Overvaluation Signals Gold’s LAST Stand (Uncut) 03-09-2025

ALERT: BEAR Market – Overvaluation Signals Gold’s LAST Stand | Steven Hochberg

There’s something we call the uh-oh effect that we first talked about in March of 2000 in our newsletter and that’s where people get so excited about the market and they see the risk but they really don’t care. They’re like oh yeah you know we’re at all-time highs and you know we see we’re in a bubble or a mania but you know what am I going to do so I’m just going to keep my mark my money in the market and if we go down well we go down it always comes back in the water. So there’s that kind of realization right at the end that there’s trouble but people don’t act on it.

Hello and welcome to Soar Financially, a channel where we discuss the macro to understand the micro. My name is Kai Hoffman, I’m the Ed.J. Armani guy over on X and of course your host of this channel and I’m looking forward to bringing back an old friend. Old means somebody we’ve known but we haven’t talked to in about two years.

It’s Steven Hochberg. He’s the co-founder Elliott Wave Financial Forecast and I’m really looking forward to catching up with him. We haven’t talked Elliott Wave on our channel in two years pretty much so it’s really time to get his perspective on things.

Where are we at in the cycle? What does this cycle theory or analysis tell us and where are things headed? What should we be focusing on? Where does he see opportunities in the market? And before I switch over to my guest please hit that like and subscribe button. Helps us out tremendously and it is really really appreciated. Now without much further ado, Steven, it is great to welcome you back on the program.

It’s good to see you again. Thanks so much for making the time. Thanks Kai, I really appreciate it and it’s good to be here.

Yeah, really looking forward to the next 40 minutes here with you. We got lots of course to go through. The last two years a lot has happened, a lot has changed but I need to ask you and I’ll bring a graphic up on the screen right now because you only shared this about a week ago here, is the overvaluation of the market.

Steven, how overvalued is the market and what’s happening? Well, according to this graphic right here which we published in our newsletter, the LEUA Financial Forecast, it’s a combination of different valuation metrics they put together and we’re more overvalued today than we were on the top day in 1929 in September, a day from which the Dow Industrials declined 89%. So we’re not going to put a number on how big we think the decline is going to be going forward but just in terms of valuations, it’s off the charts, it’s historic and I don’t think people really have a good grasp and concept of just how out of the ordinary this market environment is and that’s something that we’re writing about in our newsletter trying to tell our readers, hey look, you’ve got to watch this because it’s really important what’s going on right now. Yeah, absolutely and various indicators of course, trailing PE, forward PE, market cap to GDP ratio.

Is there one indicator that jumps out that’s extremely overvalued or are they all equally high? Yeah, they’re pretty much all equally hot. One we just published recently also was one you just mentioned, the market cap to GDP which some people know as the Buffett indicator, the Warren Buffett indicator because that’s one of his favorite ones that he uses to measure valuation. It’s just taking what we take as the Wilshire 5000, the broadest measure of stock market performance and divided by annual GDP and right now, it’s greater than two times GDP, the stock market valuation which is an historic extreme.

So any way you slice and dice it in terms of fundamental valuations, you’re looking at a market that’s just way out there. We at LUA International have something we call the Pluto chart which is very popular, which looks at dividends and book value and again, we plot all the dots at the end of the year as to where we are within this valuation matrix and right now, we call it Pluto because it’s beyond the solar system. This one dot is way overvalued relative to everything else.

So again, we’re in historic times, historic conditions and it’s great to be talking about markets and what’s going on right now because it’s so important to people and their investments. Well, 100%. I’m just looking at the S&P 500 right now as we’re speaking.

The market opened about 30 minutes ago and the S&P is down about a percent. We’re trading at 57.87. I want to get the chart up here because I think it’s quite important to share and just to understand the direction of what is happening in the markets. Are we in that corrective phase already? Is that happening? I hope everybody can see it.

That’s just the last year and the S&P 500 has turned down massively. Are we seeing that correction happening play out in front of our eyes already, Steven? Yeah, I do believe so. I think so and what’s really interesting and something we wrote about is that the topping sequence that we’ve just been through is the same type of topping sequence that occurred in 2000.

