In today's episode, Tyler breaks down today's sell-off, and despite the rough end to the week for the major indexes, he emphasizes that now is a time for optimism and opportunity in the markets. Tyler also discusses the latest jobs report, and how the Fed is now behind the curve on rate cuts. Tune into today's podcast to learn more.

Dont look back because the market is closed. Good Friday afternoon, everyone. Tyler Herriage here with you for todays VRA Investing podcast. Hope you all had a great end to your week out there. If you’re looking at the markets today, it may not have been such a great end to the week for our major indexes sectors and some of the larger stocks out there as well. But I’ll stop right there because this is important and it will be a major theme of this podcast today. And that is going to be opportunity and really optimism overall of where we are right now. And we’ll cover why after a session and really after a week, or should I say start to a month that has been so rough for our major indexes.

Big two big down days here. We’ll cover why now is not the time to panic sell this market, but rather time to be looking for stocks that are on sale in this market, because that’s exactly what we’re looking at here. Stocks are at a discount right now. And now is the time to be locked into this market, looking for opportunities, looking to buy and add to your favorite stocks, your favorite ETF’s, and say thank you for the discount over the medium to long term. Looking forward from here, we think you’re going to be very pleased with purchases in these prices ranges here, especially for a few of our favorite sectors. I’ll cover that a little bit more here on the podcast and some more areas where we’re seeing opportunity as well. But point being that now is the time to remember where we are in this market. We haven’t even wrapped up year two of this new bull market right now, we are in the middle of an innovation revolution, and we haven’t even hit the halfway mark on the roaring 2020s yet.

[00:02:05]:
So as we see it here, this is still early inning action of where this market is going to go and pull backs like this. Corrections like this can be used as opportunity, being used as a gift from the market to buy at incredible prices. So we’ll break all of that down and more on the podcast here today. But we’ll start with what really kicked off the day today, which was this morning’s jobs report. You know, after yesterday’s rough session, this number might have been leaked once again because we’ve seen it time and time again that the market ahead of reports like this, whether it’s inflation data or jobs data, the market seems to be moving in the direction that it was going to after the report either way, right? So if it was a good number today that we were expecting futures might have been slightly higher, and then it would be off to the races. Now, the flip side, when they leak them, you see selling pressure in the morning, and then when the market opens, it gets even worse from there. And that’s what we got today. Futures were lower heading into the jobs number, and once the job number came out, the selling really began, with jobs coming in at 114,000 jobs created.

Estimates this big miss here, estimates were for 185,000 jobs to be created. Unemployment moved to 4.3%, the hottest since October 2021. And I’m sure you saw a lot of people talking about the designation of the Sam rule or I blanket on the name there now rule today about jobs numbers and the likelihood of a recession when that one rule is triggered, much like the yield curve inversion, though it’s not a perfect indicator, doesn’t guarantee recession by any means, and we’re not in that camp. I’ll go ahead and say that right now. I’ll have some more evidence as well later in the podcast. But of course, we talked about this. You’re often not looking at one data point too much, but the trend, and the new trend with jobs numbers now is just that. They’re fake, blunt about it.

They’re just fake. Every single one of these seems to be revised lower. Right, which I’ll get to that here more in a second, because I got some astounding numbers about how these get revised lower. But what was so interesting about this jobs report, Kip talked about this yesterday as well. Is that going into it, the week, people would have expected that you would want a week jobs report because it means that the Fed would have to cut rates. Well, everybody learned this week that the Fed, instead of needing to cut rates in their next meeting, they actually should have cut rates this week. They’re behind the eight ball. That has been a major talking point in the media today that we’ve been talking about here for months now.

[00:05:09]:
Right? If you’re a regular listener here, you know that this is exactly what Kip and I have been saying. So today was really kind of the, the rubber meets the road moment for a lot of people to realize that the Fed is behind the curve. So instead of this jobs report being positive for the market, we’re getting the panic here instead, where again, going into this week, the mark, you would have assumed the market would have wanted a weaker jobs number. But after Wednesday, it reversed, and the market would have probably been higher today had we got, or at least not down as much had we gotten a positive jobs number. Now average hourly earnings were up 3.6%, so outpacing inflation by most metrics there. But again, the market just sold off on the news and bond yields really collapsed today. The ten year broke below 3.8 almost right away, finished at below that level as well at a 3.79, down 4.63% on the day to day. So again, you’re not just hearing it from the talking heads out there.

