Back to December (FvF Ep. 164)

In the latest episode of Facts vs Feelings, Ryan Detrick, Chief Market Strategist, and Sonu Varghese, VP, Global Macro Strategist, dive into the sharp late-November market swings, why December historically favors gains, and how shifting Fed expectations have driven sentiment. They break down sector rotation, the surprising divergence between crypto and junk tech, the return of market breadth, and the growing possibility of reflationary growth into 2026. The conversation also covers rising unemployment data, an increasingly divided Fed, and how the accelerating AI investment race may continue fueling key parts of the market.

Key Takeaways

• Market Breadth Expansion: The advance-decline line hitting new highs shows the rally is widening beyond just mega-cap tech.
• Sector Rotation Strength: Technology lagged in November while healthcare, materials, staples, and financials helped offset the pullback—validating diversified positioning.
• Fed Rate-Cut Expectations Whipsawed: Odds of a December cut plunged below 30% before surging back above 80% due to rising unemployment, dovish Fed commentary, and Beige Book labor softness.
• Reflationary Growth View for 2026: Strong global commodities, resilient demand, and expected Fed easing support the case for reflation rather than recession.
• Crypto Decouples from Junk Tech: Bitcoin fell sharply while non-profitable tech surged, breaking a correlation that typically signals risk-on/off behavior.
• AI Spending Cycle Accelerates: Competition among AI leaders is driving massive capital spending—benefiting chipmakers, data centers, and related sectors.

Connect with Ryan:

• LinkedIn: Ryan Detrick

• X: @ryandetrick

Connect with Sonu:

• LinkedIn: Sonu Varghese

• X: @sonusvarghese

Questions about the show? We’d love to hear from you! factsvsfeelings@carsongroup.com

Hashtags

#FactsVsFeelings #CarsonGroup #MarketOutlook #FedPolicy #Reflation #InvestmentStrategy #Macroeconomics #FinancialMarkets #YearEndRally

Transcript

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SPEAKER_00 0:01

Welcome to the Facts versus Feelings Podcast. I'm your host, Ryan Dietrich. And I'm joined by my co-host, Sonu Vargis. Cutting through the noise each week with Ryan Dietrich, Chief Market Strategist, and Sonu Vargis, VP Global Macro Strategist, taking out the boring and helping investors focus on what really matters. A quick note before we start the show. Investment advisory services offered through CWM LLC, an SEC registered investment advisor. Carson Partners, a division of DWMLLT, is a nationwide partnership of advisors. And we are back. Hi everybody, welcome to Latest Carsons Facts versus Feelings. Ryan and Sonu here. Sonu, this is episode 164, back to December. Sonu, wake up, wake up.

SPEAKER_01 0:45

Are you asleep on me? Not with all the technical difficulties we had for the last half hour. I'm definitely awake now if I wasn't aware. That was just to keep you up. Yeah. I know. See if I'm on the up and up. But no, I I I've been up since 3:30 in the morning. So after spending 10 days in the Middle East. By the way, I did get to swim right next to the Straits of Hormuz. How about that? In near the Persian Gulf. We went snorkeling. We saw some turtles, some sharks, some small sharks. I mean, you know. So yes, I can actually say I was swimming in the Gulf there.

SPEAKER_00 1:19

So and that was a big deal. Well, I mean, this is terrible. I remember hearing a lot about that. Why was that a big deal earlier this year? Was that some trade going on?

SPEAKER_01 1:27

The whole kerfuffa with Iran. And that's what it was. That's what it was. And Kira was snorkeling. Gorgeous waters, I should say. And my kids are a little worried about snorkeling. Are you have you been snorkeling? Are you a snorkeling guy? I mean, no.

SPEAKER_00 1:43

I I don't do the one where you go like far underwater needing a tank. You know, yeah, yeah, yeah.

SPEAKER_01 1:47

That's that yeah. I don't I I don't have a diving license, but snorkeling's fun. The waves, you know, we we stopped at two locations. At the second location, the waves are a little on the rougher side. My kids got into the water then nine, just so that you know for everyone listening. And they were like, Oh, we need to get out. We're scared. So I was like, okay, you know.

SPEAKER_00 2:07

Yeah, that's how it goes. Um, it's cold outside now, there's snow on a lot of different places. So, again, welcome to December, everybody. And we're calling this one back to December. We're hoping maybe we'll get some Taylor Taylor Swift algos when they see uh see this title. So we're gonna hit on a lot of stuff today.

SPEAKER_01 2:26

Um you had to tell me that. I I couldn't have told this is a Taylor Swift lyric.

SPEAKER_00 2:30

You know, when when you spend as much money as I have on those stupid tickets, you kind of know a few of the songs. Uh, big rally last week. We're gonna talk about some of that, what we saw. Going to talk about December, why we think this year-end rally still has some legs left to it. Uh, Fed Talk, you've got some what are we gonna call it? The your conspiracy hat? You're gonna put a conspiracy hat on? I don't know. And then um, I don't know, whatever else talking about. A little Netscape versus ChatGPT. So last week, well, how about this? Two weeks ago. Um, by the way, the Uri and Timmer episode was two weeks ago, had a lot of downloads. The YouTube channel did really well, so thanks everybody out there. We do have comments turned on YouTube, so feel free and give us any comments at all. We like comments. Um, everybody's all bared up, everybody's all talking about the end of the world. And sure enough, Sona, we had a huge rally, SP up almost five percent in a five in a five-day rally. One of the best, I think it's the third best November, apologies, third best week of Thanksgiving ever. Best November week for stocks in 2012. Wow. Yada, yada, yada. You were on vacation the first couple days was just a bloodbath, and then all of a sudden we didn't.

SPEAKER_01 3:35

That was a big reversal. I I see I left, was it the 19th or something? There was a Thursday reversal. The market is up, and then the market is down a lot.

