Carter Braxton Wirth (3:01)

Yes. Volatility. Be one word to characterize it, but also red. Right. So we've, we've had a great market for three years. I guess if you think about the last real drawdown was the 2022 bear market. The S&P declined 27%, the NASDAQ 137. And since those lows in the autumn of 2022, for three years we've been ascending and ascending aggressively to the point where, of course, those who get into valuation, we reached just four or five months ago the highest price to sales ever recorded in the s and P500 and the Russell 3000. And now, of course, that excess is being expunged.

Nicole Lapin (3:40)

You actually called the s and P500 sell off before it happened in early March. What were you seeing in the markets that made you draw that conclusion?

Carter Braxton Wirth (3:49)

Well, for starters, you're very kind to invoke or recall a good judgment. I have all sorts of bad judgments, things that go terribly wrong.

Nicole Lapin (3:56)

But this was a good one.

Carter Braxton Wirth (3:58)

I'm pleased with this particular recent effort. The principle that informed that decision, basically in January, December, January was that the breath was deteriorated. Now people say, well, there's always an issue with breath, which is a way of measuring market health. And so we have had for a long time great marquee names, right? Household names, Apple and Microsoft and Google, and they've even named them a group. Magnificent Seven. Right. Have led so much of the equity market. And people and perhaps rightly said, well, it doesn't matter that others are lagging and not keeping up. As long as these champions are carrying the team, all is well. But usually when you have divergence between the performance of an aggregate, an index dominated by a few big outperformers versus the constituents, diverging and not performing, it invariably ends with weakness in the index. And what was happening in December, really started in October, is that individual stocks started to put in their peaks. So right now we know that the sell off in the S and P, it starts at the index level on 19 February, only six weeks into it. But for instance, the semiconductors peaked in July, Microsoft peaked in August. I mean, individual securities were starting to roll and stall and starting to basically turn over and head lower way before the index. And so for instance, right now the index itself is only down, what, 12%. If you were to look at the Russell 3000, it's important to talk about that because that represents 98% of the investable capital in the United States. The s and P500, obviously not as broad and big. And. And if you look at that index, the Russell 3000, the entire shooting match, it peaked on the 19th of February is down 15, 12, 15% or thereabouts. But the median performance of all constituents is down 38, meaning we're well into a bear market. It's been going on for months and the individual stock or player on the team has been in real trouble. Only now is it coming out at the index level.

Nicole Lapin (6:11)

So if I could put that great analysis into other words, basically you were seeing the big components of the index. So if I bought Voo or Spy, which tracks the S&P 500, that was not turning around as quickly as the big companies within the index. So Nvidia, you mentioned Microsoft hit their peaks and then they kind of reverted back earlier than the overall index did. And so that showed you that the index was next.

Carter Braxton Wirth (6:44)

It would be like watching a sickness. Looking at 100 people in a room and one person, you just don't think anything's wrong. And now, now everyone's sick. But it turned out if you look back, well, that guy was sick three weeks ago, she was sick six weeks ago. Meaning it doesn't come out at the aggregate level. All of a sudden. It, it starts slowly. It's under the surface. Individual securities start to underperform, start to roll over, start to stall, start to decline even as the index goes higher. The principle is this, let me just say it this way. The parts compose the whole. The whole looked okay to the, maybe casual observer. We're making new highs in January, but the parts were rolling over.

Nicole Lapin (7:24)

So the individual companies or the big companies are leading indicators to the overall index. What, what's going to happen there? And the bigger the companies, the more of a reaction that it will have eventually. Like the, it seems like those are the earthquakes and then there's the aftershocks of the overall index. Maybe I'm mixing my metaphors here, but.

Carter Braxton Wirth (7:48)

No, I mean, look, there's so much money and so few names. The top 10 names, let me put it this way, if you went Back to the nine, about, about 50, 60 years. If you looked at the weighting of the top 10 stocks and people say oh it's, it's so much money and so few to have. But it's always high end top weighted. So if you go back the last 50 years, the top 10 stocks are on average 20 plus percent weight, meaning life sorts out winners and losers. It's just the way it is. A small hardware store gets acquired by a bigger hardware store. A bigger, better software operator takes over another. We're always going towards bigger things, concentration. That's the way it is. And so the top 10 stocks, whether it was IBM in its heyday or GE or Cisco in oh seven top sense of always about 20% weight. But what started to happen this go round in the past 18 months is they were 30 and 33%. So much so that now that they're selling off, that's why the market is finally succumbing.

Nicole Lapin (8:44)

So you predicted that this was going to happen months ago, but now it's almost like an insult to injury reaction with Liberation Day. We're talking on Liberation Day. What are you seeing in the charts right now? Because the market was declining, we were having really bad days and now this is just like, you know, kick them while it's down.

