November 22, 2024 – Financial Sense Newshour welcomes MarketGauge's Chief Strategist, Mish Schneider, to discuss the big moves that took place in the market this week. Mish explains how we are seeing a broadening of the stock market rally into other sectors like small caps and retail, which is a healthy sign for an ongoing bull market. Mish provides her outlook on Bitcoin, Ripple, precious metals, oil, and a number of areas where she sees current opportunities.
Follow more of Mish's work and daily notes at www.marketgauge.com or on X @marketminute
To provide your feedback on today's show or learn more about our money management services, give us a call at 888.486.3939 or visit us at www.financialsensewealth.com.
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Transcript
Jim Puplava:
[00:00:00 - 00:00:20]
Well, it's not a bad way to end the week. Stocks are up this Friday, recovering from earlier losses in the week. Where are we heading? Joining me on the program is Mish Schneider. She's the chief strategist at Market Gauge. Mish, let's take it from the top. As we look at the major indexes, the NASDAQ isn't quite back to where it used to be. What's your take here?
Mish Schneider:
[00:00:20 - 00:01:59]
Well, as someone who uses the Economic Modern Family as my real sector rotation macro analysis tool for the U.S.-centric market, I’m thrilled. I’ve been watching and enjoying a major rally in the growth and tech space for two years, but I’ve also been tapping my fingers, waiting for my “grandpa” of the Modern Family—the IWM, the small caps, the Russell 2000—and my “grandma,” which is retail represented by XRT, to do something. To sum up the inside sectors, I’ve been waiting for transportation (IYT) to move too.
And now they’re finally doing something! This is exciting because it’s been a long time since we’ve seen not only the rally broaden out but also optimism about where the U.S. economy is heading with the new administration. Whether that optimism proves true or not, it’s the coattail to ride right now. We’re seeing these sectors perform well despite higher rates, the potential for escalating inflation—we’ll talk about that—and a stronger dollar. These areas are outperforming the NASDAQ and good old tech stocks. Even Nvidia, which seemed unstoppable, isn’t going up anymore. It’s not really going down, but it’s no longer driving the market higher.
Jim Puplava:
[00:01:59 - 00:02:06]
I want to talk about something that everyone’s discussing today: Bitcoin and cryptos.
Mish Schneider:
[00:02:07 - 00:05:08]
Oh, absolutely. This is classic, Jim. As an old-school commodities trader, I know what a parabolic move looks like, and Bitcoin fits the bill. I’ve long considered Bitcoin essentially a commodity. Even before the current pro-crypto Trump administration came into play, we had the halving event this year. Historically, Bitcoin tends to rally about six months after a halving, and it’s been pretty much on schedule.
It started moving up around the end of October or November, right around the election. The Trump administration’s stance on Bitcoin, talk of a Bitcoin reserve, and other developments have acted as jet fuel for this rally. We’re now around $100,000, and I still think it’s possible we could see $130,000 to $150,000, maybe after the election.
However, history tells us these parabolic moves are followed by vicious downturns. It’s like the old saying in New York: when your taxi driver says, “Buy gold,” it’s probably near the top. I’ve been asked similar questions about Bitcoin, like, “Is it too late to buy?” That’s a red flag.
This is fantastic, but do I think Bitcoin will never go down? No, I believe it will, and you need to manage it accordingly. What’s also been interesting is the performance of older cryptocurrencies like Ripple (XRP). Ripple, which is known for its fast global exchange system, was delayed by the SEC lawsuit. But now, with Gensler leaving, it’s surged from 50 cents to $1.47 in just weeks.
The key is to follow momentum intelligently and protect yourself when it starts to exhaust. For Bitcoin, if it falls below $89,000 to $88,000, that’s a sign of trouble.
Jim Puplava:
[00:05:08 - 00:05:47]
Now, the markets are rallying after Trump’s victory, but you and I were talking before the show about how things look very different today than they did in 2017. We’re over $36 trillion in debt, the deficit is approaching 7% of GDP, interest rates are near 5%, oil is much higher, and inflation is elevated. I think President Trump’s second term presents a very different economic environment than his first.
Mish Schneider:
[00:05:48 - 00:08:26]
Absolutely. You nailed the key points, and I’ll add that we’ve also gone through a pandemic, which changed a lot. While our debt is high, the economy still appears relatively healthy. However, that means yields likely won’t drop as much as people hope, which is why hedge funds are shorting yields, particularly via TLT.
Globally, we see challenges too. The euro has been battered, and there are worries about the yen. So, can the U.S. remain somewhat isolated? We have great resources and borders, but we’re not entirely self-sufficient. The BRICS nations, for example, are planning around expectations that Trump won’t “play nice.”
