The Compound and Friends: "Are We in a Bear Market?"

Episode 234 | March 20, 2026
Guests:

• Host: Downtown Josh Brown (A)
• Co-host: Michael Batnick (B)
• Guest: Jim Lebenthal, Chief Market Strategist and Partner at Serity Partners (C)

Episode Overview

This episode dives into the current state of the markets, asking the timely question: "Are we in a bear market?" The conversation explores the volatility and weirdness of the 2026 investment landscape, with a particular focus on divergent sector performance, bear markets beneath the index surface, risks from AI and private credit, and the sentiment/psychology affecting investor decisions. The episode also touches on specific stock ideas, the private credit mini-crisis, and the shifting landscape for young people entering the job market—all culminating in a discussion of Jim Lebenthal’s new book, which uses the NYC subway as a metaphor for investing.

Key Discussion Points & Insights

1. Market Whiplash: Are We In a Bear Market?

• 2026 stands out as a "weird" market. Despite the S&P 500 being down only about 5% from all-time highs, beneath the surface there’s significant carnage: major stocks and sectors are experiencing bear market-level drawdowns.
  • "Every stock feels like it's just getting taken to the woodshed." —Lebenthal (C) [07:36]
• Lebenthal notes this is different from the fast V-shaped recoveries of previous years. The market is now digesting persistent, real risks: geopolitics (Strait of Hormuz), AI disruption, private credit concerns, and existential labor threats from technology. [08:49–09:51]
  • "It's like a carousel of nightmares... It's just like one thing after another, and AI taking our jobs. This is such a different environment." —Brown (A) [10:44]

2. Sector Discrepancy & Sentiment

• Many S&P 500 stocks (about 40%) are already in a bear market, and sectors like tech and consumer discretionary are especially hard-hit ([20:04], [21:28]).
• Despite this, the “headline” index drawdown is mild, largely due to asynchronous peaks and different sector cycles.
• Sentiment is sour: Retail investors who own the likes of Apple, Microsoft, Meta are feeling the pinch, reinforced by bearish AAII survey readings ([22:48]–[23:33]).
  • "The more bearish the sentiment is, the better the returns are a year forward." —Batnick (B) [23:05]
  • "I think that's healthy that 40% of the S&P 500 is in a bear market. We can't complain about valuation being too high." —Lebenthal (C) [21:00]
• Still, the panel doubts we need classic "capitulation" to find a bottom.
  • "I don't think we need it. If 40% of stocks are in a bear market, things are washed out." —Batnick (B) [27:22]

3. Earnings and Economic Fundamentals

• Profits are still growing, which supports corporate confidence even as hiring (not firing) has stagnated ([16:51]–[17:48]).
• However, risks loom: continued high energy prices and weak consumer/business sentiment could tip the balance.
  • "If profits start coming down on the back of higher energy prices... it's a different story." —Lebenthal (C) [17:29]
• Weekly jobless claims around 250,000 would signal more serious trouble ([28:35]–[28:56]).

4. The Challenge of AI and Labor Market Disruption

• The panel is divided about the effects of AI:
  • Some jobs are being rapidly replaced, particularly the kind of entry-level work college grads would do.
    • "Who the hell needs a 22-year-old right now? ...it seems very obvious that they are all going to become socialists like that entire generation." —Brown (A) [35:43]
  • There’s historical precedent for disruptive transitions (stock exchange to high-frequency trading), but it’s unclear how quickly new opportunities can replace lost jobs ([33:02]–[35:43]).
  • The generational and societal impact may be severe, visible in rising recent graduate unemployment.
    • "This is before the robots even show up... If [trucking employment] goes to 1.5 million... we have a huge displacement." —Brown (A) [40:19]

5. Investor Psychology & Market Resilience

• Investors are showing less panic than past cycles; most aren’t going 100% to cash, which suggests a shift in behavior due to past experience ([14:27]–[15:45])
• Still, sentiment is an effective contrarian signal—lots of bearishness often sets up for future positive returns ([23:05], [23:33]).
• The market is heavy and "washed out", but history suggests patience and discipline will pay off.

6. Private Credit Mini-Panic

• Private credit products, marketed heavily to wealth clients, are hitting withdrawal “gates” for the first time, a critical test for this asset class ([56:58]–[61:48]).
• The concern is less about mass defaults (since these are senior secured loans; equity gets wiped first), and more about retail advisors/clients panicking due to headline risk and lack of liquidity ([64:02]–[64:19])
  • "The problem is not that loans are blowing up, because they aren't... it's the absolute relationship problem between them and their client." —Brown (A) [64:14]
• The panel expects continued headlines, tougher conversations, and possibly a tightening of underwriting and better deals for those who can allocate with discipline ([67:12]–[68:05]).