SPEAKER_00 3:43

It was down a lot. Uh, Thursdays have been by far the worst day of uh the year so far this year. So it's not a coincidence that last week we didn't have a Thursday, and um, well, we did, we had Thanksgiving, and the market did really well. So, you know, you're getting caught up. You it's kind of neat because you kind of come come in on an 11-hour plane ride getting caught up on things. When you read about what all the wild stuff to happen on the way down and the way back up, what what'd you find? What stood out about that? Again, coming in from a thousand, you know, 20,000 feet looking at it.

SPEAKER_01 4:15

So much of it seems driven by the Fed, right? As Fed December rate cut expectations went down, you know, all the way from what 90% on October 28th, the day before the Fed meeting, down to less than 30%, you know, on that Thursday. I should know, on that Thursday after I left. Okay. And then it just, you know, markets are down what four or five percent? But then look, markets being down five percent, come on, that's just par for the course, right? If you're invested in equities, a five percent pullback shouldn't worry you. But you know, we'll talk about sentiment and why, you know, maybe people are you know worried about even three, five percent pullbacks because everyone's so concentrated on the tech trade, right? But then when I was catching up, I was like, wait a minute, when I left, you know, nobody was expecting a rate cut in December. No, no, not at all. And I remember Todd telling you that I think that's you know, I'm not saying there will be a rate cut, but I think they are we're closer to maybe at least 50-50.

SPEAKER_02 5:14

Right?

SPEAKER_01 5:14

I I think there it shouldn't be like, oh, we're definitely not getting a cut. And then I come back and catch up, I was like, wait a minute, odds of a rate cut are now back up to 80%. We'll talk about what happened and all of that. But coming back to markets, you know, the SP 500 had a massive week. Last week was up close to 4% and ended, you know, close to flat, 0.1, 0.2% for November seventh straight month of gains. I mean, this is pretty amazing.

SPEAKER_00 5:40

Oh, it is. You know, we've talked a lot with our um Carson partners and their clients. After a 38% rally in six and a half months on the S P 500, it made sense we're gonna have kind of a shake the tree moment. We had nearly a six percent peak to trough correction from the late October highs until right around uh you know November 20th, November 21st. And then we just had a ripper uh back higher. Um, you know, it I don't think it's a coincidence, though, that that you know, markets needed that. We needed that, Sonu. I mean, everyone, when the market was up six months in a row, the Fed was cutting, everybody was bullish. Yes, November's usually strong. Yes, at the last second, we just barely had a higher in November to be up seven in a row. But I think it's it's legit that this this rally continues. We needed again to refresh the fear. We we saw some of that. Now you think about um December. Uh David, we can put this this first one we can put up is December is rarely the worst month of the year. So only once in history has December been the worst month of the year. That was in 2018. Do you remember December of 2018, Sonny? What happened? I don't want to.

SPEAKER_01 6:44

I don't want to. It was like about the Fed. Exactly, the Fed. It was like Powell is probably a little too hawkish. And then December 24th, was it the 24th? It's only a half day of trading, right? And the market just crashed, and then we got this big rally. By the first week of January 2019, Powell sort of changed his tune, said, Oh, maybe we will be cutting rates. And they didn't cut rates immediately. I think it was several months after that. But forward guidance, right? And this gets to like we'll talk about the Fed and you know, my little conspiracy theory and all of that. But forward guidance was basically, you know, what pushed the market back up from that big bottom on December 24th, 2018.

SPEAKER_00 7:27

Yeah, I've always said the market just threw a big fit. The Fed came off more hawkish at their December meeting in 2018 and just a massive near-bear market sell-off. If you were there, you remember it wasn't very fun. But again, as we just showed, only once in history. Uh you tend to have September 13 times in the worst month of the year, August 12 times, and October 10 times. Not a too big of a coincidence. Then you've got May, and they're also selling may go away down 11, 11 times the worst month of the year. Um, so that's just kind of some things to think about. But so no, I was just crunching some numbers, like I like to do. Uh, I'll go there in a second. December is the most likely month to be higher 73% of the time. So no month is higher. It was down last year on the SP 500. It's pretty darn rare to be down two years in a row in December. It happened in 2015, 2016, or maybe 2014, 2015, one or the other. Close enough for government work, but right around there, then 80 and 81, the time before that. So it's rare. But uh, David, we can show this now. Another clue for a strong December. It turns out, going back 40 years, a uh first year of a of a uh first year of a presidential cycle, so where we are right now, the first year, December's been higher nine of the last 10 times. So you tend to get strength for whatever reason. I'm not ignoring it. Uh December of the first term, or I'm sorry, the first year of presidential cycle. But what we're sharing on the YouTube channel, when you're up 5% for the year, okay going into the last month of the year. So a decent year. So a decent year of 5% last month of year. Since World War II, December, in a again, a the first year of the presidential cycle, where we are now, when you're up five percent going into the last month, has been higher 12 of the last 12 times. Go back to World War II. So never lower. Every time December has been higher, so you have some strength going into that last month. You get a little more strength than normal. The average December is up 1.4%, so pretty solid. It's like the third best month on average. Now, just something for everybody, though, the last 10 years, December's actually been the second worst month. Only uh September has a worse return. Interesting. But I mean, there's a lot of numbers, a lot of stats. We like to talk about things.

SPEAKER_01 9:31

Is that skewed by 2018?

SPEAKER_00 9:32

You think it is. It greatly is skewed by 2018. Well, like we said, last year we were down pretty good last year. I kind of forgot that we had a great rally, market did well, but we did have a pretty big drop. And I think what some people noted was like NVIDIA, some of the high flyers came back. But you look at November, one last thing for me, I'll go to you. You know, the SP was up, we'll say 0.1, 0.2 percent, depending on total return or price return. So pretty much flat. S P 500 in November, Sonu, equal weight of 1.7 percent. Eight out of 11 sectors outperformed the SP 500 in the month of November. I mean, yes, it was technology, it was down like 5%. That skewed things. Um, we talk a lot about how we look at this world from a macro view, but then managing real money in portfolios for our Carson partners and their clients. This, I think last month or so really preaches home why we've said stay diversified, don't go all in, really any particular group, because then you see what happens. What do you want to add to that conversation?