And by that, I mean the Dow, remember in 2000 at the end of the dot-com mania, peaked first on January 14th, 2000. And then about three months later, the S&P 500 and then the NASDAQ 100 topped in late March of 2000. And in between, the NASDAQ composite topped on March 10th of 2000.

They all kind of rolled over together after. Well, here we fast forward to 2025 and the Dow topped first in early December. And then we just had the NASDAQ 100 and the S&P topped on February 19th.

And in between, we had the NASDAQ composite topped. So that same sequence of highs as we roll over is playing itself out again. I’m not sure that’s the key to what the market’s doing, but it’s such an interesting parallel.

And I do think that we’re rolling over here from our bull market highs. And I think the potential right here, the bearish potential is quite large. What does a correction look like for you? Right now, it seems like I see potential in the chart that it might stop or see some support around 5,750 or so, or 5,700 more likely.

What does your theory tell you? Is there more support or do you think there’s so much momentum to the downside right now that we’ll be breaking lower maybe to 5,200 even? Yeah. Well, the model we use is called the wave principle model, which is a fractal, which we’re looking at patterns that are self-similar at different degrees of scale. It’s kind of a three-step forward, two-step back pattern.

And if we can determine where we are within the development of these patterns, it implies something about the future. In our estimation, we’ve just completed what we call a five-way pattern to the upside at multiple degrees of trend. You can trace it back all the way to the 1932 low and even before that.

And so I think the bear market that we’re starting now is really going to be an historic bear market. We’re starting from overvaluation levels, as we just talked, that are historic. And the wave, the principle, the patterns that we see suggest that the downside potential is going to be equally as large to get us down to even undervaluation levels by the time the bear market’s over.

So sure, on a short-term basis, you can point out key support levels, 5,200 or whatever, but I think ultimately this bear market is going to last a lot longer and carry us a lot lower than that level. Yeah. I’m really trying to figure out what momentum looks like and what other indicators are telling you as well.

If I look at the 10-year bond, for example, at 431, the yields come up just a little bit the last 24 hours here, Stephen, but do the other indicators correlate with the main markets here, meaning that correction phase, the US dollar weakening, bond market rallying seemingly, yields going lower? Does that correlate with your thesis? Yeah. Actually, the yields, I think we’re going to start seeing a rise in yields. Interestingly, a lot of bond markets around the world are correlated.

You put up a chart of, say, the Euro bond or Italian bonds, US bonds, they tend to trend in reverse together. And the Euro bond yesterday just had its worst day since the fall of the Berlin Wall. So yields are popping up in Germany.

I think yields are going to start rising again in the United States. And that’s going to put a headwind, I think, on a lot of the risk assets we’re seeing. They’re not totally correlated.

They don’t move in lockstep. But looking at the pattern in bonds and the pattern in stocks, they both point to a continued or at least a bear market in stocks and a continuation of the bear market that’s been going on in bonds now for several years. Just trying to understand a bit of direction and momentum.

You said we will see rising yields, meaning the bond market will be selling off. Why? A simple why question, Stephen. Why do you expect that to happen? I just had a guest on earlier this morning.

He was saying yields will be dropping because that’s where people seek safe haven. So I’m curious why you’re saying that yields will be rising. There is a safe haven element to it.

So there’s a couple of reasons. The main and fundamental reason is the model we use, the elite wave model, has a five wave rising pattern in yields, which indicates that we still have a little bit more to go before that fifth wave is complete. And then after that fifth wave is complete, we’ll start having a move down in yields to partially retrace that movement.

But also there’s this kind of underlying current, I think, that’s starting to develop. It’s very, it’s burgeoning and it’s going to, I think, blossom in the future. But I think people are going to start questioning the backing of the United States economy and Treasury of our bonds and bills.

And by that, I mean, not that so much that we’re going to go bankrupt, but we’re on a path where we have 30 trillion in debt and a trillion every year sustaining that debt in terms of interest payments. It’s just simply unsustainable. We can’t keep doing what we’re doing.