This is the bond market saying to Jay Powell, you are behind the curve. And so now, you know, it brings open the question. You saw a lot of people asking it today, likely that will Jay Powell cut rates either before or at his Jackson hole meeting later this month? Because we don’t have another Fed meeting here until mid September. We’re about six weeks away here from the next Fed meeting. Now, you know, it might sound like a good idea because, yes, they’re behind the curve. Yes, they do need to cut rates, but Jay Powell historically has not done these kinds of emergency rate cuts unless like the COVID scenario, that’s an outlier. But he’s very, I hate to say methodical because I don’t think that’s the right word. But he does telegraph these things.

He seems very insistent on not surprising the market too much. At least you don’t throw a curveball every now and then, but not something like this that the market really wouldn’t expect, you know, and if the Fed does do something like that, then I think you’re looking at some real panic being created. Because if the Fed’s panicking, everyone’s going to start panicking. Right. So we might have to wait until September, but now we might be looking at a larger cut than most expected with. I’ll go ahead and skip around a little bit here. The CME tool, they have their Fedwatch tool there. Going into the week, there was a 100% chance of at least a 25 basis point cut in September, and a 10% or so is a 90% chance of that and roughly a 10% chance of 50 basis points worth of cuts.

[00:08:02]:
Those have almost flipped now. There’s now a 70% probability of a 50 basis point cut in September. Now they’ve got three Fed meetings left this year. If they were to do 350 basis point cuts. You know, at the beginning of this year, we said the people who were calling for six rate cuts, they were talking about a quarter, you know, 25 basis points for each one. Now if we get 350 basis point cuts, they won’t look so, so far ahead of where they were. They would actually be dead on really, we remain the case here, looking for two to three cuts this year. Think, you know, if I’m just playing this out in, in my head, the way I would look at it is the Fed does have a history of the first cut being a bigger one, so there’s no big surprises there.

I think if you were to roll out, they’ve got a ton of Fed speakers coming out over the next six weeks ahead of the next Fed meeting. If they come out, you know, hey, we’ve got to cut rates. They confirm it, then you can see a market where they can cut 50 basis points and no one will freak out, you know, everything will be fine, and then they can cut again a quarter and a quarter at the following two this year. You know, that’s a scenario I could see where the market wouldn’t panic. And I’m not trying to get too far ahead of the panic here, but just looking at what we’re seeing right now, if we were to get 50, 25, 25, that’s essentially three to four rate cuts in here, which is within the parameters of our targets where we began this year. So that’s not a bad deal. That that could be totally fine. But again, the fact that they have to rush to do it, when they could have essentially spiked the football on Wednesday and said, hey, we’re getting out in front of this.

Instead, it’s looking like they fumbled on the five yard line. Can they recover it and still score a touchdown? We’ll see. We’ll see. Back to the revisions here for a second, though, because I do want to talk about this and why so many people are waking up now to the fact that the Fed is behind the curve here, because these revisions have just become normalized. And it’s why I said earlier that jobs data is essentially fake. Now it’s fake news. Five out of the last six jobs reports have been revised lower. May and June were revised lower by 30,000 jobs each.

[00:10:18]:
Ten out of the last 14 jobs reports have been revised lower as well. And none of these are for small amounts. So if you’re just looking at the headline numbers and not focusing on the revisions, you know, you’re really wearing rose colored glasses out there because everything looks far better. Today’s jobs report, we could get another revision where it’s far worse than this. And we’ve been talking about these downward revisions in the economic data for months. It again makes it tougher to see on the surface that the economy is slowing, and I’ll clarify there, slowing, not contracting. This is still growth. Gdp we’re still seeing growth, so we’re not in the recessionary camp here.

We don’t see that at all for our markets right now, for the economy. Right? And those are two separate things. The economy is not the stock market and vice versa. But I’ll point out a few more reasons why we’re not looking for a recession throughout this podcast as well. But right now, back to the opportunity theme. If you’re just now waking up to this possibility, and maybe you’re in the camp that you didn’t, you maybe missed the first big move higher of this bull market. The point is, this is a great opportunity for you, especially because it is not too late to get in on the roaring 2020s. It’s not too late to get in on the innovation revolution.