Carter Braxton Wirth (9:07)

Yeah, I mean over time, and everybody knows this, markets go up. There are more Oreo Co consumed 10 years from now than now. More Gillette razors, more people. There's prosperity, there's growth and that's figuring out who you are in the market. But if you are a trader and you spend time trying to zig and zag, trying to study sequences, the current selloff at the index level is highly unlikely to stop here.

Nicole Lapin (9:32)

Okay, so can we talk through which of the industries you think are going to be helped or hurt by tariffs? You mentioned consumer products like, you know, razors and Oreo cookies and that.

Carter Braxton Wirth (9:44)

And that's a classic playbook. There was an expression soap and cereal is the most offensive thing. Soap and cereal. And what that means is if you look at companies like Nabisco that sell crackers or Colgate, PAM on we have 170, 200 year old companies in this country that literally sell soap, domestic household things and food products. Now those are the most offensive things at all. People consider healthcare, PNG or Colgate or Clorox or a General Mills cereal or that sort of thing. Health care is relatively new. We don't have healthcare companies that are old like that 150 years ago, healthcare was, okay, bite on this stick because we're about to saw your leg off. We don't have anything else to offer you. Point being, they're not defensive pharmaceuticals the way soap and cereal is defensive, classic staples. And you'll see that now in this and drawdown, what is going down? Not as much soap and cereal, that's consumer staples, utilities, very defensive names. And all institutional managers know this. And if you cannot hold cash, if you're concerned and you're selling some Apple or selling some Google or selling some Meta or selling some Tesla, by mandate you're not allowed to hold the cash. They have cash managers, different product, different things. So that money must go back by the close or the next day by the close. And so you see rotation, it's always a part of markets and institutional money will rotate to defensive things because it on a beta adjusted basis, even if everything goes down, those stocks go down less and you're seeing it in the market. Now here's a thing from March 30 saying, look, it's official, we're in a bear market. Just to talk about the statistics. The weak form of analysis in terms of charting and 10 is to look at an index. That's like if you went to the doctor, I went and I walked in, the guy from nine feet away said, yeah, you look okay. I do, I look okay, right? You don't. But you don't know about my blood pressure, whether I have diabetes or gout or cholesterol. You cannot study a patient by doing that. You have to get in the chair, get in the gown and then they take your blood pressure and they poke and prod. That's what this is. The weak form is saying, oh, the index is down only 9, 10. That's nothing underneath the surface. It's been massive deterioration and there's more to come.

Nicole Lapin (11:49)

And if you're concerned about this downside, what does that mean for you guys? Are you shorting the market?

Carter Braxton Wirth (11:55)

Yeah, well, clients, I've been short. So I have two types of institutional clients and those are pension plans. Those are long only mutual complexes. Those are hedge funds. Those are family offices, endowments, and then individual investors. Now this is not random. We reached the highest price to sales recorded, even higher than dot com. 1929, March 2000, February 2025. And we have hit our head to the penny at that line. Now how big a drawdown? Why not 20%? That's garden variety normal. Some people think it's going to be 50. I can't speak to that. I Think that's unknown. But I am very confident in saying that the current sell off is highly likely to stop here. Unlikely, right? Not likely to. Can just be over.

Nicole Lapin (12:42)

So where does it. Where does it go?

Carter Braxton Wirth (12:43)

Oh, at least 20%.

Nicole Lapin (12:45)

Thank you. Carter. Can we play a quick game of bullish or bearish? Rapid fire. Bullish or bearish on Tesla.

Carter Braxton Wirth (12:51)

Tesla's just lost 50 of its value. Tesla has made no. No progress in four years. I'm a seller.

Nicole Lapin (12:57)

Okay. S&P 500.

Carter Braxton Wirth (12:59)

Bearish. Lower about to 4850 or thereabouts.

Nicole Lapin (13:03)

Gold.

Carter Braxton Wirth (13:03)

Gold had a huge surge in 2019 and 20. Gold was sideways for four years. And gold's had a similar surge. That which was hated and ridiculed and scorned is now loved. It's on the COVID of the Wall Street Journal. We're backing away from it. We're gonna let someone else trade that here. We think it's crowded and at risk.

Nicole Lapin (13:23)

How about Meta?

Carter Braxton Wirth (13:24)

I. I think that a general statement that is worthwhile I hear is that there's nothing to be lost by postponing all new buying. If someone's that cost average down every month and plays golf instead that do it every month. But you have to know who you are in the market.

Nicole Lapin (13:39)

Nvidia.

Carter Braxton Wirth (13:40)

Nvidia. Bearish. Now, for instance, look at the insurance stocks. Look how good Chubb is. Look how good AIG is. They're very defensive. Look out. Look at Berkshire Hathaway. There's a reason for this, right? They're the only thing.

Nicole Lapin (13:51)

Even with all the insurance craziness and very defensive fires and disasters.

Carter Braxton Wirth (13:57)

So a place to hide. There's a. There's a good etf. If you wanted to do it's kie. And that picks up AIG and Progressive and Chubb and Allstate and so forth and so on.