Back in 2011, S&P actually downgraded the rating of U.S. Treasury bonds. And in 2023, Fitch did the same thing from AAA rating down to a lesser rating than that. And the question is, you know, the big one out there, Moody’s hasn’t done it yet, but they’ve also put us on a credit watch.

So I think we’re starting to see the early stages where people start to question the value of holding U.S. Treasuries. You know, are they as safe and secure as you think they are? And that’s part of the reason why I think longer term yields are going to go up. We’ve been in, we were in a 39 year bull market in yields from 1981, ended in 2020.

And now that bull market has turned into a bear market. We still have a long way to go there. You mentioned term premium and term risk, and I’m just looking at the 10 year and the two year or the six month and the 10 year, they’re almost equal.

So there’s not a lot of term risk priced in right now. There was more just a couple of weeks ago. There was higher term premium priced in.

Why is that evaporated? Where do you think? Well, we’re seeing a steepening in curve and a lot of people, particularly money market funds are buying the short end, but the long end keeps rising. And that’s exactly the opposite of what the government wants to do. At this point, they want the curve to flatten a little bit, but we were in an inverted yield curve situation.

We came out of the inversion and now we keep steepening. And that un-inversion, the inversion to un-inversion has an almost unblemished track record of predicting US recessions in the future. So we’re in a countdown right now in our estimation to an economic contraction.

I think the yield curve is signaling that and the steepening and the inability to flatten, I think is just pushing us further and further toward that outcome right now. A hundred percent. A lot’s going on.

And I meant to ask you, like bond market and especially the S&P 500 and the bond market, they’re privy to external shocks. A lot of macro shocks happening. We need to talk about tariffs because they can change the fundamentals drastically.

How do you factor that into your models? How does the Elliott Wave model sort of respect that or not respect, reflect is the word I was looking for? Well, one of the things that’s so interesting about the model we use is that it doesn’t take into account external factors. In other words, the patterns are endogenously regulated. By that, I mean that they’re internally regulated, that people move from a period of pessimism to optimism in a patterned way, and they move from optimism to pessimism back in a patterned way.

And all these external factors that come from left and right and up and down don’t determine the trend of the market. It’s people and their interaction and their psychology that determines the trend. So while it’s interesting and we follow this whole tariff and these proclamations and who’s doing what to whom, you know, if you look at a chart of the market, you really can’t tell for the long term these individual events because they really don’t have an effect on the trend.

We’re looking strictly at psychology, strictly at how people interact together and the way they interact is how these waves of optimism and pessimism are created. And so from our perspective, the fact that we’re rolling over in the market and we’ve completed five ways to the upside, we’re entering a bear market, it really doesn’t matter what the Fed’s going to do at this point or what the president’s going to do or tariffs. It’s just the waves and the waves are plotting out our future.

It’s the same thing that happened with us in gold. You know, we turned bullish gold when it was at 1810 in October of 2023. And it wasn’t because we were looking at any sort of inflationary aspects or what the dollar was doing.

It was simply that the waves had come to a point in the development of gold’s pattern that said to us, we’re going higher and it’s time to turn bullish. So that’s how we approach the markets at any freely traded market like gold, silver, stocks, yields or whatever. And so that’s kind of our model.

It’s a unique model and it’s really interesting. Now, Stephen, you brought up the Fed and I was curious, like, how does the Fed rate hike cycle align with the Elliott wave model that you’re running? I’m trying to figure out, I’m trying to poke holes into your system a little bit just to figure out if there’s anything that could upset your wave model as well. Yeah.

Well, what’s really interesting about the Fed is that they don’t really lead the market. They follow the market. And one of the things that we look at is simply what’s the yield on the three month and the six month U.S. Treasury bill? Because if you look at that yield, eventually the Fed is going to take their Fed funds rate and move it toward where that yield is.

And so we can forecast ahead of time, most of the time, what’s the Fed going to do? Are they going to lower rates? Are going to raise rates? Are going to stay the same? And part of the way we do that is simply look at the short term Treasury yields and say, OK, if yields are falling and the Fed is behind, then the pressure on the Fed is going to be lower rates to get more in line with the market rate. So the Fed is following the market. It’s not leading the market.

