Risk Of A "Ferocious" Market Reversal Becoming Increasingly High | Cameron Dawson

**SPEAKER_1** (0:00)
Your summer starts now with Memorial Day deals at The Home Depot. It's time to fire up summer cookouts with the Nex Grille 4-Burner Gas Grill on special buy for only $199.
And entertain all season with the Hampton Bay West Grove 7-Piece Outdoor Dining Set for only $499. This Memorial Day, get low prices guaranteed at The Home Depot. While supplies last, pricing valid May 14th through May 27th. US only exclusions apply. See homedepot.com/pricematch for details.

**SPEAKER_2** (0:31)
When you need to build up your team to handle the growing chaos at work, use Indeed Sponsor Jobs. It gives your job post the boost it needs to be seen, and helps reach people with the right skills, certifications, and more. Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a $75 sponsor job credit at indeed.com/podcast. That's indeed.com/podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed Sponsor Jobs.

**Cameron Dawson** (1:00)
Bob Farrell was this iconic Merrill technical analyst. He was like the guy, and he had a phrase that he'd always say is, you know, parabolic moves go further and last longer than you think, but they don't correct by going sideways. We are in the go further and last longer than you think part of that statement.
Whenever the last part of that statement, that they don't correct by going sideways part hits, you know, that can be rather ferocious. The timing of it is just really, really difficult to know.

**Adam Taggart** (1:39)
Welcome to Thoughtful Money. I'm its founder and your host, Adam Taggart. Stocks have positively roared back to new all-time highs after some initial market jitters at the start of the Iran War.
Is such confident optimism warranted? Or is Wall Street irresponsibly discounting serious risks like the global oil price shock and rising bond yields? To find out, we're fortunate to welcome Cameron Dawson, Chief Investment Officer at NewEdge Wealth, back to the program. Cameron, thanks so much for joining us today.

**Cameron Dawson** (2:09)
Thank you so much for having me, Adam.

**Adam Taggart** (2:11)
It's always such a pleasure, and you are squeezing us in on a busy day. I very much appreciate that. Let's just get straight into it here. Cameron, last time I talked with you, I can't remember exactly when, but I'm going to say maybe three plus months ago.
Your outlook was for a stagflation light. Of course, this was pre-oil price shock. So I'm curious, is that still your outlook, or have world events changed that?

**Cameron Dawson** (2:42)
In some ways, it's interesting because if we were to break apart the stag and the flation to make stagflation, I'd say obviously, given the oil price shock, there's more of the flation part of it. But because of the AI capex boom, we're actually seeing probably stronger growth than you would normally expect given an exogenous supply shock, meaning that the AI capex boom is happening in spite of what's going on with consumer forecasts for spending, going on in spite of what's going on within oil prices for certain, and even forecasts for GDP growth, which have been coming down because of this impact from a weight of higher oil prices on the consumer.
It's interesting because the stag portion really reflects, if we go back to the classical definition in the 1970s, stagflation was a period of high unemployment and high inflation, things that were not supposed to happen together in classical Keynesian economics. But of course, they did in the 1970s, very much related to a supply shock. But what's interesting is that you're not seeing that upward pressure on unemployment because of things like immigration reform and the drop in the labor force.
You've had drop in labor supply, and you're not necessarily seeing companies revert to wholesale big layoffs because overall corporate profits remain really resilient. Now, it's worth talking about the concentration of the upside in this corporate profits over the course of the last five months. But the reality is that the US economy is not falling off a cliff, nor is the US labor market. And so you get this combination where inflation is running hotter than the Fed's target. So you're getting that inflation part of things. The stag side of things, it's more, it still is, it still is light, meaning that you still have growth that is subpar because if it had not been for the Iran issues, what you would have had is probably a stronger consumer. And so, yeah, it still is stagflation light, but it's a slightly different flavor, a slightly different variety, so maybe it comes from a different brewery this time around. All right.