Domestically, Trump’s policy promises—like deportation—could create labor shortages in jobs Americans won’t take, and deregulation raises questions about oversight. Lower taxes might stimulate spending, but that’s inflationary. There’s a lot that could go wrong, though I hope it doesn’t.
Jim Puplava:
[00:08:26 - 00:08:48]
Let’s talk about gold. Typically, a rising dollar and rising interest rates hurt gold, but gold is going up. What’s driving this?
Mish Schneider:
[00:08:48 - 00:10:17]
Gold serves as a mirror reflecting potential risks. Central banks outside the U.S. are buying gold because of concerns about geopolitical tensions, debt bubbles, and global crises.
Trump’s promises to resolve conflicts—like Russia-Ukraine and Israel-Hamas—sound great, but these entrenched issues aren’t easily solved. Gold is reacting to these uncertainties, as well as to concerns about debt sustainability, inflation, and stagflation risks.
Jim Puplava:
[00:10:17 - 00:10:20]
Let’s talk about silver, gold’s sister metal.
Mish Schneider:
[00:10:20 - 00:11:24]
Silver has dual functionality—it’s both a precious metal and an industrial commodity. It plays a big role in data centers, AI, EVs, and solar energy. Despite trading over $31, silver is lagging gold in terms of inflation outperformance. If that changes, it would be a key indicator to watch.
Jim Puplava:
[00:11:25 - 00:11:43]
Silver deficits are another factor. Unlike gold, silver is consumed in many industrial applications, which makes its supply tighter over time.
Mish Schneider:
[00:11:44 - 00:11:51]
Exactly. That’s an important point—silver’s industrial use makes it unique compared to gold.
Jim Puplava:
[00:11:52 - 00:12:18]
Let’s shift to another commodity—oil. The IEA released bearish reports over the summer and early fall. But when I look at oil consumption, we’ve been consistently consuming over 103 million barrels a day for four months, and inventories are dropping. I have a feeling they may need to revise their bearish outlook.
Mish Schneider:
[00:12:19 - 00:13:28]
I agree. Part of the bearish sentiment stems from Trump’s statements about reopening pipelines and pushing for more domestic drilling—what we used to call “drill, baby, drill.” While those promises sound impactful, they are still speculative.
When there’s uncertainty, I like to turn to the charts. Looking at the January 2025 crude oil contract, we’ve formed a massive bottom between $64 and $67. That tells me we’re not likely to go lower anytime soon. The question now is how much higher oil can go. Based on the chart, it’s quite possible we could see oil climb back to $100 per barrel before needing to reevaluate.
Jim Puplava:
[00:13:28 - 00:13:38]
Let’s turn back to stocks. You mentioned small caps earlier. They’ve been struggling for a while, but it seems like they’re starting to get a lift.
Mish Schneider:
[00:13:38 - 00:15:12]
Yes, they are! Small caps are actually outperforming today. As we speak, IWM is up 1.73%, while SPY is only up 0.3%. That’s exciting, especially for me as the creator of the Economic Modern Family.
To give some context, IWM hit an all-time high in 2021 at $244.50. Recently, we’ve come close to that level intraday but haven’t been able to close above it on a weekly basis. Looking at the weekly chart, the highest weekly close so far has been $241.81. We’re not there yet, but we’re testing the upper range of last week’s trading.
If we can break through $241 or $242, we won’t even need to worry about the November 2021 high. That would signal a significant breakout, and I believe small caps could go much higher from there.
Jim Puplava:
[00:15:12 - 00:15:39]
Over the past year, the market has been dominated by AI stocks, particularly the MAG7. But now I’m noticing that the rally is broadening into more sectors, not just technology.
Mish Schneider:
[00:15:39 - 00:16:38]
Exactly! That’s what I was saying earlier. If you want to measure the health of the economy, you can’t just look at Nvidia hitting new highs and assume everything is fine. Sure, Nvidia’s success is great for the future of AI, but it doesn’t tell the whole story.
To get a broader picture, you need to look at companies manufacturing in the U.S., small-cap companies, and consumer spending. The consumer is still the most critical part of the economy, and they need to stay engaged. Additionally, the Dow Theory tells us to watch transportation—goods and services need to move robustly.
Right now, we’re seeing all of this happening, and the sectors tied to the U.S. economy are performing well. That broadening into other sectors is great news for the market’s overall health.