And we’ve got long history showing this. And that’s one more way that we use kind of market based indicators to figure out what’s going to happen in the economy, what’s going to happen with the Fed, what’s going to happen with market and so forth. Three weeks ago, if you would have asked me, I would have said the Fed is going to raise rates sometime this year, just based on what I’ve been seeing, bond vigilantes, bond yields, the 10-year at about 4.8, running towards 5. And then we’ve seen a turn in the yield, especially in the 10-year.

And I’m more neutral now. I think we have a meeting coming up in 12 days, 13 days of the Fed. I don’t think the market expects a cut.

I forgot to check the FedWatch tool this morning, but I’m assuming the market is fairly neutral on the rate cuts. What are your expectations? A, where did the bond vigilantes go? And B, what are your Fed rate expectations for the rest of the year? Well, right now, the Fed funds are at four and a half. And I think the last time I looked, three-month treasury bill is about 4.3, 4.4%, kind of right in line with where the Fed is.

So the market is telling us that the Fed’s not going to be moving because they’re right in line with short-term treasury bills. So there’s all these different models that people use. The models that we think are the most effective are market-based.

And the market itself is telling us at this point, as we’re talking, that the Fed’s not going to do anything. Now, if three-month and six-month bills suddenly start falling down sharply, well, the pressure is going to be on the Fed to lower at that point. But as we speak right now, they’re right in line with each other.

And so Fed should be doing nothing at this point. Yeah. 91% is the FedWatch tool.

I just looked it up. And so, yeah, nothing’s going to happen in March. And we’ll probably have to see.

Well, I’m curious, actually. I wouldn’t take it off the table because Jerome Powell said, we’re adjusting our scenarios based on politics to a degree. And I’m paraphrasing a little bit, but he said, we’ll take different scenarios into account.

I think that’s more what he said, word by word, when it comes to tariffs and things. It’s not just data dependency anymore. Right.

I think if the stock market falls out of bed and plunges and short-term rates plunge with them, which they probably will if the market goes down, then the pressure will there be on the Fed to lower the rates because the market rates have been lowered. Investors are telling you that they want the Fed to come down. But absent that at this point, the Fed’s not going to do anything at this point.

Yeah. It’s like, why would it? What is Goldilocks territory for the Fed almost, to bring that term back that we’ve heard about? It was last summer, I think it was Goldilocks season. We’re using that term extensively in the markets.

Let’s talk about the currency. Let’s talk about the U.S. dollar and its behavior. It’s dropped off versus other currencies just the last few days here as well.

Where are we in the wave pattern for the U.S. dollar here? Yeah, it’s had a really sharp move the last couple of days. The sharpest in years with the euro just exploding higher. And this is something we were looking for, actually, because based on our model, the wave principle model we had from the peak in the U.S. dollar several years ago, we had a five wave decline, which told us that the trend was to the downside.

And then we had this ABC rally that ended recently. And one of the things that I showed in my update to our subscribers was that large speculators had been speculating really heavily in currencies other than the dollar. In other words, they were super bullish the dollar.

They were short these other currencies, which means they were long the dollar, to put it more succinctly. They were expecting the dollar rally to continue. And in fact, that that position that large speculators have held had gone to a nine year extreme.

And usually, you know, speculators are smart, smart traders. They’re mainly comprised of hedge funds, but they tend to make really big wrong way bets at trend reversals. So when this indicator that we use based on the commitment of traders data went to a nine year extreme, we say, you know what? That looks like a top to us.

It looks like the dollar rally is ending. In fact, it did several weeks ago and we’ve fallen very sharply. I think the dollar is still going to go down.

I think still has a larger downside potential, probably will get below par. That’s our forecast at this point. There are some alternate scenarios we’re looking at, because usually when stocks fall very sharply, you get this bid in the dollar.

But at this point, as we’re watching the dollar, our pattern and what it’s telling us has been working out very well. And it’s suggesting us we have further to go on the downside. So we’re watching it every day.

