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시장 급락 원인으로 유가 상승(이란 갈등), 채권금리 4.57% 돌파 및 30년물 5% 돌파, 강한 산업생산이 꼽힘. 금리인상 확률 약 50%로 상승, 사모신용 우려 지속. AI·반도체 주도 장세지만 시장 폭(breadth) 협소, 마진 잔고 사상 최고, 레버리지 ETF가 변동성 요인. 하드웨어(AMD·엔비디아) 낙관 유지하되 노출은 제한, 소프트웨어를 다음 단계로 봄.
다듬은 글
Woah, why is the market so upset today? And is it worth buying the dip? Does anything fundamentally change? And are there any particular stocks that are going with what's going on with yield and Iran. Then I'm going to tell you about what's happening inside the fundamentals of the market. We're going to look at some institutional analysis.
And as always, my goal is to give you facts as succinctly as possible so that way you could get on with your day. So, consider subscribing to the channel. Welcome. My name is Meet Kevin. Let's get into it. Okay, obviously, Brent is up. Why is Brent up? Because Donald Trump is pissed at Iran. This is the old news.
We didn't really get a lot of crazy data this morning. Of course, we got CPI and PPI earlier this week, which rightfully were quite hot and did shoot up bond yields. But we respected that longer-run average of maintaining that 10-year bond yield below 4.57%. This morning, we did get industrial production numbers that came in well higher than expected at 0.7% versus 0.3.
And the last revision or last numbers that were low at -0.5% were revised to just -0.3%. So, both of those a little hotter than expected as well as manufacturing production hotter than expected and industrial capital is capacity utilization. So, how much of our industrial capacity we're actually utilizing higher than expected.
In other words, the underlying economy is doing quite well. Which as you drive that underlying economy up, and I'm not talking about every household, I'm talking about the industrial economy, as that is firing on all cylinders, you have fear that we're going to need higher interest rates to contain this expanding economy.
On top of that problem, we have Donald Trump who says he's now losing patience with Iran for a few different reasons. First, Bloomberg has been reporting that Donald Trump might just kick the can down the road on a nuclear enrichment deal with Iran, which is really interesting because you kind of have two choices.
You could take the Israeli route and just keep bombing Iran or you could take the Obama route and work some kind of deal where you delay weapons manufacturing in exchange for weapon inspectors watching exactly what you're doing and keeping track of where enriched uranium is, which is interesting because Donald Trump is sort of stuck in the middle now.
He's tried the Iranian approach. We still don't have a nuclear deal. We tore up the Obama deal and we still don't have a nuclear deal. This is in part why Donald Trump is frustrated. Now he's making comments on Fox News that he's losing patience and they better make a deal soon, sending a little bit of a concern that maybe Donald Trump will go back to strikes.
Though that's not really a popular opinion given that at least sentiment polls in America are really anti-Donald Trump fulfilling this war in Iran or continuing strikes in Iran. This is not a popular war, especially as it continues to drive gas prices through the roof. You do not want to fill up a diesel truck these days.
I just did and it sucked. But unfortunately, we did just on the 10-year Treasury break through 4.57, which even though we've popped and broken through that previously, it has acted as somewhat of a ceiling historically. So while we could break through it temporarily, the concern is that now you've got a hotter industrial economy at the same time as Donald Trump is losing patience with Iran that you were going to break through higher yields even more consistently.
And now the 10-year being up 13 basis points on the very day that Kevin Warsh is appointed as Fed chair or sworn in as Fed chair kind of sends a little bit of a middle finger to Donald Trump's plans to have rate cuts. So this gives us a little bit of an intro of what's going on, but let's listen to what some institutions are saying about all of this.
So uh first, we can see here that uh Uh, there is institutional talk about what we call the boogeyman. And the boogeyman of markets right now remains to be weak breath in the market. Again, not how toxic your actual breath smells, but rather how wide dispersion is in the market. In other words, how many stocks are actually rising versus how many stocks are declining.
When only quote a handful of mega cap AI beneficiaries are holding the entire market together, what we what you really need is oil prices to come down to help expand or broaden the overall stock market's performance. Unfortunately, as they wrote here a couple of days actually, I think they wrote this yesterday.
