Will Stocks Fall Even Further From Here? | Lance Roberts & Adam Taggart

**Lance Roberts** (0:00)
You've got sentiment as negative today after a 4% decline, as you did during the financial crisis, during the 2020 pandemic, during the 2022 correction. And it's not just retail investors that are that negative, it's also institutional investors. If you take a look at our composite index, it's at levels that are often very coincident with intermediate market bottoms.

**Adam Taggart** (0:32)
Welcome to Thoughtful Money, I'm Thoughtful Money Founder and your host, Adam Taggart, welcoming you back here at the end of the week for another weekly Market Recap featuring my good friend, the Tortuous portfolio manager, Lance Roberts.

**Lance Roberts** (0:44)
Lance, how are you? What was the word this week?

**Adam Taggart** (0:47)
It was torturous, not meaning that talking to you is torture, but torturous means full of twists and turns. And I think that's a good description of both the markets, but just sort of the world we're navigating right now in general over the past week or two.

**Lance Roberts** (1:03)
It's actually been a really, really interesting week, you know, and what's going to be on. I'm going to show you some stuff that we wrote about two weeks ago, and it's all come absolutely true. And, you know, and now we're looking at this like, oh, my gosh, what's going on? It's like, well, two weeks ago, we told you this was going to happen. And so here it is. So there's nothing to really panic about. But there's some really interesting things that are going on that you might surprise you as well. So we've got a lot of stuff to talk about today.

**Adam Taggart** (1:32)
OK. Well, I mean, why don't we just kind of dive right into it then? So obviously, for anyone that's been paying attention this week has seen that we've seen what is now getting referred to in the headlines as sort of a growth scare in the markets. And the markets have sold off a bit.
We're seeing weakness in a lot of different asset classes right now. But stocks obviously is what's getting the big headline attention. Although Bitcoin has dropped pretty darn substantially over the past week. I think since the beginning of the year now, it's officially down over 20 percent. And we've talked about that being kind of a real bellwether for sort of speculative sentiment in the market. And so it seems like the market's becoming more and more risk off here. So anyways, yeah, why don't you start wherever you want to, Lance? But I know we've been warning about valuations, which of course is not a timing thing. But you have been saying in the past recent appearances on this channel and in your daily videos that you were expecting the markets to have a little bit of a sell off here. And that's sort of what we're seeing.

**Lance Roberts** (2:42)
Yeah. And again, it's really easy to get caught up in all the headlines and things that are going on. It's like, oh my gosh, this is a growth scare. This is the scare. It's, you know, this is weighing on the market. So here's what we wrote just recently. It says, the bullish bias is evidence is witnessed by the recent surge in retail money flows and the leverage DTFs and speculative options trading. That includes Bitcoin. That includes gold as well. However, as is always the case, when investors are crowded on the one side of the boat, it's often a decent contrarian signal to be a bit more cautious. Furthermore, while there is currently no evidence of a catalyst for the correction, it's worth noting that we are entering the seasonally weak part of February. And this was the chart that we posted. This was what we wrote on February the 15th, day after Valentine's Day. And so all you've seen in the last week is just the reversal of some of this exuberant kind of overbark market that we've had. And in fact, beyond that, we then published an article that you and I talked about a bit last week. I believe it was last week.
Yeah, it was. It was actually last week. We talked about this because the kind of retail exuberance in the market had gotten very, very extended. And we discussed that this is what happens when all correlations kind of go to one. And so we showed this chart of emerging markets versus international markets versus the SP correlation was near one at that time. We talked about Bitcoin, which had a correlation of one to the markets. And remember, all Bitcoin is, you can give it, you can try to come up with all the theses that you want to come up with. Bitcoin is this or Bitcoin is that. At the end of the day, it's a leverage bet on the NASDAQ. That's all it is because the correlation, as you can see here, this is Bitcoin correlation to the S&P. It just stays at one. And so now this was, again, this was over a week ago we published this chart. So when the market corrected by 4%, not surprisingly, you got about a 15% correction in Bitcoin because of its correlation to the equity markets. And if you think that's bad, go take a look at the investors that were piling into MicroStrategy and the 2X leverage MicroStrategy ETF. That's down about 75% over the course of just the last couple of weeks. So again, just a very big drawdown in these leverage bets. Again, this should be of no surprise whatsoever. We talked about golds. Its correlation to equities had reached one. Whenever you've had a very big or very high correlation between gold and the S&P, typically a good sign. And we said this last week, just take some profits, rebalance. And we have a portfolio of this long gold. We just rebalance the position, just took a little profit out of it. And this is something that also we talk about in our weekly newsletter. We post this chart every week in the newsletter, and this is our risk range report. And we have now adapted this to the simple visor as well. So we have this running real time in simple visor. But this was two weeks ago, and we noted in that article two weeks ago, that we said, you know, the kind of this oversold condition technology, it was ripe for rotation. And we've seen stocks like Nvidia and Meta get really sold off. However, you know, that sector along with international margin markets goal, gold miners is well outside normal risk ranges. Those markets should be rebalanced by taking profits, reducing exposure to target weights. There's a decently elevated risk. We'll see a rotation out of those areas sooner than later. So again, none of this that's going on right now is any surprise. Now, here's what is interesting about all of this. And we just wrote about this today in our daily market commentary.