And if there’s any change in that pattern, we’ll be communicating that to subscribers. Right now, we look for the dollar to go below par. Part to what? What would below par? Just explain.

Yeah, the dollar index is just a figure. It’s just a measure against different basket of different currencies like the yen and the euro. Okay.

The Dixie’s go below 100. Okay. Gotcha.

Okay. Sorry. Gotcha.

Sorry. I was thinking mentally against the euro, but it’s going the other way. The euro is getting stronger.

So I was like, I had a mental blockade. I do apologize. I was wondering.

Okay. But to follow up on that, Stephen, the euro has gotten stronger and that’s a driver, obviously, but it’s mostly because Germany and other countries announced massive potential massive expenditures, meaning we’re going to increase our military spending, we’re going to loosen, or maybe even get rid of our debt break here in Germany. The question like I’m always like, I’m struggling with like an Elliot wave model without being an expert because it’s so static.

But you can have our Chancellor come out tomorrow or soon to be Chancellor Friedrich Merz come out and say, ah, we’re not going to do that. And then the trend is completely reversed, if that makes sense. So I’m trying to figure out like how the macro, I call it a macro shock factor into the model.

I don’t think that if he did that, the trend would be completely reversed. Now, you might have a short term emotional reaction to it. But we’ve been forecasting a rally in the euro above 112 77, I believe, was the high in July of 2023.

If I’m not mistaken, but we’ve been forecasting this rally for now months, at least a month. And that was way before the Germans just last week, or this week, announced this massive budgetary increase in increase in defense spending. So our forecasts aren’t based on on outside externalities.

What we were looking at was simply the pattern. The Elliot wave pattern said, you know what, the euro is bottoming, the dollar is topping, we expect the rally in the euro, obviously a decline in the dollar, the near mirror opposites. And that’s exactly what happened.

And lo and behold, we get these fundamental reasons that kind of appeared out of nowhere, Germany expanding their defense budget, and so forth. And that’s kind of what happens. The patterns are telling us that their psychology is changing.

And we don’t know what fundamental event will come out when people rationalize why we’re getting the rally, but we’re getting the rally because the pattern suggests we’re going to get the rally. It’s really as basic as that, but there’s such depth to it. And it’s really interesting when you kind of get into it and look at why mood moves from one to the other and pessimism to optimism.

But it does, and it traces patterns out. And if we can determine where we are within that pattern, it implies something about the future. No, 100%.

No, it’s interesting. It also helps take emotion out of it. Apparently, I must be quite emotional.

That’s a great point right there. Yeah, because investing in falling markets is completely emotional from an individual standpoint. If you can set yourself apart from the crowd, you’re going to set yourself up for success, I think, long term.

So that’s a very good point. No, absolutely. If you stick to that and you don’t let your emotions roll, you’re definitely ahead of everybody else already.

And that makes a big difference. Steven, an emotional topic, of course, is war and geopolitics as well. We do have to talk about how does that factor in? If you look at it, let’s assume Russia and Ukraine and the US, they all hold hands.

It’s in Kumbaya next week. What does that do to your models? Does that even affect it? And what’s priced in already, perhaps? Yeah, I mean, everything out there, every possibility is already priced in. I’m not sure that’s the right word, but it’s reflected within the emotions of individual investors.

And like I said, there can be short term emotional outbursts from layout, maybe a surprise somewhere where the market will have a day where it screams up or falls sharply. But it doesn’t affect the trend. I mean, the trend is the trend and the models are the model and the pattern is the pattern.

And if we’re in a five wave advance or a five wave decline, that’s going to express itself no matter what’s happening externally. Because like I said, everything is endogenously regulated. It’s all internal.

As people interact with each other, they’re creating these trends. And so, yeah, there could be a peace deal or may not be a peace deal. I mean, what we look at is peace deals tend to come near market highs.

And when people are very optimistic, prices are high, hemline lengths are higher. People listen to pop music. Peace deals tend to break out.

And just the opposite happens when we’re in a bear market. Pessimism is widespread. People pull back.