SPEAKER_01 10:49

Uh yeah, no, I'll come to because a big thing as we came into October and even November was that oh, we don't have breath. Everyone's like, oh, we don't have breath, right? It it tech has been stealing the show, and then in early October, we got a crash in crypto, right? And then so one proxy for crypto I like to look at is basically you know non-profitable tech. Think of it as junk tech, right? So in the month of November, as you said, the SP 500 went down five percent and gained back close to the same amount to finish the month of uh sort of flat. The Nasdaq was down negative 1.5%, it was down 1.5%. David, we can put this chart up. This shows uh junk tech getting hard hit in November. And if you're looking at the YouTube channel, you'll see this as a purple line showing the Goldman Sachs nonprofitable tech index. That was down 11.5% in November, right? At one point in November, by the 20th of November, it was down almost 20%. And I wonder if that gets to why sentiment is sort of bearish. Because a lot of people are you know more concentrated in that technology side of the market, both in quality technology, which is think of that as a NASDAQ, and then in junk tech too, right? With all this other stuff, and then maybe crypto's in there too. No, one thing that's interesting, and David, you could put this chart up too. This shows crypto getting rocked and getting decoupled from junk tech. Usually when I think about crypto, I'm like, I don't know how you know, I have a model for gold in my head, right? We can talk about gold. We probably should talk about gold because gold's been doing well again, right? But you know, crypto, I don't really have a model. So what you know, my proxy for crypto is small growth, junk tech, right? And usually they tend to be really tightly coupled. And they were really tightly coupled up until October, but now, since then, Bitcoin's gone down. Bitcoin's actually down, you know, two, three percent year to date, maybe slightly more after what happened yesterday, the first day of December. Junk tech, Ryan, is up about 44%. Right? That's a huge difference, that's a massive difference, right? And I'm not part of me is like, I I'm I'm just saying this. I don't know, I don't know how to explain it. I don't know what the deal is. I was gonna ask you if you had any thoughts as to what's going on there, like why Bitcoin seems to have and crypto in general is sort of decoupled from this junk tech.

SPEAKER_00 13:17

Yeah, we've talked about this. Yeah, great, great question. Yeah, I was actually gonna kind of ask you because I was watching CNBC this morning and Carl Cantanilla looks at Jim Kramer, he's like, hey, over the past month, stocks are like flat, all right? So the SP is like flat the last month, give or take. Um, Bitcoin's down 30%. You know, so like if you would have told me four weeks ago that Bitcoin's down 30%, I would have said, uh-oh. You know, we're probably in trouble. Like, like we're gonna have maybe a 10% correction in the market. I don't know. I mean, we we'd probably be in some trouble. Yet we're flat. And you look at it, yes, a lot of it is tech, but I think markets really held up awfully well. I mean, maybe we're not quite as reliant as we were on cryptocurrencies before using it as a potential proxy. And I still think it is a risk-on, risk off. And we start to see more of a bottom and rally in crypto in December. That's probably going to be good for markets. But I think it just comes down to the thing we've been preaching. When in doubt, diversify it out. You know, I look around the globe and I see new highs all over Europe, all over emerging markets, 52-week highs, different places. You've got these countries that have, you know, metals and mining and financials and industrials, not a lick of technology in there. Those those countries are doing just fine. You know, silver, I mean, by who knows, people listed as silver is just going absolutely crazy to the upside. Copper's near all-time highs, gold did have a well-deserved break, starting to pull up a little bit and pull back, uh, pull higher a little bit more. You know, there's a lot of things going on here. And I think it just says again, just don't go all in on technology. You know, we have maybe you could argue the slightest of slight overweights in the money we run, but we're trying to keep our technology right about benchmark because we still think you need to have technology exposure. Look where all the growth just came from. Maybe they did get ahead of themselves. They probably did, some of those names. I mean, let's be real. But the I love the fact that the market's um um kind of finding other leadership. So, David, let's put this one up. It's literally the one without a title, but it is uh a chart that shows the uh SP 500 and the um SP 500's advanced decline line. The advanced decline line is simply a cumulative basis. How many socks go up versus down every single day? In the late 90s, what happened? That advanced decline line peaked in the late uh I think it's middle or late-ish 98, went lower for years, but the market went up. Why was that? Because tech was just about the only thing going higher at the end of that bull market and other major peaks outside of like a hundred-year pandemic. We've seen advanced decline lines peak well ahead of price. Well, everybody, last week the SP 500s advanced decline line made another new all-time high, like we're showing on the chart on YouTube. And that to me, the way I was brought up is breath leads price. Sono this is a broad-based rally. This is not just seven stocks anymore. The X Mag 7, there's an ETF, but I can't mention what it is because I'm not allowed to, but there's a you can find it. There's a X Mag 7. So the 493 literally closed last month at its all-time high on a monthly basis. All right. Now that's that's only been out, I don't know, two or three years, something like that. But the X, the other 493 are doing really well. You did a bunch of great work on earnings. Let's talk about earnings a little bit. You you sent a daily note to our Carson uh partners every day, and it was awesome. You looked at earnings. That 493, they did pretty good too, right? I'm gonna cough. So give me a sec, I'm gonna go on mute, I'm gonna cough. You start talking.