Notable Quotes & Memorable Moments

• On Market Weirdness:
  "The market is actually digesting real stuff... concerns about private credit, AI...these are real things." —Lebenthal (C) [09:27]

• On Recency Bias:
  "Why is everything that happens compared to 2008?... It's the thing that's in the front of everyone's mind." —Brown (A) [11:56]

• On Sentiment Contrariness:
  "Statistically, the more bearish the sentiment is, the better the returns are a year forward." —Batnick (B) [23:05]

• On the Challenge with Private Credit:
  "For private credit to go bad en masse, it's gotta go bad first for the whole show: the equity." —Lebenthal (C) [63:12] "The problem is not that loans are blowing up, because they aren't. The problem is the relationship challenge with clients amid negative headlines." —Brown (A) [64:14]

• On Market Leadership Fading:
  "Microsoft... has underperformed S&P 500 for the last five years." —Batnick (B) [44:39] "If you get an opportunity to get a great company at a great price, you just leap into it." —Lebenthal (C) [46:49]

• On AI Anxiety:
  "The recent college graduate unemployment rate is 6% and the overall is 4% and it's going higher. We've never seen this before." —Brown (A) [35:43] "Even if the handoff goes poorly, humanity, America, our kids will be fine. I just can't tell you what the new jobs are going to be." —Lebenthal (C) [39:00]

Timestamps for Key Segments

• Market environment weirdness & bear market discussion: [07:07]–[11:00]
• Sector divergence, sentiment, correction vs bear markets: [20:04]–[27:27]
• AI, tech layoffs, and risks to young workers: [33:02]–[41:21]
• Private credit: Mechanics, risks, and advisor headaches: [56:58]–[68:05]
• Stock picks (Amazon, Apple, Oracle, Citi): [74:53]–[82:15]
• Book discussion: “How to Ride the Subway” (Investing Metaphor): [82:16]–[86:44]

Featured Stock Calls

Amazon (AMZN):

• Bullish on long-term potential, especially given AWS and advertising [75:14]–[76:14]

Apple (AAPL):

• Seen as a stealth AI beneficiary via App Store commissions; possible game-changer with upcoming “Agentic Siri” [76:45]–[79:23]

Oracle (ORCL):

• Potential “coiled spring” if AI spending continues and OpenAI capitalizes on infrastructure contracts [81:09]–[82:16]

Citigroup (C):

• Labeled the “easy button” post-Banamex IPO and profitability improvements [80:42]–[81:05]

Life & Investing Lessons (The Book Segment)

Jim Lebenthal discusses the premise of his new book, using the NYC subway as a metaphor for investing lessons:

• Patience: "You can't just get thrown off the train or walk out because it hasn't come."
• It's not a zero sum game: “We’re all trying to get where we’re going—you don’t have to succeed by my failing.”
• Respect for diverse investing disciplines: "People should not have to agree to respect each other’s work.”
  [84:26]–[85:43]

Closing Thoughts

The panel’s consensus is that, while the market feels heavy and troubled due to multiple overlapping issues, much of the underlying fear is future-oriented, not present-day disaster. There’s no full-blown bear market yet, but there is a rolling recession/bear market among stocks and sectors. Private credit is a risk, more for headlines and client experience than for widespread defaults. The right attitude now: acknowledge the weirdness, exercise patience, focus on quality, and avoid panic-induced decisions. As always, understanding context, sentiment, and one’s own time horizon is crucial.

Memorable Closing Exchange

• "We’re all trying to get to the same place. You don’t have to succeed by my failing, and vice versa." —Lebenthal (C) [85:25]
• "I love that. That’s why you have a healthy market." —Brown (A) [85:43]

Book Shoutout: “How to Ride the Subway” by Jim Lebenthal
A metaphor-rich guide linking urban navigation to investment strategy—with a strong nod to patience, resilience, and collective progress. [82:16]+

Useful For:

• Investors wondering why the index seems fine while their stocks are battered
• Planners/advisors coping with panicked clients over private credit headlines
• Those interested in how market sentiment and sector rotations drive price action
• Anyone debating when/if to buy the dip on fallen tech giants
• Listeners seeking big-picture, market-tested wisdom on weathering confusing cycles

[End of summary]