Nicole Lapin (14:07)

How about Apple getting beat down with the tariffs?

Carter Braxton Wirth (14:10)

Apple, I'd nibble.

Nicole Lapin (14:11)

How about Nike?

Carter Braxton Wirth (14:12)

Nike. That's an unhappy. That's unhappy. And. And sometimes this happens. Great franchises, Nike, Disney. It's tempting always to think it's cheap. So Nike is the same price it was in 2015. It's now 2025. So adjusted for inflation, Nike's lost about 40% of its value. That's a. That's a disaster. I wouldn't step in and buy that. Why? Just because it's down? There's no thesis. Just one of the oldest rules in the book. Hard to do. I constantly holding my own finger off the buy button. Don't buy stocks in downtrends. Just don't do it.

Nicole Lapin (14:47)

But what about buy low, sell high?

Carter Braxton Wirth (14:49)

Yeah. Those are idioms and adages that they say they're melodious, they sound good in the air, but they're not really real. Stay away from this. I wouldn't buy this. Don't buy stocks and downtrends, a pretty good rule. I, as I struggle with myself, I'm always tempted. This is so cheap, I got to buy it. Don't do it.

Nicole Lapin (15:02)

So what do you do instead? Is there something that you are bullish on that I didn't mention?

Carter Braxton Wirth (15:06)

I just showed you one of the great market insurance stocks are fantastic.

Nicole Lapin (15:10)

Even with all of the. The craziness in the world and all of the natural disasters.

Carter Braxton Wirth (15:15)

Yeah, well, there's some are life health insurers. They're not. Aflac doesn't care about disasters. You're talking about property casualty. That's a different kind of thing. But MetLife Brew Chubb Chubb is, you know, doing insuring antique clocks and that kind of thing, case by case. They're not all great, but again, this is a very fine area of the market to be in right now. If one has to be long, we.

Nicole Lapin (15:37)

End our episodes as, you know, Carter, with a tip that listeners can take straight to the bank. It could be anything that we talked about today around technical fundamental analysis, whether to buy, how to react to the news, anything.

Carter Braxton Wirth (15:51)

The thing that I would say, if you really, you really don't change your stripes. And that is the single most important thing. So someone told me once, there's only three kinds of hands in the market. There's weak, weak. There's weak, strong, and there's strong hands. You can be two of the three, but you can't be one of the three. So let's talk about it. Week, week, Is this ready? So week, week is this. We buy a stock at 10, it's 11. Feeling good, it's back to 10. It's 12, it's 11, it's 10, it's 950. It's 9. I don't want it. Walk away. Meaning you're willing to acknowledge error. Move quickly. Bought at 10, it was 11, we didn't get it. Now it's 950. Walk away. Week, week, just hot potato, that's fine. And then there's strong hands. We buy it at 10, goes to 11. Feeling good. We think it's worth 30. Then it goes to 12, but it's back to 9. Now it's back to 8. We buy some more, it's down to 7. Fine. We're confident. We think it's worth 30 dot Buy some more. It goes to 5. It's cut in half. Water. 10, it's 5, we're buying more, and ultimately we're vindicated. The thing that you're talking about, and it comes out and turns and it goes to 30. That's strong hands. You took it. But the third thing you cannot be is weak. Strong. You think you're strong, but you're not. So you buy a 10, and then it's 11, then it's 10, then it's 11, then it'S 9, and the other guy walks away. Weak. Weak. She walks away. Get rid of it. Don't want it. The weak, strongest. I can handle nine, then it's at eight. I don't know. I don't know. Then it's at seven. I think I'll buy some more. Okay, I should do it. I know I should do it. Buy some more at seven, then it's six. Oh, this is bad. It's five. All right. I gotta get out. And selling it all, that's a disaster. That's not knowing who you are in the market. It's okay to buy it and be wrong. Buy it at 10, sell at 950. We're wrong. Weak, we just don't care. Or strong. We're buying it 10, we think it's worth 30. It goes to 7, we'll buy more. It goes to 5, we'll buy more. We were confident. We did the work. The team is smart. We know we're doing. And it merges like a phoenix. It goes to 25. You make money, but weak, strong. I think I'm strong, but you're really weak. And this is a mental thing. You buy a 10 and 8 and then you. And then. And then you walk away. 5. It's a disaster. It can't be weak, strong, weak, weak, or strong, weak, strong, no good.

Nicole Lapin (18:10)

Money Rehab is a production of Money News Network. I'm your host, Nicole Lapin. Money Rehab's executive producer is Morgan Lavoy. Our researcher is Emily Holmes. Do you need some money Rehab? And let's be honest, we all do. So email us your money questions moneyrehaboneynewsnetwork.com to potentially have your questions answered on the show or even have a one on one intervention with me. And follow us on Instagramoneynews and TikTokoneyNewsnetwork for exclusive video content. And lastly, thank you. No, seriously, thank you. Thank you for listening and for investing in yourself, which is the most important investment you can make.