They wear dark colored clothes. They listen to dark music. Wars break out near the end, near the lows of bear markets.

So, we can almost forecast the tenor of the times based on what the wave principle is doing and where it is within its progression. Now, it’s interesting. It really helps you take all of that emotion out of it.

It’s that simple sometimes. And you can move away from that. And as you said, it is priced in or reflected.

Pricing is probably the wrong word, but it is reflected. Really, really interesting. Stephen, you touched on gold.

We have to talk about it. I mentioned it to you before, hitting the record button. How emotional is the gold price right now? Oh, God.

Gold is always emotional, isn’t it? One of the charts that we showed in this month’s issue, and we talked about in many issues going back years and years, is we not only look at the Dow in nominal terms in U.S. dollars, but we look at the Dow in terms of real money, which is gold and simply the Dow Gold Ratio. We call it the real Dow. And that peaked out in July of 1999.

And it’s currently 67 percent below its high. So if you were pricing the market in real money, there’d be no question that we’ve been in a long term bear market. It’s only because the purchasing power has been decreasing and corporate values have been increasing because of inflation.

And so that’s why you’ve got stocks in nominal values still within shouting distance of their old highs. But stocks denominated in real money are down 67 percent. I think that’s important.

It’s key. It’s key to understanding what’s happening. It’s key to understanding why we’re starting to see a lot of negative social mood events present themselves throughout the world is because the Dow price to real money is so low at this point.

In fact, just recently, it just dropped a new four year low. And so that’s one way we look at things. But gold itself, which is really interesting, is since that top day in July of 1999, if you look at the return of gold up until today, gold is outperformed.

It’s outperformed the Nasdaq 100. It’s outperformed the Dow Jones Industrial Average. It’s outperformed the S&P 500 over this period.

I think it’s up a hundred and last I look, 137 percent from July 1999 to now, whereas the Nasdaq 100 full of all these tech stocks and AI, it’s only up 900 and some odd percent. So gold has been the main performer over this entire century. And I think that it’s telling you that there’s a problem underneath what’s going on.

And that problem is a decline in the purchasing power of U.S. investors and U.S. citizens based on what’s happening through our government. Yeah, a lot’s happening there. I want to come back to the VIX and GDP in a second since we’re on the metals right now.

We do need to talk silver as well. Silver hasn’t moved in lockstep with gold. It’s sort of, what do you call it? Diverging.

Diverging is the word I was looking for. I’m struggling with my words today, but it’s diverging from gold. Gold silver ratio roughly at 90, probably 89, 90 right now.

What does your theory tell you about silver? Where are we at in the cycle here? Yeah, that’s a little bit of a problem for us because when there is divergences between the two, it’s usually not a healthy sign. So for us, if silver spot prices get above $34.92, they’ll erase the divergence that’s currently in place between gold and silver. But their inability to get above there to us is probably a short to intermediate term negative for both precious metals.

We’ve had a really good run in gold. I don’t think longer term it’s over, but we’ve kind of gotten ahead of ourselves, I think. And we’re approaching a point where I think we’re going to get a pretty healthy correction.

We may not be there just yet, but we’re getting close. And I think silver’s inability to confirm gold may be a hint that that impending correction is coming. Absolutely.

No, I didn’t agree. And we’ve just discussed this as well. Let me get this on the screen here because I just loaded the graphic of, of course, hold on one second.

Technology is tricky. The fear and greed index. I know it’s on CNN, so some of my listeners will probably hate me for sharing this.

But I’d like to bring that up from time to time because I look at it regularly, but we’re in the extreme fear area right now. It’s worsened. The signals have worsened.

And I want to talk about the VIX in particular. Volatility has increased. And some of the indicators that are leading to a potential negative market moves.

I don’t want to use the word crash yet because it’s too early maybe to tell if it’s a crash or not, but the indicators are pointing to what’s very negative sentiment. Let’s talk VIX and the fear index. How do you factor that in and the volatility increasing? Is that something that’s being reflected? Yeah.

