Bloomberg Audio Studios, podcasts, radio news. The market is lower than the futures at nine twenty nine, the Vix, Paul, please, I can't do it, Paul, quote the Vix, it's too much pain.
Well, I'm just ninety s and P five technically got bear market right there at that low here, but we've got the vics here fifty how about that Tom five zero.
Five zero point sixty four. And I did a standard deviation study. Lauri Kelvicina said she wouldn't come on if I didn't do bear market bull market calls. I gotta do standard deviation calls. And we're out at three point three standard deviations down, standard imports five hundred, one step down, two steps down, and this morning, three steps down. We are honored the Lori Kelvicina would join us here in this hour, Lord, your observation as you speak to your clients this morning.
Look, I think people are trying to make sense of what's going on. How far we could go down? You know, just a few minutes to go, I had an email with someone who was talking to me about my four Tiers of Fear framework, and so there's a lot of sympathy among my clients for your thirty one hundred, which is the fourth tier where you have a major crisis
and lose half the market value. I'm not going to sit here, Tom and tell you everybody saying that, but that was one email that came across, whereas other people have sort of resonated to the idea that we said, you know, we've been in a growth scare. Of the risk now is we're pricing in recession. And it sounds to me like just based on where we open, we're
headed straight for that. So I think that people are doing what we do when we have these events in markets where there is a fear that is cascading very rapidly.
What we're going to do here now with an equity strategist is take all over wonderful abilities, particularly with less profitable non Apple, non Microsoft companies, and bring it over to what people are talking about with the DOWBT negative fourteen hundred. Laurie Calvicina, take the equity market and what it will bounce off in a credit mark. The deteriorates. The jargon that Paul Sweeney uses is spreads deteriorate. That's the yield of a garbage bond versus a full faith
in credit and the yield goes higher. Are we to tipping point in credit that affects the equity market.
It's a great question. I'm certainly not an expert on the credit market, tom, so I'm gonna deflect on that one. But what I will say is that, you know, maybe up until about a week ago, and it was a little bit before the Rose Garden ceremony, to be honest, but we had actually been seeing small caps starting to outperform large caps, and like on the big down days in the market, small caps weren't doing quite as bad,
and I thought that was interesting. That was making me feel a little bit better because they had already been so de risk, they were so cheap, and we felt like there was this rotation going on that was hitting the bigger caps harder than the small caps. But that's all changed. So we've seen that attempt that small caps were making to bottom now fail posts the Rose Garden, and that's going to be very you know, similar right
to that high high yield cohort of the market. And what that's been telling me over the past few days is that those recession risks are getting priced in rapidly because as cheap as they are. And honestly, tom My valuation pe for the My valuation model, the market cap way to pe for the Russell two thousand, was it thirteen and a half times on the Thursday close In recession it tends to go to eleven to thirteen times, even before you clean up the excess earning's optimism. So
these things have been acting pretty pretty bad. But I do think that credit markets holding off, not deteriorating, you know, that's been sort of the thing that's kind of kept people out. And I hate to use the word panic in markets like these, but that's been kind of the thing that's kept people calm. But they can't be a necessary part of the bonding process we have to go through in here.
Let me uncom you right now, Paul the Vicks fifty two point zero.
Seven exactly, Laurie, what's the earnings risk still out there in the marketplace do you think? I mean, is it a flat earnings year in twenty five or maybe something more than that.
You know, what we've got modeled is is you know, kind of a stagflationary scenario right now for two fifty eight, which is well below the bottom up consensus which last I checked was two sixty nine. Who knows what it
is now because things are starting to change. But what we have found is an interesting question you asked Paul, because if you kind of go back and look at bad earnings years, what we often find is that, you know, in kind of big crises, big recessions, you're seeing earnings year Earnie's growth on a year over year basis going
down like thirteen percent or something worse. Right, So some big, ugly numbers, but they're actually a lot of years where earnings are just flat year to year, and when we see companies, you know, sort of being able to muddle through, that's often what's happened. So we when we recently changed our Arni's number to two fifty eight, we said, you know, kind of the downside scenario, if we want to kind of put in a barricase, We're thinking a lot about
kind of that two forty six number for now. That could change if we go into a full on recession. But outside of that, that's not a bad assumption to make, just that earnings go nowhere.