SPEAKER_01 16:33

Yeah, no, look, earnings are up, revenues up, and even for over, especially compared, you know, this earnings season to what happened in 2024, what happened in 2023, 2022, it was mostly about the US economy doing well. And if the US economy doing well is, you know, why does that matter? Because that means revenue is strong for companies that have most of its revenues in the US. Yeah, right? What was a drag was the rest of the world. Right? That's not the case anymore. This earnings season in Q3, we just finished that. Revenue growth for companies with less than 50% of their revenues from the US. Right? So most of their, you know, the majority of the revenues come from outside. Revenue growth was up like 10%. Right? For every everyone else, it was like 7-8% or something for the whole index. And let's just hammer holds.

SPEAKER_00 17:26

7, 8, 10, I mean, these numbers you're throwing around that is huge for revenue. I mean, that's like the best we've seen in three years. I mean, so exactly.

SPEAKER_01 17:35

And and then it gets to the point of diversification. This came up in our conversation conversation with Dorian Timmer as well last week. Uh, you know, how do you you want to ride that AI wave? You want to ride that technology wave, which, as you said, we are slightly overweight. Technology stocks, we like communication services, it's all in there. But at the same time, I think November was a case in point why you want to jump in. Can I jump in just for a second?

SPEAKER_00 17:59

Can I jump in just for a second? So, again, on the morning call, you break all this stuff down, and I always get something out of it. Um, we do with our partners every Monday morning. Communication services was up last week. All right, tech was down like multiple percent. I forget the exact number, but usually, now this is usually those two kind of trade the same. Now, listen, it's all not at all, but a lot of that was because of Alphabet. They came out with Gemini 3, which I'll admit I don't think I can give recommendation on a stock, but I will say Gemini 3 is pretty cool. I'll just leave it there. Um, that's a big reason why. So that was a different part. But again, it was interesting that tech was weak, but communication services was strong. Maybe it's because of Google. But anyway, go ahead.

SPEAKER_01 18:37

No, and and and then you know, you had meta in there too, going the other way and things like that. Again, none of this is a recommendation. But last month, technology, SP 500 technology sector was down close to four or five percent. Yep. Right? Five percent. And then you think, okay, it's very concentrated. Now, if that's all you own, yeah, you'd be in trouble. Maybe that's why sentiment is pretty bearish. But the SP 500 is flat, which means everything else made up for that. Everything else made up for that. Healthcare was up nine percent, staples are up four percent. And you think, oh, wait, maybe it's all defensive, risk off. No, materials was up four and a half percent, energy was up two and a half percent, financials is up just under two percent. So it wasn't just risk off and just staples and utilities and anything. No, you had very cyclical sectors and especially materials, but materials do well. Materials get a lot of their revenues from outside the US too, goes back to that international diversification thing. And then you look at just the MSEI EFA index, developed markets, that was up over half a percent in November. And that's why, like, you know, you want to be diversified. There are ways, like November was a case in point in how to diversify your portfolio. Yeah, right? And EM was actually down. I think EM is part of that whole tech, you know, EM is mostly China, it plays into that AI story, technology. So again, you know, EM, I it's not like we we are slightly underweight, EM, but look, there I know people who are very positive on EM, but very positive in China, that's fine. But again, be careful of putting too much in that technology AI basket, right? You want to be diversified. There are ways to diversify right now.

SPEAKER_00 20:13

Well, no, well said. Do you want to talk about gold? Want to go do go there? Um, we can kind of talk about a little bit, or do you want to what do we think?

SPEAKER_01 20:18

Uh I actually let's talk about the Fed and then we'll get into gold because I want to talk about Kevin Hassett, too. And I think that's a good thing.

SPEAKER_00 20:24

Okay, so if we're going to go that route, any okay, anything else on equities then? I'm trying to think if there's an else. I don't think I want to talk about any equities before we trollly shift gears. I think we covered it pretty well. Yeah. I I I mean maybe it'll tie it together because one more, what maybe one more for me. I think I've list this before, but um it is really, really rare for the SP 500 to peak in October, right? We had the peak October 28th, October 29th, the Fed did a cut. It was like a smallest, smallest down day, one of the smallest down days ever on a Fed day. Um, and then we had the sell-off. And when the market was down five, six percent, I mean, we were out there saying we still think new highs are gonna happen. I know I know I said that. People gave me some crazy looks two weeks ago. Now it's like, okay, now we're a chip shop multi-highs, time we're doing this. But only four times the last 75 years has the SP 500 peaked um the month of October. Like one of the most recent was like 2008 or something like that. It's like, oh, you hear that. And well, no, no, 2007, apologies, it'd be 2007. Sorry, wrong one. It's like, oh, you hear that? Oh my goodness, what happened next? But no, you know, it's never that simple. Uh, we're still quite optimistic as we've laid out. But just know it's rare to peak in October. You have market breadth, you have a dovish Fed, like we're gonna talk about, you have uh seasonality, you have everybody freaking out just again, just two weeks ago, about all the bad stuff they're telling you on TV. Um, again, that's the recipe for a year-end rally, and we're still pretty optimistic we're gonna see it. So let's go to the Fed now. Kevin Hassett.

SPEAKER_01 21:42

Um I'd say October 29th, when we recorded the episode. October 29th, uh episode 159 came up. We titled it Here Comes a Year End Rally. What happens after October 29th?

SPEAKER_00 21:53

That was your idea. I didn't want to call it that. I said, Buckle up, here comes a mild sell off. Sonny said, No, Ryan, you can't use that. Uh yeah.

SPEAKER_01 22:03

So what happens October 29th? Powell comes out. That's the day of the Fed meeting, right? We recorded before the Fed meeting. We expected them to come, but they came out pretty hawkish. And then throughout the first week of November, you had all these regional Fed presidents coming out of the Woodwork, we talked about that, throwing cold water on December cut.

SPEAKER_00 22:20

Honestly, the government shut down too. Even though we that doesn't necessarily impact equities, it did impact consumer confidence. I mean, I think that that's clear when you look at those numbers. We had no data, too.

