range of 3,300 to 3,500 over the next 12 months Additionally, he sees bond yields consolidating around 2% And he believes gold is in the midst of a major breakout he recommends buying on weakness and sees strong support in the 13 25 to 1350 range with upside potential of 1750 over the next 12 months. Just remember this is a trade idea and not investment advice You should do your own research consider your risk tolerance and investing lean for real vision. I’m Justine Underhill You

23 thoughts on “🔴 Why Stocks, Bonds and Gold Are All Rallying (w/ Chris Verrone)”

  1. This is what we call FOMO fear of missing out. The big liquidity is just all the people that get off the market in last Q4 getting back in. With the comming recession all this Fomo guys will just help the hedge funds “active mgt” guys get off the market and cash in. Big crash for 2020 as real vision tv has predicted. Great work Justine and team!

  2. whiteboy better start doing something productive before shit hits the fan, those playing this zero sum scam won't be safe once the economy tanks.

  3. If history is any guidance, it shows one thing about gold. Gold will go lower. The miners reaching lower highs. So it looks like gold will follow the miners lower. We will see.

  4. Gold may go up but s&p500 to 3300?.. what a joke. You don’t need to be an expert to see what’s is going on.

  5. Wow print endless amounts of currency and suprise suprise it pumps up the price in all assetts across the board.

  6. Central banks around the world are stuck at historically low rates. Germany has negative rates. Consumers are at all time debt levels and the market is propped up by buy-backs and plunge protection. Yes Gold is attractive, because smart money is preemptively converting to an asset that can't be printed infinitely. And the price is absolutely suppressed. Just look at usdebtclock.org

  7. What a great interview with Patrick Bateman! Say hi to Paul Allen for me. Call me, we're going to Dorsia tonight.

  8. HaHa Focus on the market. We haven't had a market for ten years.
    And another thing dreamer boy, i'm an aussie and i can tell you first hand every third house down here has a for sale sign on it. Justine you should do your own research too before you get another toss pot on like him.

  9. Savers trading their fiat currency for gold. Fiat pays ZERO yield and cost of living keeps going up. Central Banks not allowing cost of living to go down.

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