Broken Pie Chart

Derek Moore goes through how markets have bottomed (maybe?) and are now up 10% since then. All the while investment banks have now started moving their 2025 year end targets down. The bear case on corporate net profit margins (and bull case). Plus, how max bearishness against US equities at market lows may have been a contrarian signal. With more earnings this week, Apple's implied volatility is forecasting what as an expected 1 standard deviation move. Keeping perspective on the markets as the media talks about ends of eras and more.

Apple earnings implied volatility

What is the implied volatility expected earnings move for Apple

FMS manager survey shows fund managers were max bearish near recent bottom

Distance off the low is now +10% after being down -18.90%

All that said, the S&P is down -10% off the all-time high

Investment banks start downgrading their year end S&P 500 Index targets

Bear case for housing due to high mortgage rates

Earnings have been good so far but what about the future?

Comparing mortgage payments at low vs 7% rates

Sentiment and VIX readings near contrarian lows like prior periods

Container shipping container rates are down and that is not inflationary

Container shipping volume and capacity are all down

Mentioned in this Episode

Derek Moore's book Broken Pie Chart https://amzn.to/3S8ADNT

Jay Pestrichelli's book Buy and Hedge https://amzn.to/3jQYgMt

Derek's book on public speaking Effortless Public Speaking https://amzn.to/3hL1Mag

Contact Derek [email protected]

Derek Moore talks about airport business as a sign or lack thereof of recessions. Gold makes another all-time high while the safety trade like treasuries and the US dollar aren't working lately. Plus, looking at typical widening of high yield spreads during recessions compared to today. Later, the VIX Index is still not appropriately pricing in historical volatility given the moves again this week in equity markets. Also, surveys of economists are up to 45% probability of recession in the next 12 months although short of the 60%+ probability in late 2022 and early 2023 so why should we even consider them? Finally, how fund managers were overly long US Equities in December but now after the selloff they are saying they may reduce US equities. A little late no and how even professionals may react, panic, or be influenced by prevailing sentiment.

Gold all-time high

US Dollar and US Treasuries get correlated with US equities and weren't the safe havens

The airport crowdedness indicator of recessions?

Fundamental EPS estimates are down a little but not much so far so what are they waiting for?

Big earnings week including Tesla and Google (Alphabet)

Fund manager surveys show they were overly long US equities before the selloff

Fund manager surveys also show as equities are in drawdown, they are thinking of selling

High Yield spreads not showing recession levels of widening currently

Typical high yield spread during recessions is 1000 basis points plus

How economists tend to crowd together in their predicting recessions

VIX Index implied volatility (expected) vs actual volatility (historical)

Mentioned in this Episode

Derek Moore's book Broken Pie Chart https://amzn.to/3S8ADNT

Jay Pestrichelli's book Buy and Hedge https://amzn.to/3jQYgMt

Derek's book on public speaking Effortless Public Speaking https://amzn.to/3hL1Mag

Contact Derek [email protected]

Derek Moore reviews the surge in bond yields, and why the VIX Index should have been 100-125 this week as there is a mismatch between expected volatility and realized volatility. Earnings season begins but will analysts start downgrading their S&P 500 Index forecast? Why does the market often bottom out ahead of whatever reason its scared happens. Plus, believe it or not over the past 10 days Bitcoin's historical volatility is the same as SPY. All this and more this week.

Bitcoin volatility vs SPY volatility

Did the market bottom this week?

Comparing volatility in March 2020 to tariff selloff today

Context on how much market moved in a day to a normal year

Intraday move was literally 2 ½ hours for a market to move 9%

Biggest up days cluster around the biggest down days

Bond yields surging is a problem

Treasury Secretary Scott Bessen gets when tariffs are paused for 90 days

The VIX Index wasn't pricing the crazy daily moves we've seen in markets

Why investors shouldn't panic sell

Mentioned in this Episode

Derek Moore's book Broken Pie Chart https://amzn.to/3S8ADNT

Jay Pestrichelli's book Buy and Hedge https://amzn.to/3jQYgMt

Derek's book on public speaking Effortless Public Speaking https://amzn.to/3hL1Mag

Contact Derek [email protected]

Derek Moore is joined by Mike Puck to compare this selloff to others like 2020, 1998, 2015, 2000 and more. Then they talk about how the Trump administration is arriving at their tariff percentages. Later, they discus how the market didn't price in the eventual announcement. How things like the VIX Index and the High Yield Bond spread Thursday weren't high enough. Did the market miscalculate the tariff announcement? What is the sentiment among advisors and investors from what we are hearing and are we at max panic yet plus the continued case for hedging.