Jim Puplava:
[00:16:38 - 00:16:49]
Let’s talk about a sector that’s been struggling recently: pharmaceuticals and healthcare. With the elections and RFK Jr. in the mix, what’s your take?
Mish Schneider:
[00:16:49 - 00:19:10]
Healthcare, particularly biotech, looked like it was ready to break out earlier this year if you were watching IBB or XBI. But RFK Jr.’s announcement sent the sector skidding downward. That said, it seems to have found decent support and is now bouncing back.
The reality is that one person can’t single-handedly change the outlook for biotech, and that’s starting to sink in. Within biotech, I’m particularly interested in the diet drug space. Novo Nordisk and Eli Lilly are the leaders in this space—think of them as the Teslas of diet drugs. Other companies, like Amgen, are entering the market too.
What’s exciting is that large companies with over 500 employees are now adding these obesity drugs to their health plans. This trend could have a ripple effect. If people lose weight and get healthier, they’ll care more about their appearance, buy nicer clothes, spend more on skincare, and eat healthier foods. It’s a whole chain reaction.
In the biotech space, I’d keep an eye on Novo Nordisk, Eli Lilly, and the competitors entering this market. As costs come down, these drugs will become more accessible to consumers, which could drive demand even higher.
Jim Puplava:
[00:19:11 - 00:19:34]
Let me throw a wrench into this discussion. Two key risks I’m watching are inflation—which I think has bottomed—and rising yields. If inflation starts climbing again and yields rise above 5%, what does that mean for the Fed and the markets?
Mish Schneider:
[00:19:34 - 00:21:36]
Those are excellent questions. Growth sectors haven’t been too bothered by higher interest rates, but now we’re seeing interest rate-sensitive areas like consumer stocks, transportation, and small caps moving higher.
The big question is whether the market can normalize inflation and interest rates around a Fed funds rate of 4.5% to 5.5%. Historically, 5% interest rates have been relatively normal. We just got spoiled when rates dropped close to zero.
If inflation remains under control, we might reach a sustainable equilibrium. However, if inflation spirals out of control, everything changes. Right now, inflation is at a level people can live with, but there are warning signs. Coffee prices, for example, have gone crazy. Sugar prices haven’t come down much either, and oil remains a concern.
Another wild card is the dollar. With the recent surge in Bitcoin, is fiat currency at risk? If so, that could dramatically change the inflation conversation. For now, though, we’re not at that point.
Jim Puplava:
[00:21:36 - 00:21:43]
Given what you see in the market right now, where would you recommend putting money to work?
Mish Schneider:
[00:21:44 - 00:23:59]
This week, we doubled our position in the retail sector because of a major breakout in XRT after a 10-to-11-month consolidation. Retail is still undervalued—it peaked in 2021 before interest rates started rising. XRT’s high was over $100, and it’s trading at $81 now, so there’s room for upside.
I’m also focusing on the diet drug space, as I mentioned earlier. Companies like Novo Nordisk, Eli Lilly, and even Amgen could benefit from this trend. Beyond that, I’m looking at commodities. The energy sector is already rallying, but crude oil, silver, and gold still look promising. If you don’t have a position in these, now is a good time to identify support levels.
Cryptocurrencies remain interesting as well, especially Bitcoin and other key players. Additionally, food commodities like soybeans, corn, and wheat are worth watching. DBA (an agricultural ETF) has already gone up due to coffee prices.
In the tech sector, I’d keep an eye on beaten-down names like Intel, which might benefit from a Trump administration. Defense stocks, solar energy companies like First Solar and SolarEdge, and the TAN ETF are also worth monitoring, especially after their recent sell-off.
Jim Puplava:
[00:24:00 - 00:24:09]
Same here. Well, Mish, as we wrap up, can you let our listeners know where they can find more about your work at Market Gauge?
Mish Schneider:
[00:24:09 - 00:24:38]
Sure! You can visit our website at marketgauge.com, where I write a daily blog covering many of the topics we’ve discussed, complete with chart analysis and fundamentals. I’m also very active on X (formerly Twitter); my handle is @MarketMinute. Additionally, I’ve written a book called Plant Your Money Tree: A Guide to Growing Your Wealth, which covers the Economic Modern Family and my approach to chart analysis and phase changes.
Jim Puplava:
[00:24:38 - 00:24:46]
Well, Mish, I want to wish you a happy Thanksgiving and thank you for coming on the program. I always enjoy our conversations.
To provide your feedback on today's show or learn more about our money management services, give us a call at 888.486.3939 or visit us at www.financialsensewealth.com.
Stay ahead of the market! Subscribe to our premium weekday podcast