SPEAKER_01 22:29

We had no data. We were flying blind. The Fed is flying blind. So uh David, you can put this chart up showing December rate cut expectations. Uh so the odds before the Fed meeting of a December cut was about 90-91%. That fell all the way below 30% through November 20th. Okay. Right? And the SP 500 just followed that down. It fall it was down about 5%. Then, this is when I went on vacation. The next thing I know, wait, wait a minute, rate cut odds for December back up to like 85-90%. And I was like, what happened? I think there were three catalysts. One is we got the September payroll data on November 20th, right? That showed the unemployment rate going up to 4.44%. Yeah. Just a tad, 0.01 percentage points below being rounded up to 4.5%, right? And of course, in September we saw that of 190,000 jobs. The employment population ratio was also steady. But the big number, headline number, is the unemployment rate has been going up. I think that was like, wait a minute, that should increase the odds for a cut. I think the market rallied a bit on that day. The next catalyst was on the 21st of November, New York Fed governor John Williams comes out and says he sees room for further adjustments to rates. The labor market weakness in his mind poses a bigger economic threat than higher inflation. Right? That took rate cut odds to above 60, 70%, something like that. And then finally, last week, the day before Thanksgiving, we got the Fed beige book. You know, it's basically anecdotal evidence from all the different Fed offices, basically, across the country. They talk to businesses, they're pulling all this data saying, how do businesses feel? It's not like a sentiment thing, it's anecdotes, things like that. I think that sort of sealed the deal for the November cut. Uh the most important message, this is from Bloomberg, in that beige book, it covers a period from early October through November 17th. Employment declined slightly, with nearly half of the Federal Reserve districts noting weaker demand for workers. That's a significant downgrade since the previous report when unemployment levels were seen mostly as stable, right? So you had these three things, and I think that's basically what took rate cut odds, you know, December rate cut odds back above like 80, 85%. I think Powell's probably in favor of another cut. I always thought he would probably, if he had to choose, like, do I not cut because I'm worried about inflation? Versus, do I cut because I'm worried about the labor market? Given what he said over the last several years, I thought he's going to come on the side of protecting the labor market. Which is why I think I was always like, I think we'll get a cut in December. I'm not so sure. I remember you know, I we didn't have any payroll data, nothing like that. And now, yeah, I think Powell's in favor of another cut. We had a lot, we are in this quiet period, right? This is the period next week is a Fed meeting. Right. 10, 12 days before the Fed meeting is the quote-unquote quiet period where you don't get Fed governors coming and speaking, things like that. Maybe some of us could probably argue that the entire period between Fed meetings should be quiet periods and they shouldn't say anything. But look, we've gone into the we're going into the meeting with rate cuts, uh rate cut odds above 80%. So I think we are going to get a cut. The thing is, are we going to get now a hawkish cut or a dovish cut? Look, a cut's a cut. I think that's going to be possible.

SPEAKER_00 25:58

Let me jump in there. Um, one of the things we've we've talked about, usually the first Friday of the month, you get the monthly employment data. I believe we're still not going to get that this time, right? Sonny, doesn't that come out until after the Fed meeting? So we're still getting like old, we're getting some data, but it's all old. It's all September data. It's all September data. So I don't know if that's really going to change the Fed. We don't have employment data until after the Fed. Uh again, uh, you know, kudos to you because you said the whole time, listen, I don't think it's a 30% chance of a cut. I mean, you said it's probably always over 50-50, is what you were saying. Um, and now you know there's more data and we know, and that's the way it looks like. So that's good. Just one more fun one. I think it's fun. So the Fed cut near all-time highs twice already this year, right back in September, and then literally cut of all-time highs based on the day before close. So the market closed all-time high October 28th, next day, October 29th, they cut 21 times, Sonu. Back in history, they've cut within 2% of an all-time high. One year later, the SP 500 is higher 21 times. I've mentioned this a lot. Um, who knows where we are next Wednesday, but we're we might be within 2% all-time high. We're there right now. Um, you know, we had the one in September, one in October. So there is the old saying, don't fight the Fed as we head into 26. The is the Fed still um, I guess, dovish, you think, going into 26 then?

SPEAKER_01 27:15

I think so, because Powell ends his term in May of next May, right? Maybe right. And President Trump is probably within next week or two, I think, at least going by reports, news reports. It looks like we'll get the nomination for the new Fed chair. It looks like Kevin Hassett is in the lead. He's the head of the National Economic Council. He's Trump's guy, basically. He's Trump's guy. What does Trump want? Trump wants rate cuts. He's gonna put somebody in there who will go for rate cuts, right? And the prediction markets, David, we can put this chart up showing Hassett is a front runner for Fed share. Uh, poly market right now has odds of Kevin Hassett at 81%, odds of Kevin Hassett being the Fed chair, right? And here's the thing for like all the noise, right? We went through so much annoyance in November. We're like, will they cut or will they not cut? And rate cut odds going down to 30%, going back up to 85%. If you look at 2026, what markets expect, markets still expected like close to a 3% Fed funds rate 2026.

SPEAKER_00 28:17

So how many cuts is that? It was about three to four cuts. About three, so somewhere between three and four. So it just always stayed there. It always stayed there. I mean, all the short-term jockeying, whatever, but the market said, listen, you you guys can argue about December. We know we're still cutting next year. Is that kind of the way to put it?

SPEAKER_01 28:31

Exactly. Okay, right? And and I think that gets to our outlook too, without giving too much away. Right. I think there's a reflation story next year. The Fed is cutting. Don't fight the Fed. We're getting tax refunds. Uh, and we could talk about oil prices too. I think oil prices may be coming back a little bit into next year. Seems like that's a that may be a contrarian call here. But I think we get reflationary growth a little bit. That's very good for stocks.