As they wrote this yesterday, throughout any disruption to that narrative risks correlation snapping higher. And while we didn't get headlines out of China, what we really got are headlines out of Iran thanks to Donald Trump's commentary suggesting, "Hey, uh, we're going to be seeing not only higher for longer oil, but just higher oil." Which isn't great.
And this comes at the same time that we're seeing risk appetite currently sitting at a higher level. This is per Goldman Sachs. Then what we've seen in 2021 on a Z-score basis. In fact, this is the first time we've had a Z-score of over three for the first time since 2000, which is pretty remarkable.
Now, in addition to this Goldman piece, let's take a look at a little bit more analysis. Uh, you've got a piece here indicating that Federal Reserve is really approaching what they call a stress test. And the stress test is when the 10-year Treasury bond breaks through that 4.5 level. I've been talking 4.57, some people say 4.6, some people say 4.5, whatever.
It's all relatively close. And we're not we're we're basically there right now. We're breaking through it right now. Hopefully, it doesn't last long because you've also got the 30-year breaking through 5%, which is the first time that we've sold 30-year bonds above 5% and certainly at least in the last 40 years if not potentially forever depending on the history of our 30-year bond sales.
But anyway, these are high yields and high yields unfortunately put more pressure on a potentially weakened private credit market. A lot of professionals inside the private credit space argue that these fears are completely overblown and that private credit is really bottoming out. I hope that's true, but while we've seen a bottom in stocks like Blue Owl, which is great that we're finally seeing a bottom on these.
You can see this bottom really started forming at the end of March right here in Blue Owl. It's been a very very slow recovery for stocks in the private credit space suggesting there might still be some fear. Is the BlackRock's fund also still on a day chart not doing very hot although it is also off bottom.
And if you look at KKR's, you can also see off bottom but also not doing too hot. These higher yields put more pressure on an already somewhat fragile private credit industry, which isn't great because obviously that's where we fear there could be some form of black swan that breaks out as we actually hit bankruptcies and layoffs.
Who knows? But here you can see more graphically how we've been breaking through on the 10-year. I sort of circled how we've broken through these on the 10-year and the 30-year in the past. So it has happened before and we tend to retrace. So I don't think that the numbers we're seeing in the treasury market today are really a long-term oh no, we're all screwed.
I think it's just sort of a confluence of we had a you know pretty dramatic CPI and PPI week in addition to strong industrial numbers in addition to Iran drama and maybe not much progress coming out of China. And so when you merge all of those things together, you do get for a really depressing set up for rate cuts.
Yesterday we were analyzing that the odds of a rate hike this year are somewhere around 30%. It looks like right now they've actually risen even more. We're now sitting at 38.4 plus 9.6 plus 0.9. We're now sitting at almost a coin toss of a rate hike this year. I personally do not think we will get a rate hike this year.
I think Kevin Warsh will act as an anchor rather than you know, somebody who is willing to go along with increasing rates. But if you look at stable or cuts going through next year, you're sitting at still a good shot here of a rate hike. Right now it looks like this has And this is a little bit more volatile when you go all the way out to 2027.
This year indicating stable or cuts at about 69% with about a 31% chance of hikes. But the more you go out, the more volatile this becomes. So I personally like looking at December of 2026. And as I see this shift, which is now dramatically shifted in favor of rate hikes now being a coin toss, whereas yesterday we were on 30%.
You you tend to get a little bit of pressure under the market. Though I have found recently that these interest rate fears tend to be relatively short-term. They could end up signaling bigger problems in if we get some kind of black swan breakage. But so far this overall momentum we're seeing in the market, hardware especially through the SpaceX IPO, I'm still relatively optimistic on.
Even though I keep I'm keeping my hardware optimist exposure relatively limited to a few choice hardware stocks. Mostly because I find the opportunity right now to be a setup for software. But, that's what I call phase two. We know that I think I say that like every day. I just don't want anybody in the future be like, "Kevin, you didn't tell us." Oh, no, I told you.
