Matt Tuttle on Historically 'Bad' Market Breadth, MU Earnings Can 'Pull Everything Down'

SPEAKER_1 (0:00)

But I do want to welcome in our next guest, take a broader look at the reaction that we're seeing this morning. We have a big week in terms of macro data. We're also kicking off tech earnings with Micron. We've got Matthew Tuttle joining us this morning, CEO of Tuttle Capital Management. And Matthew, you brought up a really good point. We've been talking a lot about market breath and this bad breath, but you brought up that historically there are only two other times that stand out to you that have similarities to where we currently are. So walk me through how you're comparing those other two historical instances. And if you think that we may have a similar reaction or a similar move that we did then.

Matthew Tuttle (0:42)

Yeah, and unfortunately, the only two times we've had breath this bad were kind of that 1999-2000 area in 1973

Most of your viewers probably don't remember the 70s, lucky for you. But we do remember what happened in 2000, and it was pretty ugly. You've got a lot of people comparing what's going on right now in AI with what was going on in the Internet. It doesn't mean that that's what's going to happen here, but certainly you want to be prepared, watch your position sizing, have hedges in your portfolio just in case. And normally I love buying dips. I'd be careful on any AI related dips until Micron reports on Wednesday.

SPEAKER_1 (1:35)

And you mentioned most of the viewers probably don't remember what happened in the 70s. So I do want to dive into that because it's a fascinating set up, a little less bubble. I mean, this was this period of divergence that I think many people called a stealth bear market. I mean, do you have concerns that we are in a stealth bear market, that under the surface we are missing what's really happening here and tech can only take us so far and once the cracks crack, we could be in big trouble?

Matthew Tuttle (2:03)

Yeah, so I think that the term stealth bear market doesn't matter as much. Yeah, I think what you're seeing is outside of the indices, which are not very far from all times highs. The average stock is getting crushed and bonds are getting crushed. So if you're sitting there in a 60-40 portfolio or something like that, you're not having a very good time right now.

I think the real parallel to the 70s is the potential of stagflation. I don't think we're anywhere near that. The economic numbers still look pretty strong.

You know, inflation is not so bad, depending on what you believe. I actually believe it's probably closer to 11% or 12%, but that's a conversation for another day. But that's the parallel I'd worry more about from the 70s, is we have a period of stagflation. What I'd worry about from the 2000s is you've got a bubble that bursts. And again, most of you remember how that looked and felt.

SPEAKER_1 (3:07)

Matthew, we're gonna need another conversation to unpack that 11% inflation. So I'm gonna save that for our next chat. But I do wanna dive into that at another time. But let's talk about Micron. You said you'd stay out of dip buying and tech until we hear from Micron on Wednesday. What specifically do you need to hear from Micron to feel more confident in the tech trade?

Matthew Tuttle (3:30)

Yeah, I mean, you've got the expectations, then you've got the whisper numbers. I would love to see them blow away the whisper numbers, whatever those are.

We don't pay a lot of attention to it because it's gonna be what it's gonna be. It's a binary bet.

They're either gonna make the market happy and we're gonna have a rally or they're gonna make the market sad and we're not. You can't really bet on that ahead of time unless you're a gambler, so I'd sit on your hands and see, but I think that's gonna be an extremely important earnings announcement. There are a bunch of bottleneck trades we love. Memory is the biggie and any weakness in memory is gonna hurt. So I definitely want to see them talking about stronger demand, higher prices, all the things that makes traders happy.

SPEAKER_1 (4:24)

And let's dive into if we potentially saw any weakness. You said it's going to hurt. If Micron disappoints, if that happens, what parts of the AI trade are most vulnerable?

Matthew Tuttle (4:35)

So I mean, I think they all are. Unfortunately, the problem is the AI trade is in many ways one trade. You're not gonna see memory stocks sell off and photonic stocks going up.