Market May Be Topping Out & Then Likely To Re-Test The Lows | Michael Lebowitz

**Michael Lebowitz** (0:00)
We think the market is probably close to forming at a minimum and intermediate top, a period of consolidation, and likely to go and at a minimum retest the lows of, what was that, early April, about a month ago.

**Adam Taggart** (0:27)
Welcome to Thoughtful Money, I'm Thoughtful Money Founder and your host, Adam Taggart. Welcoming you back here at the end of another week for another weekly Market Recap this week, featuring my good friend, the pungent portfolio manager, Michael Lebowitz. Mike, how are you doing? I'm doing great.

**Michael Lebowitz** (0:43)
Pungent?

**Adam Taggart** (0:44)
Pungent, yep. It's actually not really an adjective for you. It's much more for me this week. So my wife and I, we live on the kind of outskirts of town. We paid the skunk tax this morning when we let our dogs out at dawn. So it's been a fun morning dealing with that here. Yeah. So things are still quite pungent here in the home office.

**Michael Lebowitz** (1:04)
Well, good thing YouTube hasn't come out with aromas in addition to the video.

**Adam Taggart** (1:10)
Yes, with smell-o-vision. Yeah, it's a good thing. Smell-o-vision hasn't really become a thing yet. Yeah. All right. Well, look, things are starting to smell better on Wall Street versus the rough April that we had. I will say, Michael, that your colleague, your co-portfolio manager, Lance Roberts, has been saying that he expects the volatility we've seen from the start of this year to continue over the next quarter or two, and so he has said his advice has been more sort of sell the rips. So I'm curious, are you guys selling or positioning to sell this current rip that we're seeing in the markets?

**Michael Lebowitz** (1:53)
Yeah. I remember we were talking about this kind of at the end of last year, beginning of this year, I was on, and my prognosis was that this was going to be the year of the roller coaster. We start and end at the same place, but there's some thrills along the way. I didn't expect the roller coaster to be this scary, but nonetheless, this is the roller coaster we were expecting.
As the year has progressed, we got our long-term cell signals. Those are tried and tested, and we really use those to help guide us. So we've been, once those triggered, they happen to trigger towards the bottom of the market a month or two ago, and the market was grossly oversold at that point. So we were in risk reduction mode, but very slow to reduce risk, because the market was so oversold that even if the world was coming to an end, we were going to get a bounce first and get better prices in which to unload stock or add shorts or however we were going to reduce exposure. And sure enough, we got a bounce down there. And it's been a relatively durable bounce so far, lasting over a month. In fact, we've reversed the losses since Trump announced his tariffs. So that's positive. And we have been reducing. We're down to roughly 45 percent equities out of 60 So we've cut basically a quarter of the equities that we have. And, you know, three different ways we do that. We can just outright sell securities. We can add short exposure via an ETF, which we've done, and we can change the composition of what we hold. So we might want to own more staples and less technology, more utilities, less communications. You know, this time's a little different because of tariffs. So maybe you want to own less companies that are heavily dependent on China or other countries. So, but same concept. We've reduced our exposure into this RIP, our last trade happening a couple of days ago, which now has us kind of where we want to be. And we think the market is probably close to forming at a minimum and intermediate top a period of consolidation and likely to go and at a minimum retest the lows of what was that early April about a month ago.

**Adam Taggart** (4:40)
Okay. So you mentioned there's sort of three strategies you could use, reduce equity exposure, actually increase your shorts or change the mix. It sounds like you've definitely done the first. Lance has mentioned in previous weeks that you were increasing or you're adding to shorts, this small position, but we're adding to it. Are you also doing all three or just the first two?

**Michael Lebowitz** (5:04)
We've actually done all three a little bit.
The biggest one was reduced exposure by about 10%. We added about 5% of short positions, which basically offset exposure. And we recently bought a couple of energy stocks that were very cheap. We added Procter Gamble a while back. So more conservative things to offset some of the more high beta stocks that we had sold or high beta sectors that we had sold. So really a combination of all three gets us to where our portfolio is today, which, you know, again, is conservative. And we're bracing for how these tariffs are going to actually impact the economy. I think we still have yet to see that. Right.