And this should be looked at as a gift of a buying opportunity right here and now. I’ll talk more about, you know, not wanting to buy a falling knife here in a minute. But we also have seen this bull market run so quickly. You also don’t want to get too cute with your purchases, right? Like I said earlier, over the medium to long term, I think you’re going to be very happy with buying at prices where they are today. Even so, again, I’m kind of skipping around a little bit here, but overall, the emotions of this week’s market trading has really been all over the place. Not long ago, just a week ago, we were hitting at or near all time highs. We were in greed mode on the fear and greed index. Well, today that collapsed.

[00:12:31]:
We got all the way down to extreme fear in today’s session at a 24. There, it’s out of 100. We closed at a 27, which is still just right on the edge of extreme fear. We saw it in the put call ratio today. Anything in the put call ratio above a .7 is seen as excessive bearishness. Today’s top reading was a 1.42. We were above a 1.16 all day today. And what was really interesting here is the trend, the arms index.

This is another one that you see. Anything above a one and a half, and it’s usually a contrarian buy signal. Anything above a two and it’s a backup, the truck buy signal. Well, today we hit a high of a 1.97. And so what’s most interesting about this is when the trend hit a 1.97 and the put call ratio hit a 1.42, it actually marked the lows of the day for the Dow. The Dow was down 1000 points at the time. We went on to rally 400 points off of those lows there. So again, these are the signs that we’re starting to look for here.

But we’ve seen this movie before. The market in this scenario has to tell the Fed what to do. So back to the Fed here for 1 second. Again, you know, we don’t expect a mid meeting rate cut here. I would say that’s unlikely and likely would panic the market even more. So it’s probably not what you want either. But we are now nearly two years away from Jay Powell’s infamous pain speech, the one that he gave in Jackson Hole, you know, right when he was wrong about inflation being transitory and that they were going to have to start raising rates and that Americans are in for pain. Just a terrible sentiment, terrible for sentiment speech that was.

[00:14:24]:
So now that we’re two years out of that and we’re looking at a rate cut cycle, we could get the exact opposite from Jay Powell this year. And I think that would help our market out a lot. So that said, let’s take a look at our market action on the day because yes, it was an ugly day, especially on the surface, but I can’t get past this point. I can’t stop talking about it. Now is not the time to panic. Now is the time to go bargain hunting. Here we are champing at the bit to buy our favorite stocks at these prices. We liked them before at higher prices.

Why wouldn’t we like them now, right. It’s kind of the Warren Buffett School of approach there that you buy when others are fearful, buy when there’s blood in the streets. Well, right now there’s so much fear going through this market. We’re looking for opportunities. And again, so back to this point that we don’t like to catch a falling knife. Yes, we’re making new lows and I’ll get to some of that here in a minute as well. But you don’t want to miss trying to call, you know, the bottom tick and potentially miss a string of moves higher. Right.

So again, we’re not trying to call the bottom here, but we do think that these prices make stocks that much more attractive here. So be looking for opportunities as you’re, as your approach to this market. Alright, that said, let’s take a look at our market action on the day today. You know, it’s tough to say to be looking for opportunities when I’m about to tell you that the Nasdaq has entered correction territory. May seem conflicting there. Right. But kind of arbitrary numbers from the market. A 10% pullback is a correction, 20% is a bear market, which as Kip pointed out yesterday, the semis are now qualify for a bear market here.

[00:16:19]:
But this is where it’s important to have some perspective. So we’ve equated this time period that we’re in right now, the innovation revolution, the roaring two thousand twenty s to the nineteen ninety five to two thousand melt up from markets where yields were at a much higher rate than they are now, more restrictive than we are today. And the Nasdaq went on to rally 575% in that five year timeframe. Well, I might as well point out that we saw multiple corrections during that timeframe, including one bear market as well. Essentially, you average about a one, about 110 percent pullback per year. So this is still not outside the realm of normal market action here. And again, not a call for panic. So all those pullbacks from 1995 to 2000 had one thing in common.