When do we reach capitulation?

The market is cheaper so will people step in and buy?

The problem analysts have in making forecasts given the tariff landscape

Explaining implied volatility vs historical volatility

Why was the VIX higher after the first bad day Thursday

Discussing how a VIX closes at 45 is significant

Remembering sentiment at different inflection points in the market like 2020, 2015 2000 etc

Markets are back to where they were in August when the Yen Carry trade unwound

Why investors shouldn't panic

The case for using hedged equity strategies

What does a bottom look like?

Market is much cheaper on a forward valuation basis

What are the economic risks?

Unemployment was fine and the economy was adding jobs so what's the problem?

Atlanta Fed GDP Update

Mentioned in this Episode

Derek Moore's book Broken Pie Chart https://amzn.to/3S8ADNT

Jay Pestrichelli's book Buy and Hedge https://amzn.to/3jQYgMt

Derek's book on public speaking Effortless Public Speaking https://amzn.to/3hL1Mag

Contact Derek [email protected]

Derek Moore reviews two paths for market post -10% correction with and without

a recession. Plus, talking through the difference between expectations miss vs the

actual data through the lens of YoY PCE Core Inflation. Later, confidence in the

stock market plummeted. Oh, and like clockwork, the first investment bank

lowered its year end S&P 500 Index price target and 12-month forward earnings

outlook. Are more coming? And what is going on with the Atlanta Fed GDP now

model? Tune in for this and more this week.

Recession or not in next year may determine market returns from here

Inflation Head Fake but everyone worries

S&P 500 Index Year End Target Update as Barclays lowers EPS and price targets

1 YR Stock Market Expectations Plummet over the last 2 months, largest in 40 years

Implied Volatility pointing to 1.5% 1 standard deviation daily moves in S&P 500

Market sentiment is in the dumpster but is it too much given where markets are?

Markets got back down to over -9% pullback from all-time high

Mentioned in this Episode

Atlanta Fed GDP Now Model https://www.atlantafed.org/cqer/research/gdpnow#Tab1

ECON PI http://econpi.com/index.php

Derek Moore's book Broken Pie Chart https://amzn.to/3S8ADNT

Jay Pestrichelli's book Buy and Hedge https://amzn.to/3jQYgMt

Derek's book on public speaking Effortless Public Speaking https://amzn.to/3hL1Mag

Contact Derek [email protected]

Derek Moore is back to discuss markets, volatility, and the economy through the prism of intra year drawdowns, Spot VIX vs Vix Futures prices, and LEI or Leading Economic Indicator. Why are the Fed's Dot Plots useless (still). Thoughts on the idea that Buffered strategies don't beat the market. How different markets have performed since the first Fed rate cut in September and much more.

Since September Rate Cut Mag 7 vs SPX vs Equal Weight

Intra Year Drawdowns vs full year return

Comments on AQR post on Buffered funds

VIX Index vs VIX Futures in the coming months

AAII Bull Bear Spreads says way bearish still

Fed dot plots

Fed Funds Futures rate expectations

Multiple Contraction is the reason for the drawdown not a reduction in earnings estimates

LEI Leading Economic Indicator

Mentioned in this Episode

Conference Board Leading Economic Indicator https://www.conference-board.org/topics/us-leading-indicators#:~:text=Using%20the%20Composite%20Indexes:%20The%20Leading%20Economic,economy%20is%20heading%20in%20the%20near%20term.&text=The%20CEI's%20four%20component%20indicators%E2%80%94payroll%20employment%2C%20personal,used%20to%20determine%20recessions%20in%20the%20US.

CME Fed watch Tool https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html

Federal Reserve Dot Plots Summary of Economic Projections March 2025 https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20250319.pdf

Derek Moore's book Broken Pie Chart https://amzn.to/3S8ADNT

Jay Pestrichelli's book Buy and Hedge https://amzn.to/3jQYgMt

Derek's book on public speaking Effortless Public Speaking https://amzn.to/3hL1Mag

Contact Derek [email protected]

Derek Moore is back to break down the wild week including Nvidia rallying when against the bearish tide. How the US Dollar index pulling back might be bullish for earnings. Plus, have we reached max panic and max bearishness setting up for a near term bottom in markets? Later, looking at the Fear and Greed Index, the VIX Inversion and what that means for markets, and why people are now bullish or bearish based on politics. All that and more!