Uh, but anyway, same thing as we've been saying like you know, somebody left me a comment yesterday like, "Kevin, why don't you tell us this before it happens?" I go, "I did. Where were you all of the end of March and beginning of April where I go, 'Wow, AMD and Nvidia are dirt cheap right now. I think we're about to have a hardware rally.'" I mean, that's like the only sector that is dominated.
But, whatever. Less about that, let's focus on the data here. So, here's a here's a Jefferies piece that suggests that uh, really Donald Trump uh, is in a tough spot when it comes to Iran. We've somewhat touched upon uh, this already. But, what I've written down is I've written down some little notes here about Pickaxe Mountain.
A lot of people get frustrated when I talk about Pickaxe Mountain, but I think it's because they're not paying attention to it. Pickaxe Mountain is the facility that was not a bombed. So, we bombed Esfahan, Natanz, and Fordow, but we did not bomb Pickaxe Mountain, which is actually located right next to the Natanz nuclear facility.
Which is fascinating because when you zoom in on Google Maps to the Natanz nuclear facility, it actually says that it's temporarily closed. Gee, I wonder why. There should be like a B-2 bomber logo here. But, what's remarkable is if you actually zoom out on this, see this dark section right here? This is Pickaxe Mountain.
And Pickaxe Mountain has not been struck or was not struck during Operation Midnight Hammer, and it was not struck during uh, Operation Epic Fury, as far as we can tell. In fact, when we look at imagery here, a lot of this imagery that we're getting, which is 2026 imagery here, a lot of this imagery is new construction.
These are new construction tunnel entrances. I mean, you can see the vehicle tunnel entrances right here getting built out, concrete rock formations. Uh, you can see it over here as well. This is Pickaxe Mountain, which is uh and here you can see more sort of excavation staging equipment. Uh, this facility has actually been uh not only untouched, but it's the facility that a lot of experts think the highly enriched uranium that Iran has, the 460 kilos, has been moved to.
I think that this facility is deeper than anything our bombs can actually reach, and as a result of that, this is probably where Iran actually has the highly enriched uranium. And my fear, I think there's probably about a 12% chance of this, like a one and eight and a half-ish chance, that this is where they are actually developing a nuclear weapon.
The reason they are trying to delay a nuclear deal with Trump is because they're trying to rush to enrich a nuclear weapon, and then they want to hold it up and say, "You ready? We'll let this thing go off in the jet stream, and it's going to blow nuclear fallout all over the world. Do we you really want to go?" Uh, you know, because obviously if they actually try to launch a nuclear weapon, it's going to get shot down.
And shooting down a nuclear weapon isn't necessarily going to detonate it. Uh, you can design them to detonate. Uh, that's actually called um it's uh salvage fusing is what they call it, where you design a weapon to self-destruct if it's, you know, trajectory is getting screwed up or it's getting intercepted or whatever.
Uh, nuclear weapons usually are purposely not designed with that, so you don't blow up a nuke over your own land. Uh, but then again, you know, it's Iran, so anything's possible. Uh, so well, who knows? You know, may maybe that's that's crazy, but it's something to pay attention to, and it just indicates that these problems are unfortunately lasting longer because Donald Trump, as I sort of refer to him as the bull in the china shop, he's just not getting the job done in sealing the deal.
But then again, he has also mostly just kicked the can down the road on most of his tariff negotiations, so it's par for the course, I suppose. Uh, now something else to pay attention to, let's uh let's see here. Let's go jump into the top of this right here. So, right now, what's driving a lot of the up cycle that we've seen in markets is artificial intelligence.
We already know that. 80% of the S&P 500's returns this year are driven by artificial intelligence. However, on a price to earnings growth basis, it is actually still the cheapest sector, which is crazy. A lot of people get mad when I say this, but you know, when when I work with my course members and we look at valuations for companies and we study valuations for companies, we also look at price to earnings growth.
Uh we don't just look at PE ratios. And so, if I go to stock tab right now in our course member app, which now has a desktop version and uh a uh a phone like Apple and Android version, and I throw in Nvidia into our app right now, I can see Nvidia is only trading for a two peg, which uh suggests it has about another 30%, maybe even slightly more upside.