SPEAKER_00 28:55

And let me let me jump in there for a second because uh you and I were sharing a note uh with Barry and Grant on our team. It I don't see, and again, the outlooks are all coming out, but I haven't heard too many people say reflationary growth, that's what we see in 2026. I mean, it doesn't feel like that. And that's one thing like you know, I love where we're different than the crowd. I mean, listen, if everybody's modestly bullish, okay, well, whatever. But we've been different. Like, again, if you listen to this podcast, you know, early in 2026 we changed our tune. I mean, in December of sorry, December of 2005. So this year, this is this December. I'm gonna get there, Sonu. This January. Apologies. I'm all mixed up, guys. I don't know. I'm hungry. It's almost lunchtime. Actually, you know why?

SPEAKER_01 29:34

I'm the one with Jet Lager.

SPEAKER_00 29:36

I'm thinking of two different things at once. Here, I'll just tell you. So I just got an email from CNBC. This is why I can't focus. I want to get off the shit. So it's cool. So I'm gonna be on CNBC today at 3:35 Eastern time, closing bell by the time people listen to this podcast. Hopefully, it's already happened and I didn't make a fool of myself. And I'm on with Mike Sentoli, which is good. I'm a big fan of Mike. I thought it'd be Judge. I love Judge. Judge can be tough, Judge can be tough. So I'm on with Mike, so that'll be fun talking with uh with Mike. Now, where was I? Oh, well, on this very podcast, literally the last week or so of January, early February, I'm out there saying maybe the dollar is gonna peak. I know nobody was thinking about that. Very few people, my friend Chris Kemble, a couple other people were saying there's some reasons to think the dollar is gonna go lower. Everybody said it had to go higher. And then Germany did its thing and all the fiscal stimulus, and then you and I were all kind of on the same wavelength, like, wow, maybe we should look around the globe more this year than we have the last three years, well, or last two years before, while we like the US. And that's why you know we make our decisions with the data, we let the data come to us. We're not always going to write, we're not always going to be wrong. But it's cool because this podcast we manage almost $7 billion on our team, right? When we talk, it hopefully matters. And I'm on CNBC or Sony who's doing all his stuff, and our team manages real money. We're not just a podcast that just pontificates. We pontificate, and I know you've got some theories coming up, but we actually bring it all back to managing real money to help our Carson partners, you know, grow their businesses and help their clients sleep at night. Um, all right. Now I'll get off my totem pole there or my. No, no, I think it gets too much.

SPEAKER_01 31:02

Yeah, what do you want about 2026 bet? Like our bet is reflationary growth.

SPEAKER_00 31:06

There, that's that's where that's what I asked you about 17 minutes ago. Reflationary growth. Thank you for bringing me back to it.

SPEAKER_01 31:20

You have like the inflation eats us. I'm not saying, you know, I I think inflation the Fed has a little bit of an inflation problem. I I do think it's not a huge problem because shelter inflation, disinflation will offset other things. But I still think inflation, you know, if I had to pick, probably stays closer to 3% rather than getting back to 2%. Which means they have a problem because inflation's now closer to 3% or above for about what five, six years, right? So that's that's a long time, right? So which means that's still a problem for them, but then they're still going to continue cutting. And like we said, don't fight the Fed. This gets back to if asset is in there, you know. I think this is a go good period for gold, too, right? And there's a reason why gold is rallying because the Fed is cutting in the face of elevated inflation. Right? We've talked about this. When did gold start its rally after Powell's speech, it's the latest rally, I should say. Right. After Powell's speech at Jackson Hole. You know, forget the inflation stuff. We are more worried about protecting the labor market. We're going to continue cutting. And now, you know, including the December cut, assuming they'll cut, they'll put up cut 75 basis points, 0.75 percentage points. That's a lot, right? Meanwhile, inflation's still close to 3%. I think that's why gold is rallying. But so anyway, we are on that reflation growth, you know, island, which is, I think, good for equities. It's good for gold, it's good for managed features as well. Like all these commodities, especially with global global growth going up, you know, copper's up, right? Oil is called aluminum's up, steel is up.

SPEAKER_00 32:51

I will say natural gas is one that's kind of near the top. I mean, I've I follow some smart people. They think natural gas could be one that I don't know if we want to pay more, but I mean from an investments point of view, if you're thinking about these things, natural gas, maybe potentially oil, like in 2026, these could be playing catch up with some of these other commodities that have already soared. And it's just very hard for me, Sonu, to think there's some global recession coming when I see copper near all-time highs, when I see silver strong, I get it. Silver's got a little bit of both to it. It's got a little uh you know, precious metals to it, but also has some industrial stuff to it. So to see those things happening, it's hard to become majorly bearish in a global economy, which we're not exactly, but that's what the market's telling us.

SPEAKER_01 33:28

And I think a lot of people, some people are like, oh, we're going to get inflation, but we're going to see slower growth. Yeah, yeah. Right? That that's stagflation light.

SPEAKER_00 33:36

That's a very popular call. I mean, that's a very popular call. Inflation could be trouble, but the economy doesn't grow more than a percent next, one percent next year or something. Right, right.

SPEAKER_01 33:44

That's stagflation light, right? And you know, that that's a scenario where you probably don't want to be overweight equities. I mean, if I was predicting that, right? That that's a different. Well, that's like I'm not saying it's like the 70s, but some of these guys are that's what they see. But uh, and then on the other side, you have the recession light, folks. Like, wait, the unemployment rate is going up, which is true. That like maybe the economy is in trouble. That's also a scenario where you probably don't want to be overweight equities. You want to be overweight duration, you want to be overweight long treasuries because you think, oh, if we are getting close to recession, the Fed's going to cut a lot.

SPEAKER_00 34:17

So in simple English, I mean bonds, right? I mean what bonds of listeners do we get a little geeky with our lingo sometimes. You want to own bonds in that type of scenario because bonds are a little safer and they they probably will give you some zig when stocks zag and stocks zag would be down in that particular uh scenario, probably.