Fear and Greed Index

Drawdowns vs full year market performance

US Dollar index

US Trade Weighed Dollar Index

University of Michigan Sentiment Indicator Republicans vs Democrats

Nvidia was up close to 8% last week

Micron earnings through Implied Volatility Readings

Long Straddle cost before earnings

VIX Futures curve inversion

Mentioned in this Episode

Derek Moore's book Broken Pie Chart https://amzn.to/3S8ADNT

Jay Pestrichelli's book Buy and Hedge https://amzn.to/3jQYgMt

Derek's book on public speaking Effortless Public Speaking https://amzn.to/3hL1Mag

Contact Derek [email protected]

Derek Moore is back together with Jay Pestrichelli this week to react to the market turmoil. What is going on and is this just a revaluation or something worse? Plus, now the Fed Funds' futures indicate 3 rate cuts. Looking at the Mag 7 selloff compared to the rest of the market. Unemployment was fine so what's the big deal? Later, looking at whether the options market via the implied volatility readings is pricing in more, less, or just right actual historical volatility. They even take a listener question and read a sad email from an avid listener who is boycotting the show. We hope they come back but this week we dig into everything markets and provide some historical context and whether there are bullish signs.

Peter Lynch on corrections from 1994

Comparing this drawdown to all the others since 2009

Why investors shouldn't panic

Reminding everyone why it's good to be hedged to ease your mind around corrections

What are options markets saying via the implied volatility levels and the Vix Index

Comparing 10 Day implied volatility on SPY options vs 90 Day implied volatility

The S&P 500 Index forward PE ration vs earnings estimates

Nvidia bear market territory despite earnings beats and falling Forward PE ratio

Washington DC new unemployment claims in perspective

The unemployment rate of 4.1 percent threads the needle

3 Fed Rate cuts now priced in 2025?

Value of hedging your portfolio

High yield has held up ok so far compared to the equity market

Earnings estimates are still higher, but will analysts cut them due to tariffs?

Uncertainty of Tariffs

Why the Atlanta Fed GDP Nowcast went negative

Balance of trade on exports minus imports due to tariffs gets really wide

Trade deficit expands

Mentioned in this Episode

Peter Lynch 1994 video talking about corrections in markets frequency https://zegainvestments.com/blog/for-investors-worried-about-market-corrections-this-is-why-you-hedge-so-that-you-can-worry-less

Derek Moore's book Broken Pie Chart https://amzn.to/3S8ADNT

Derek Moore goes through last week's pullback and Nvidia's post earnings move. Then, looking at the AAII survey where investors got really bearish. Later, he looks at how the Mag 7 hasn't made a new high since December but other things have. The yields are dropping at the same time forward PE ratios are lower after a slight increase in forward earnings expectations and the market dropping down.

Nvidia kills earnings but sells off proving investing is hard

Treasury yields ease

Mag 7 vs the total world stock market ETFs

Forward PE levels drop as markets retrace while earnings estimates rise

US Effective Tariff Rate impact of various potential tariffs according to Goldman Sachs

AAII survey goes full bear but is it justified compared to prior periods?

Broadcom earnings and what the implied volatility suggests a 1 standard deviation move is

Did the options market get the post earnings Nvidia move correct?

Mentioned in this Episode

Derek Moore's book Broken Pie Chart https://amzn.to/3S8ADNT

Jay Pestrichelli's book Buy and Hedge https://amzn.to/3jQYgMt

Derek's book on public speaking Effortless Public Speaking https://amzn.to/3hL1Mag

Contact Derek [email protected]

Derek Moore and Mike Puck talk about the resurgence of international stocks against the US. Plus, how the rest of the market has a similar performance to the Mag 7, indicating a broadening out of stocks in the S&P 500 Index. Later, they discuss what markets historically have done after being up in January and February. Profit margins are rising outside the Mag 7 names and looking at the expected Nvidia move around earnings based upon the implied volatility levels.

S&P 500 Index 493 vs the Mag 7 year to date

International stocks including emerging markets and developed markets shine against the US

Profit margins continue to rise across the entire S&P 500 Index

RSP vs SPY vs EEM vs EFA year to date performance relative to one another

Average performance since 1950 for the S&P 500 Index after being up January and February

Nvidia options before next week's earnings announcement

Calculate expected moves in Nvidia based on implied volatility

Pricing the long straddle and short straddle on Nvidia pre-earnings

Mentioned in this Episode

Derek Moore's book Broken Pie Chart https://amzn.to/3S8ADNT

Jay Pestrichelli's book Buy and Hedge https://amzn.to/3jQYgMt

Derek's book on public speaking Effortless Public Speaking https://amzn.to/3hL1Mag

Contact Derek [email protected]