I think, you know, 300 is is a trajectory it can get to. AMD, which is crazy because after its rally off of the 230 line, uh and it shot through 400 to now 430, it's only sitting at a 1.57 peg, which at a 1.57 peg for a designer, this company has about a 71% upside, uh which is a remarkably better deal, in my opinion, than something like a SanDisk, which right now is sitting at a 12 peg, or Micron sitting at a seven peg, screamingly overvalued.
But, a lot of that is because of momentum that's flowing into these uh these memory names. And it's totally understandable because you know, DRAM memory is really good at uh regular chatbot artificial intelligence, but these NAND providers, where we can actually store agentic information on uh basically SSDs, is so in demand for agentic AI, so you don't have to either lose context and then hallucinate halfway through your agent AI work or have to start over every single day.
It's kind of critical. Obviously, something that could sort of compress some of the excitement around NAND would be the progression of China in manufacturing NAND since we know China is really your you know, manufacturing basket if you will of the world and the concern is that once we actually see China start printing memory chips, we'll end up being flooded and and over you know, over produced with memory.
That unfortunately is not here now and we still have memory shortages, which is good for those stocks, but it won't last forever. So, I'm a big fan of like if you're making a lot of money on stuff things like that, that's great. Just have trailing stops, so you take the emotion out and they can be wide.
You know, you could be up so much, you could probably set a 20 to 30% trailing stop on some of these. So, that way you know, if that momentum truly reverses at some point it happens quickly while you're on vacation or not paying attention or whatever, you're not suddenly looking at a stock that's down 90% because that's that's a lot.
But anyway, take a look at at this right now just to understand where people are sitting in the market. We've got first comparing to past bubbles per Bank of America, the semiconductors index socks is sitting at a 62% deviation from its 200-day moving average, which compares to the dot-com bubble which had a 55% deviation.
The China Shanghai bubble 37% deviation in 2005 to 2007. And then the Mississippi French bubble I believe that was the Mississippi Co bubble 73% deviation, but that was back in the 1700s, which is crazy. So, this is an insane deviation that we have here at 62% from moving averages. Personally, I think some of this is explained by leverage.
Leverage is really rocketing up. In fact, I wouldn't be surprised. Let me see if the latest FINRA margin statistics are out. That margin in the United States continues to rise. I wrote a Daily Wealth yesterday, which is free. You don't have to be a course member for that. You can just download the Meet Kevin app in the App Store.
You can customize notifications and get the Daily Wealth if you wanted or you could turn off the Daily Wealth. And I literally yesterday before today's sell-off said, "Hey, make sure you're not going crazy on margin. Hedge and here are some ideas." Uh so I suppose it was a timely post. But if you actually look at margin accounts for April, we hit yet another all-time high.
We did go down in February and March and you can see that deleveraging that occurred in February and March, but we're right back up now to new all-time highs in April and I would suspect that number has gotten even larger in May. And it's not just leverage and margin, but it's also triple leveraged funds that I personally think are driving a lot of the momentum and volatility.
And so when you get into these low breadth environments, which is, you know, an issue that we flagged a few days ago, you really just end up getting a lot more volatility. You have a lot of concentration right now. Here's a Morgan Stanley piece talking about exactly that. They obviously see cybersecurity as a good you know, potential software play.
As some hedge funds did end up last week as net buyers of software. However, they're picky in software choosing cybersecurity over software as a service plays that are not in cybersecurity. This sounds entirely reasonable to me. Uh and uh something else is that hedge funds have been sellers of momentum and buyers of utilities and materials.
Yeah, I actually put uh crypto in in very much a momentum basket. Yeah, so some people have been asking me like, "Kevin, how come Bitcoin's been lagging this sort of S&P and Nasdaq rally?" Well, it's because the S&P and Nasdaq have been driven by actual real earnings, which it does make us a little bit different from the dot-com bubble, but it doesn't make us too freaking different from the bubble that happened right before the dot-com bubble, which was the infrastructure bubble that happened essentially a couple of years before where we had a lot of dark fiber that was being laid under this impression that there will be infinite demand for fiber.
That's essentially the same thing we're hearing today that they're going to be that there's going to be infinite demand for tokens. And while it does seem like there's actually infinite demand for tokens right now, I expect once we actually get to like token optimization rather than token maxing, you know, what you're hearing about, uh you're going to see a slow down.