They were fantastic opportunities to buy the dip. Now, of course, on the back end of that there came a day where it was not a good idea to buy the dip right when the.com melt up turned into the dot bombs. Fortunately, we don’t see any signs of being at the end of this move yet. As a matter of fact, we see it as the beginning of this move. Right now we’re likely, if we’re in that timeframe, we’re still in 1990, 619 97 at the latest. Here we see this bull market running through 2030, ultimately taking the Dow Jones to 100,000. We’re at 39,000 today, taking the Nasdaq to 40,000. We’re at 16,776 today.

We see big moves still remaindehenite. Very bullish here. All right, so for our major indexes, small caps did lead the way lower, down 3.5% on the day to 2109. Next up, the Nasdaq down 2.43% to 16,776. And I’ll go ahead and point out here, we did see the semis leading lower down 5.45%, quickly approaching extreme oversold levels here. Excuse me, I get a sip of water real quick. All right, next up, we had the S P 500 down 1.84% to 5346. And finally here for today, the Dow down one and a half percent to 39,736.

[00:18:56]:
Alright, looking at our internals on the day to day, not pretty numbers here, we did have more declining stocks than advancing stocks coming in three to one negative on the NYSE and over four to one negative on the Nasdaq. It has been a little while since we’ve had internals this bad, which makes it feel a little bit like a flush, not the sign of much further pain to come. Next up, 52 week highs, lows. Had our one high note today. Coming in positive on the NYSE, with more 52 week highs than lows did come in, though just shy of three to one negative on the Nasdaq. Finally here, volume did have a big downside volume today. 84% downside volume on the NYSE. What we don’t want to see is that continue into Monday.

Then on the Nasdaq, 77% downside volume. So below a bearish thrust there. So no, not ideal, but no big red flags there. Looking at our sectors on the day, I gotta say this was the high note. Maybe not the sectors themselves, but what they did. We finished with three out of our eleven s and P 500. Sectors higher on the day were led by consumer staples, which hit an all time high. Now, again, maybe not the sector you want to see hitting an all time high, but new highs do beget new highs.

And we saw it from the utilities as well. Up less on the day, but also hitting an all time high as the biggest borrowers in the nation. Yields lower, helps them here. And speaking of yields lower, another sector that benefits from it, the real estate sector. Now, we usually focus on home builders and the housing index here, as opposed to the S and P 500 real estate sector cause it’s mostly made up of REItse, but they are interest rate sensitive. And mortgage rates today collapsing, dropping 22 basis points in one day, down to a 6.4% now. The lowest level since April of 2023. And down big from April of this year where they were at a 7.5.

[00:21:02]:
Still, they should be at about 5.5% right now. Look how restrictive the Fed is. We got a ten year yield at 3.79, and the Fed funds rate right now is at five and a quarter to 550. They’ve got to cut, seriously to get into the range of reality. Again, anyone can see that now, and that’s why we’re seeing so many people talking about it right now. But again, that fear gives us an opportunity if we’re willing to take it here. Alright, that said, let’s take a look at the lagging sectors. On the day, we were led lower by consumer discretionary financials and energy here, obviously tech, one of those leading lower as well.

So at the end of the day, three out of our eleven sectors finishing positive, less than ideal. But there were a couple bright spots in there. Finally here for today, our VRA commodity watch gold now back to being higher on the day today. Hit in all time high this morning at $2,522 an ounce. Got a midday pullback. This is a group we do remain extremely bullish on here, especially in this environment. Now up two tenths of 1% at $2,486 an ounce. Silver now up seven tenths of 1% to $28.68 an ounce.

Copper now up over 1% to $4.12 a pound. And oil. Wow, what a back and forth it’s been this week. Now back below $75 a barrel, down 2.84% at $74.14 a barrel. And bitcoin here to wrap it up today. Little bit of a rough week again, though, over the longer term. This is a group we continue to like a lot, bitcoin in particular of the cryptocurrencies right now down three and a half percent to $62,430 of bitcoin. Folks, that is all that we have time for here today.

Please be sure to subscribe to receive our VRA podcasts every day at the market close. You can sign at vraletter.com dot click the podcast link at the top. We’d love to have you with us. You’ll also find our notes and transcripts of the podcast there as well, so hope you can join us. All right, until next time, hope you have a great weekend out there. We’ll see you back here on Monday for the close.