Let me come at it from a little different angle here in that usually, because these are technical measures of emotion in one way or another, and usually in bull markets or even in bear markets, you’ll get a rebound when you get to bearish levels, such as the CNN extreme fear measure here. But what’s interesting is that there’s two aspects. Number one, there’s something we call the uh-oh effect that we first talked about in March of 2000 in our newsletter.

And that’s where people get so excited about the market and they see the risk, but they really don’t care. They’re like, oh, yeah, we’re at all-time highs and we see we’re in a bubble or a mania, but what am I going to do? So I’m going to keep my money in the market. If we go down, well, we go down, it always comes back in the long run.

So there’s that kind of realization right at the end that there’s trouble, but people don’t act on it. The other point I want to make is that we have to kind of delineate between what people are saying short term and what they’re doing. For example, another measure that got really oversold in terms of being bearish was the bearish extreme was the AAII numbers, the American Association of Individual Investors, and the percentage of bears shot way up.

But what’s interesting is there’s another measure that they keep that not many people really look at, but we plot all the time and discuss, and that’s what their allocation is in their portfolios. In other words, what are they doing with their money? Not what are they saying? They’re saying they’re really bearish, but right now, 67.9% of the assets they have are allocated to the stock market, which historically is a very high level for this very conservative group. So what we’re finding is that people are saying they’re bearish, but they’re keeping their money in the market.

And to us, that’s not a bullish sign for stocks. It’s actually confirming that we still have more to go on the downside. When people start actually selling their assets, not only telling you that they’re bearish, but actually selling them and reducing their portfolio, then we know that we’re closer to a low than we are right now.

Is it because of a lack of alternatives that they’re staying in the market? And also, they’ve been spoiled the last 14, 15 years with about 20% annual growth rate in the S&P 500, for example, with only three years being down years. I think it was four, but one year was only 0.5%. So I’m not really counting that. And the last bigger drawdown was in 2022, of course.

But is it just because of a lack of alternatives? And maybe they’ve just been accustomed to 20% returns a year, and they’re still hoping for a rebound later this year? Well, I think that’s part of it. But I think really what it is, is they’re accustomed to the market always coming back. Because over their lifetimes of investing, that’s all they’ve known.

Even if the market goes down, wow, it always comes back. But a lot of these people that are investing right now don’t remember that the S&P lost 51% from March 2000, October 2022, and the NASDAQ crashed 78% over that time. And it took years for your portfolio to even break even before we started going up again.

And then we had the 2007-2009 financial crisis, which wiped out 58% of your portfolio down S&P. And it took a number of years, but eventually the market came back. And I think that cohort, that group looks at the market and says, oh, well, you know, it’s always going to come back.

It always goes up long term. But the problem is, you know, when you’re living through it, which a lot of these investors have not, it’s hell. I mean, it plays on your emotion.

You know, you’re up every night, you’re wondering, you know, God, you want to retire in the next number of years, your portfolio is down 40%. What am I going to do? You know, so while people can look historically with 20-20 hindsight and say, oh, yeah, sure, the market went down 50%. But then it came back up and we went to new highs.

Living through it is a whole different experience. And I don’t think a lot of these investors have truly lived through a punishing bear market, which we think is what’s going to be coming for share prices in the future. Yeah, I should have thrown it in earlier, but I found it on your X channel, the Elliott Wave International X channel is the Atlanta Fed GDP growth forecast, which has gone from like 2.3% to 2.5%, negative 2.5%. That’s awesome.

We need to talk about that. I should have thrown that in earlier, but I just remembered seeing that. That is a massive shock that I wasn’t aware of, that took me by surprise, that forecast.

And it hasn’t made the rounds. It hasn’t made mainstream media, in my opinion. It hasn’t been talked about much.

So what’s your take on that? Yeah, that tends to be a pretty volatile measure. But what I think that’s telling you is that the yield curve, the inverted to un-inverted yield curve is right on track. We’re right on track to getting into an economic contraction.

And so the yield curve un-inverted months ago, and just now the Atlanta GDP now has shown a contraction or potential contraction in the first quarter for annual GDP. So in our estimation, what we’re seeing in the yield curve is exactly what we’re going to be seeing going forward. And that is a precursor to an economic contraction.