We don't know when, so we're not trying to be bearish now. I actually don't think it's it's time to be horribly bearish right now. I think it's time to be out of debt, but uh but but overall I think there are plenty of opportunities in the stock market. And we should just anticipate more of these crazy ups and downs and volatility days as, you know, there's news on Iran or whatever.
Now, uh something that does make me a little bit more nervous in fairness is the allocation of Bank of America to stocks is at the highest level we have ever seen, ever, uh which is crazy. Um you've got a 66% allocation, and I think on a decimal basis it's slightly higher than what we've seen with uh the 2021 level, which I think is why Bank of America is calling it the highest level ever.
But really, when you look at the chart, it looks like it's tied with October of 2021, which was really like the top of the market, which is pretty remarkable. Uh okay. Then, we also have, take a look at this, financials versus the S&P 500 now below the Great Financial Crisis and COVID-19 lows. This is pretty remarkable because it's basically saying that bank stocks and stocks like SoFi and Robinhood are just getting absolutely destroyed right now, which it has been true.
Uh I actually think Robinhood's finally got a decent valuation. Uh it was a little overpriced when As soon as it crossed 80, 90, and then ran past 100, it was like, all right, we're getting a little stretched over here. Uh but then again, I I use a fundamental analysis that a lot of people don't use.
They use a different style than a lot of folks. And if you want to learn that and want to be part of that, almost every day when the market is open, make sure you join us uh in the Alpha report. We typically get that every day when the market is open uh with few exceptions. And join us over at me so, let's see what else we have over here.
We do have a Memorial Day uh sale going on as well. And so, you're welcome to take advantage of that. Obviously, we'll expire that when Memorial Day comes around. So, what do we have here? Cash holdings right now, lowest cash holdings ever for Bank of America clients. Uh and despite this, you've got household net worth up $26,000 on average uh per household since the start of the year.
That's $4 trillion. Obviously, uh people invested in the stock market are benefiting from that rather than every single household. Uh on top of that, we uh we talked about this a little bit earlier about breadth. Just to sort of finish that thought a little bit. Uh this is a piece here that indicates we have an exceptionally narrow market.
Breadth continues to deteriorate despite new highs with an elevated 52-week low and fewer stocks driving the tape. This is really the Titanic indicator that's been bing bing bing bing bing ing here. Uh and so, we're we're definitely seeing some weakness in that market concentration, which again, in my opinion, drives volatility, not necessarily bearishness, but do expect large moves up or down.
The information did also talk about Cisco, and and they rightfully pointed this out as well. I reported on this, but that Cisco is essentially raising guidance while at the same time firing people. And right now, people are still being absorbed by the labor market, but the question is, you know, what happens when that stops?
What happens when that absorption in the labor market stops? And that's really the part people are most scared about. Right now, the labor market, I've actually got an image here somewhere. I'm going to find it really quick, and then we'll jot it in here. I've got an image of the labor market. Oh, yeah, here it is.
Okay. So, this gives you a little bit of a characterization of what's going on in the labor market. Jump in over here. Uh you can see on the BLS data, so the Bureau of Labor Statistics data, we've had this incredible stabilization, which is exactly what Goolsbee said would not happen. That, you know, this line doesn't just fall to zero and then magically stop.
Except that's exactly what happened, which is, you know, really a blessing and somewhat of a miracle. And if you look at those private payrolls going back to the summer of last year, so sort of on a weekly basis, you can see that we've really actually been driving up uh on an average trend here on labor.
So, the labor market's holding up, hence consumer spending is holding up. And And broadly, you know, the market's just responding to essentially the economy holding together. Problem with that is because the economy is holding together and Trump can't figure out what's going on with Erdogan, you have higher oil prices, you'll have higher for longer, you won't have rate cuts.
And unfortunately, we're going to have to deal with, well, higher oil and higher rates for longer. But that's okay, there's still deals to be had out there. And if you want to learn more about the deals that I'm looking at, consider joining over at meetkevin.com. We'd love to have you. Get lifetime access.
Uh thank you to all those of you who are already members. And thanks for watching. All the information we have here, .
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