SPEAKER_01 34:33

Now, where I think is you know, next year we could see some volatility is like, yes, Hassett could come in, or he probably will come in as a Fed chair, but there are 12 members who vote. There are 19 members total. The chair does not get to override, or it doesn't get a tie-breaking vote or something like that, right? So the question is can Hassett deliver the rest of the Fed to go along with rate cuts. I I think they will cut, but it's not a certainty. And because of that, we could get a lot of volatility. Look, the administration's going to try and get their people on the FOMC by next year. The data going in that direction will help. Ideally, it'll be because inflation's moving lower instead of the unemployment rate going up. So it'll be like, you know, it's good news, and that's why they're cutting because of productivity growth, things like that. But yeah, we haven't had a divided Fed in a very long time. The last time we had a divided Fed, Ryan, was 1994. You know, a lot of Fed officials wanted to raise rates in 1994 faster than Greenspan did. It actually caught Greenspan by surprise. Since 1993, I looked at the data, only five meetings, five meetings since 1993 have had three dissents. The most recent one is 2019. Right? The last time you had four dissents was 1992. Now in this December meeting, we may get four or five dissents. The vote may be seven, five in favor of a cut. But what does that mean? Meeting by meeting, you know, we're going to be like, is it going to be seven five in favor of a cut? Or if two people change their views, it's going to be seven, five, you know, in favor of no cut, right? So we're going to be flipping back and forth. You're going to have a lot more volatility when you have more dissents. I mean, in fact, there's some academic research showing that, you know, markets are more volatile when there are more dissents. And I think that actually may be Powell's legacy here. There's my, it's not going to quite conspiracy theory. Well, here's one way to look at it. You had all this Hawks versus Doves commentary, right, over the last month. You had the regional governors who were like hawkish, then John Williams, then New York Fed governor comes out and says, Oh, I think, you know, we can cut more. One way to look at this is Powell's lost complete control of the Fed. It's a free-for-all. Right? Yeah. I don't think so. I think he's like, you know what? You guys go out there, push your views. That's okay. Right? He's pro he's promoting dissent. That's a way of keeping the Fed independent.

SPEAKER_00 36:55

Is this when you should put your conspiracy hat on?

SPEAKER_01 36:57

Is it where we're going with that? And I think what he's saying, his final legacy when leaving the Fed is, you know, all this time he's been the one, you know, we've talked to, I forget who we talked to. He said before the meeting, Powell calls everyone, tries to get a consensus view. That's why most votes are unanimous. Now it's like, you know what? You guys dissent. That's okay. He's sort of minimizing the role of the Fed chair just before he leaves, just before Kevin Hassett comes in. And it's a complete free for him.

SPEAKER_00 37:24

Get that seat nice and warm.

SPEAKER_01 37:27

And make it a little hot seat, right? Because you know, if like Hassett's got to have to wrangle all these guys, Powell set the tone for, oh yeah, you guys go out there and dissent. Have your own views. It's okay. And meanwhile, the president's screaming at Kevin Hassett saying, you know, I appointed you for rate cuts, but you're not giving me my rate cuts, right? I'm gonna fire you. So I think next year we'll see some volatility associated with this. I still think they'll cut. Okay. But, you know, praise for you know a lot of dissents, some market volatility around Fed meetings. If you thought what happened over the last month was volatile because of, you know, Fed rate cut expectations. Get into March, May, and June of next year. I think we see more of this.

SPEAKER_00 38:11

Yeah, that's good for having a podcast because our views and downloads do go up when the market goes down. We don't really want the market to go down. We want it to go down and then come right back up, is what we're we do manage money, right? Um so there's a lot there. I know that was a lot. No, it's a great discussion. No, no, it's awesome, great discussion. Yeah, as we as we head into 2026, we'll talk a lot more. Speaking of 2026, so I know I did see we just got an email from Barry Gilbert on our team. He shared the Outlook 2026 draft with us. Um, so so we are working uh furiously on our outlook for 2026 uh from the Carson Investor Research Team. We know a lot of people listening to this podcast are excited about that. We're excited about it. Hopefully, it comes out around the first or second week of January. Can't give an official time because we're not we're not even sure, but what that's when we're shooting for. Um why do we do that? A lot of places. I literally saw some outlooks are already out. Like literally out already. I personally love the idea of not doing it that early, letting the year settle, and then releasing it in and I guess it's because people want to get out there first, but we don't play that game. Like again, we manage real money. What we care about is helping our partners grow and making sure the money we manage is doing what it's supposed to be doing. Uh, we love content stuff, we love creating, we love writing. I guess maybe that's the answer is we're not trying to be first, we're trying to be right when it comes to our outlooks. Our outlook will come out in early 26, but it's there. Anything you want to add to that, Sonic?

SPEAKER_01 39:37

Yeah, and a lot of times the people writing the outlooks are not the ones managing money.

SPEAKER_00 39:41

Exactly. That's why that's why they want to have that's what it'll be first, because hey, you can get ours out there first. PR loves it.

SPEAKER_01 39:46

But I think this time I it it matters even more that you come later because we haven't got any data. All these outputs that are coming out are based on data we got through September, right? The next payroll report we're going to get, I think it's December 17th or something like that, is when we're going to get it. 16th or 17th is when we're going to get the November payroll report. By the way, we still haven't gotten Q3 GDP data. So all these outputs that are coming out is based on Q1 and Q2.

SPEAKER_00 40:13

Yeah.

SPEAKER_01 40:13

Right? We haven't gotten Q3 GDP data. We're going to get that, I think, on December 23rd, right? They're not going to give us the initial estimate. It's going to be the second estimate, but that's fine. You know, it's still what it is. But yeah, that's why I'm even more comfortable about the fact that our Outlook is coming out only in January, because by then we have a better picture of, you know, where the economy was in Q3. Right now, everyone's going by where the economy was in Q2.