Laurie's staying with us. We're going to continue Lori Kelevisina wec with this yere on the equity market. Eric belt Chuonis made it up from Philadelphia. They didn't cut the funding on the A Cell Express. Get the bell chunis here in a moment. I just had a negative fifteen hundred print on the Dow, negative two thirteen. I want to emphasize futures at eight. At nine twenty nine, we're about negative one forty. We're now negative two ten on
the equity market. The vics explodes out. That's the right word. Forty seven forty eight out to fifty two point seventy six. I never used this phrase. I'm going to use it, Paul. On a half hour to half hour basis to the Asia opening. We're sort of in uncharted territory. It's different in Paul. The yields go up. There's a fear trade into bond's price. Excuse me, priced down, yield up, and the whole margin call. I'm sorry, I'm going where Dennis
Gartman was earlier this morning. You wonder, Paul, what's going on out there?
Of course, and I think I was just asking where do we go from here? In terms of policy? I'm not sure anybody really knows. And that kind of goes to the earnings question, like, I don't know how bad earnings could get because I'm not sure how far this policy is going to go. And I think that reflects
a lot of what the market's doing. So, Laurie, I think most of us listening watching here would say, you know what, twelve twenty four to thirty six months from now, this market's going to be higher than where we are right here, probably meaningfully higher. So I should probably be doing some buying here. How does that conversation do with you?
Well, look, look, I'll tell you it's sort of the fly and the ointment for the strategists right now. And I see this in my own modeling, Paul. We have five different models that we used to come up with our price targets. And look, I know everything is scary if people are like math, Oh my god, you're doing math, But that's what we have to do right to keep
ourselves grounded. And when I go through and look at my modeling, the one model that's still pretty constructive is actually the sentiment model, and it's basically looking at aaii net bulls that are down around GFC lows twenty two lows, nineteen ninety one recession lows, and that is a good reminder that as quickly as things cascade onto the downside, they come, they tend to come roaring back when you get some resolution, And so I think that's you know that,
that's something a lot of you know, us forecasters, we had in the back of our heads as we've tried to navigate this environment.
It's hard.
So that's impossible, right to say, what is that trigger? But it is something we have to watch, and it's a necessary condition for a bottom that's already been put in place.
Tesla not to a two hundred and ninety nine. We're not there yet. I don't want to be too gloomy, but I'm going to go over here, Laurie to something nobody talks about. And of course we're on a Canadian border on this Ford Motor under ten dollars nine dollars eleven cents right down on lows for twenty twenty five, and they got a pe multiple on Ford of five and maybe the forward multiple, which we're going to blow up.
We know that is seven. Are we in value territory medium and small cap stocks like we clearly are with the Ford Motor Company.
So you know, I was having an argument with someone about that this morning, talking about not my husband. I'm I'm on a trip, I'm in a hotel room. So I believe that he ardues with.
The marriage survives.
Yeah, but not. He's very scared of my tears of fear chart. I had to take some passwords away from him. But the reality is is that you know, when I highlight this small cap chart and that we're at thirteen times, or at least we were as a Thursday, people say, well, we have to adjust the earnings, and I say, I know,
we have to adjust the earnings. That's the separate thing though if you look at you know, sort of historically my forward pe data, eleven to thirteen times is where small caps tend to bottom out even when the E is too high, and people just can't mentally wrap their heads around that. But it is something important you have to keep in mind because it's one of those things
again that you have to see. It's not going to peg a bottom on its own, but it's still a signal even though there's some problems with the E. Now, I do think with earnings, we have to get the numbers down before anybody is going to have faith to come in and buy here. Forty percent of the revisions and the rote, the Russell and SMP are still to the upside. Nobody's cutting numbers because they don't you know they I don't know a lot of different reasons, but nobody's been cutting the numbers.
You're a trooper to come on. Lori back to her clients at RBC Capital, Marcus Lori, Kelvisenior. Hug the children is all I can say.