Rising Reversal Risk In Stocks? | Lance Roberts

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**Lance Roberts** (1:22)
The bull thesis right now is that Fed rate cuts and tax cuts are going to cause a resurgence in economic growth, and therefore, forward earnings are going to go higher. And so, Wall Street estimates have actually been ratcheting up going to Q3 reporting. The concern I have is that if we don't get that economic resurgence, you're going to see a decent kind of reversal of this kind of valuation in the markets, because everybody's going to have to start to re-evaluate what forward earnings look like, because economic growth isn't there.

**Adam Taggart** (2:05)
Welcome to Thoughtful Money. I'm Thoughtful Money Founder and your host, Adam Taggart, welcoming you here at the end of the week for another weekly market recap, featuring my good friend, the sun dancing portfolio manager, Lance Roberts. Lance, how are you doing?

**Lance Roberts** (2:19)
I am good. And yeah, this market's been so hot, it's like dancing on the surface of the sun.

**Adam Taggart** (2:24)
Hey, that's a good analogy. That wasn't what I had in mind, but I like your answer just as much. We're losing a lot of good people recently. We just lost Robert Redford this year, and so I was giving him a tribute in my description there for you. But let's actually start where you're talking about there, about how hot the market is.

**Lance Roberts** (2:46)
Yeah. No, it's been quite phenomenal. What has stunned me more than anything else as of late has just been kind of what some market, and it's really not markets themselves, but it's parts of markets in themselves, and we're now getting a very high correlation between a lot of different asset classes. Typically, when you see asset classes that are typically non-correlated, so just say, for instance, stocks and gold as a good example. Typically, gold is kind of a risk-off asset, and so they typically have a non-correlated nature, but they're all running up at the same time. When you start to see a variety of asset classes across the board, small cap, mid cap, Bitcoin, everything else moving up at the same time, that's just representative that there's a lot of FOMO in the market and nobody wants to miss out. So everybody's buying everything that they can get.

**Adam Taggart** (3:44)
I'm going to chime in for one second here because I want you to finish this, but you brought it right to something I was going to ask you, which is last week. You said, all these things are going up in tandem at once. That's not supposed to happen.

**SPEAKER_6** (4:00)
It's not supposed to happen.

**Adam Taggart** (4:01)
And then in like a beat later, you said, but there's nothing wrong with this market.

**Lance Roberts** (4:06)
There's not.

**Adam Taggart** (4:07)
People in the comments were like, what?

**Lance Roberts** (4:09)
I know. So you can explain it. Yeah, it's the most, so that's kind of actually where I was headed, which is, and again, it's been funny because so three days a week, we have an investment committee meeting with all of our advisors. And so we all sit down and we talk about what the market's doing. And it's been so boring over the last three weeks. It's the same message. There's nothing to do because everything's going up. And that's not a good thing. It's not a good thing when every asset class rises at one time. That's just the that's just the sign that you've got a lot of excess momentum and speculation in the markets. And when you're looking at markets right now, I mean, there are markets that are trading at three and four standard deviations above their five-year moving average. That is typically where markets are finding a peak. But again, there's so much push in the markets right now that this, that I was explaining this on the radio show earlier this week. Think about, you know, when you're driving down the freeway, you see those long trains on the railroad track. And you know, there's like one or two engines at the front. And then there's like a mile of railroad cars behind it. Well, so when they're running at speed, you know, that's all great, fine, and dandy. The problem is, is when the front engine puts on the brakes, all that momentum from the train cars behind it start to push the engine down the track. So even though the engine's breaking and trying to slow things down, and eventually it will slow the momentum, it just takes a very, very long time for that momentum to really start to reverse and start to slow down. That's the way the market is right now, is that there's so much momentum in the markets that it's just hard to stop a train. It's like that commercial for the air conditioners. That's kind of where we are right now.