SPEAKER_00 40:40

Well, very, very good stuff. We've gone along. You know, we didn't have much of a script, and as usual, we just go. I mean, I do want to touch on one thing, David. The the last chart I sent that overlays ChatGPT um with the IPO from Netscape. Uh, the Netscape IPO came out so new August of 1995. The SP 500, the first three years after that, doubled. Why does that matter? Because we just hit the first three years when ChatGPT, did I say right? ChatGPT came out just three years ago on November 30th. NASDAQ's up about 100%. Now, as we're sharing the YouTube channel right now with this chart, not a lot of people have shared his chart. I made my own version of it because it was the three-year anniversary of ChatGPT coming out. The NASDAQ back in the late 90s, three years after it gained 100%, after uh the Netscape IPO, doubled once and then doubled again the next 19 months. Now, we're not calling for that. In fact, I don't want to see that, but what we are saying is, you know, if you kind of, and I get it, there's a lot of different factors here. But just because this wave has gone for a while doesn't mean it's over, right? And I think it's just really important to note those things while we still think there's reasons to be quite optimistic as we had in the next year. And maybe technology still does well. Yeah, it had a terrible, not terrible, strong way to put it, a rough November, kind of ahead of itself, but there's still some reasons to like it. Sono, we probably need to wrap it up because I have to do another podcast in like four or five minutes, because we started late. What do you want to end this uh um Taylor Swift themed back to December uh podcast? What do you want to finish behind?

SPEAKER_01 42:18

I think the wave continues for a while. I mean, I'm just looking at a headline on Yahoo Finance showing it's saying OpenAI's Altman declares code red. Code unclear code red. Code red's all over the place as as rivals gain. And you just mentioned Gemini, right? But what is that what does that mean practically? That means they are need they're going to need to spend more money. Right? They they have and then you know their rivals will have to spend even more money. And when these companies spend money, that's profits for other companies, you know, Nvidia's of the world, etc., because they have to buy chips, they have to buy power, they have to buy all sorts of things to set up data centers. So I think this continues, right? For now.

SPEAKER_00 42:58

Well said. You know, NVIDIA peaked on um October 29th, and over the next 20 to 25 days approximately, it lost almost like 850 billion dollars. Now remember, it peaked at it peaked at 5 trillion. So just it's going to give some back and volatile. But if you look at what Alphabet did, so Google Alphabet from October 29th until the same period, it gained like 650 to 700 billion market cap. So, no, it wasn't a pure one-to-one, but I think it's a real good way of showing there's a lot of things sloshing around in there. A lot of people are overweight, these high-flying tech names, and hey, they've done great. But when you have these big pullbacks like we do, we've seen in those names, that's why everybody feels like they're freaking out when you look at magazine covers and sentiment polls and put-to-caller ratios and all that stuff. Again, keep a diversified portfolio, own some gold, own some manufutures, own some cash, own some bonds, own some Europe, own some EM, own a good chunk of the US with a little bit of a large cap tilt, maybe split value growth kind of makes sense. Maybe own some momentum, maybe own some low vol. What I just said is how we manage our portfolios. We sleep well at night, knowing we're still over with equities with a lot around the globe, but we've still got those diversifiers to help diversify that other 40% bucket, which in our case is not quite a 40% bucket. Uh, but nonetheless, that helps you sleep at night. Um, all right, I don't know. I think we're done. We done, Sundu? Anything else you want to say?

SPEAKER_01 44:15

So I may need to get a nap and get over tech flag.

SPEAKER_00 44:19

Yeah, I'm um I'm I'm traveling out to Arizona uh tomorrow. My wife is turning 50 years old. Uh are you supposed to tell everyone that? Yeah, I don't know. She's 29. My wife is turning my second wife is turning 29. I don't know.

SPEAKER_01 44:34

Did you buy her a nice gift? Did you say it's Cyber Monday shopping?

SPEAKER_00 44:37

Or I haven't, you know, we've got some ideas. I haven't done any yet. Uh we'll see. I'm thinking maybe just get something out in Arizona. Let her just pick it out. I don't know. Make it easier.

SPEAKER_01 44:45

I still don't know what to get my wife for like a birthday present or anniversary present. I mean, she's just so I mean I think I'm hard to shop for her, but you know, like yeah, I um I don't know.

SPEAKER_00 44:56

I'm I'm terrible at it. I mean, I try. I try, so I just always take it on a nice trip, you know. I don't know. That's kind of that that's that works. That works. Yeah, so anyways, everybody have a good week. Hopefully, you're not in the snow, but where I'll be, there's no snow, so that'll be nice. Um, thanks all the listeners out there. If you give us a like, give us a follow, give us a review. Not positive, not negative. I can't lead the witness. I got in trouble for that before. Give any types of comments. We do like that. The algorithms love those things, and um, we're just excited to keep doing this podcast. Hopefully, everybody's enjoying the holiday season, which is coming up, and hopefully the potential. What's that beeping? What is that? What is that beeping? I don't know. I don't know what that is. Whatever. Maybe it's time to stop talking what that is. Hopefully you enjoy the uh potential end of your rally, which we're still pretty optimistic is going to happen. We'll see you by next week. Take care. Thank you. Information provided on facts versus feelings with some of our geese and Ryan Dietrich are for general information only and are not intended to provide specific advice or recommendations for any individual. The statements and opinions of show guests may not be reflective of CWM LLC or its affiliates. Past performance is no guarantee of future results. All indices are unmanaged and may not be invested in directly. Investing involves risk, including possible loss of principal. No strategy assures success or protects against loss. To determine what may be appropriate for you, consult with your attorney, accountant, financial, or tax advisor prior to investing. Guests on facts versus feelings are not affiliated with CWM L L Cha.