You can call it recession, depression, whatever you want to, depending how deep it is, you can call it whatever you want. But I think we’re starting to see signs of that in a lot of the consumer delinquency rates, auto delinquencies, credit card delinquencies. The consumer is starting to get a little bit tapped out here.

So I think that we’re on the road to economic contraction. Stocks usually lead the economy. Sometimes they’re coincident, but the stock market has turned down.

So the next domino, so to speak, to fall, I think will be the economy. Yeah. Donald Trump has been speaking about the potential pain to come.

Tariffs and many other measures like doge cutting budgets in general are not positive to the economy. It has to be reflected. He wants to get that out of the way so the company or the country can heal.

He’s running the country like a company. That’s probably where my Freudian slip came from. But yeah, we’re in for some fun here.

Yeah. I mean, whoever’s president, the president’s popularity is tied to the stock market and the economy. But if the stock market goes down, whether it’s President Trump or Biden, whoever’s in the office, they’re going to be blamed for it.

And that’s just the way it is. It’s the way it is historically. So if we’re going to go into a bear market, I think presidential popularity is going to go down, too.

Yeah. You need to blame somebody, although a lot of it is historic. And I wouldn’t want to be President or Jerome Powell right now, personally.

You can’t win this. There’s no way you can win whatever you do. Stephen, my final question, I warned you, I’ll ask you about that.

But if I were to show up on your doorstep with a million dollars and would ask you to allocate it for me, this is not financial advice. This is more of a question to sum up our conversation, Stephen, just to frame it as part of a disclaimer for our audience. How would you allocate that? Well, the one word that comes to my mind is safety at this point.

And this is something we’ve been talking about to our subscribers for several years, is to be safe, because if we do get a bear market, yields start going up, you want to be safe. So what we’ve been talking about for subscribers is, number one, two-year floating rate notes. They’re short-term treasuries that are tied to the short-term treasury bill that reset themselves.

They’re currently, last time I looked, the yield on that was, or a coupon on that, was about 4.35%, which is pretty good. Three- and six-month treasury bills, they’re short, they’re safe. They were yielding more than 5% compounding.

They’re now about 4.3%, which is still respectable. You’re still getting a return on your money, but your money is very safe at that point. And then we allocate some of our portfolio to gold.

You want it as a safety, as a hedge, gold and silver. It may not be a huge part of your portfolio, depending upon whether you’re trading or not, but it should be part of your portfolio, just to have a backup there in case of real big economic turmoil worldwide. So these are the main aspects that we’re telling our subscribers right now to be looking at.

I’m not quite sure you want to be invested in stocks at this point with the historical revaluations, with an Elliott Wave pattern that’s complete on the upside. It looks to us like we’re entering a bear market. And so those are our main kind of things that I think subscribers and readers and people on your channel should be thinking about.

There’s a time to take risk and there’s a time not to take risk. This is the time not to take risk. And I think when things start going down, you’ll have plenty of cash available to allocate closer to what we think will be a low down the road than we are right now.

Fantastic, Steve. What a wonderful conversation. Really, really appreciate you coming on the channel.

Let me just say one thing also to wrap this up. Just for your subscribers here, people watching the channel, if you go to ElliottWave.com forward slash SOAR, we’ve got some really cool charts and an offer for people who are just kind of watching us today just to learn about the Elliott Wave model and what it is. And I think they’ll really enjoy that.

No, fantastic. We’ll definitely put the link down below to it. I was going to ask you next, where can we find more of your work? But ElliottWave.com slash SOAR down below.

So we’ll definitely link to that. Stephen, thank you so much for coming on. It was wonderful to get your insights and pick your brain on where things are headed.

And I think we’re in alignment here. So really looking forward to this playing out because I’m positioned on the gold and mining side and it’s time. I’ve been waiting.

Thanks, Ted. I really appreciate it. Absolutely.

Thank you so much for coming on and everybody else. Thank you so much for tuning in. I hope you enjoyed this conversation with Stephen Hochberg.

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