Can The Stock Market Bubble Continue Into 2026? | Sven Henrich

Regarding potential recession scenarios: the market is currently pricing in earnings growth for next year, but if actual earnings start to decline, the market will need to find new justification for prices, making earnings the key variable that actually matters

“Looking back at all these cycles, the the one thing that really matters is earnings. Uh you need to see earnings actually drop... As long as earnings keep going higher, you will find some bull that wants to, you know, justify multiple expansion, right?”

Three back-to-back double-digit years in stock market (2023, 2024, and tracking for 2025) is extremely rare, and having achieved this requires a reversion to mean valuations, not immediately but eventually, and markets must underperform to rebalance

“we've had uh now we're on track, I think, for three back-to-back double-digit years in the stock market. and we had, you know, barn burner years in 2023 and 2024. Who knows how the this year will end... then we're going to have a third barb burner year. Um which we still don't need to to have some sort of reversion to the mean valuation wise.”

Adam Tagert argues that valuations are really poor timing indicators in short term but excellent indicators of confidence in long-term returns; pulling tomorrow's value into today through multiple expansion means markets must eventually underperform to balance out

“you u ask your your boss for a loan, you know, to to to pay you early for next week's wages. Sure, he pays you today, but at the end of next week, you don't get a paycheck because you already got it last week, right? So, when you pull tomorrow's value into today, when you get to tomorrow, there's a value drought.”

The Fed is in a difficult position because they ran loose financial conditions while claiming tight policy via high rates, and now face stagflationary risks with tariffs, requiring them to cut rates despite record valuations

“The Fed actually is in a very difficult position and partially they're to blame that for themselves. Um because they while they seem to run tight for conditions with high rates, they actually have let incredibly loose financial conditions run. And so now they're in this position where they face these stackflationary risks.”

The US government is running massive budget deficits with $345 billion in deficit in August alone despite $30 billion in tariff revenue, putting the annual deficit trajectory near $2 trillion—higher than last year—representing ongoing 'fiscal dominance' that supports asset prices

“these record budget deficits, you know, here we go again. You know, $345 billion deficit in August and that is despite what 30 billion odd in tariff revenue. So that would even be larger. And net net, you know, the deficit's running basically close to two trillion.”

Margin debt has exceeded $1 trillion, with retail investors leveraging positions 2x, 3x, and 4x, and crypto markets offering up to 50x leverage, creating systemic fragility where any correction will force margin calls and forced selling

“we do have the retail mania back in in a major way, right? We got what over a trillion dollars in margin debt now. We got people going leverage in in double, triple, quadruple. Heck, in in crypto, you can get 50 times leverage now on on pressing your luck.”

The Fed statement removes reference to tariffs and shifts language to emphasize that the balance of risks toward employment has shifted, implying the Fed will prioritize employment over inflation and tolerate higher inflation as a consequence

“they kind of remove any kind of reference to export, you know, uh, noise related to tariffs and things like that. And they really focus on the weakening in the job market... the committee is attentive to their to their two two main objectives, inflation and job job market. And they clearly say here that the they they view the balance of risk has has soundly shifted towards the job market”

Europe has had a fantastic year so far and is trading a bit more cleanly on some technical levels and is still cheaper than the US, potentially offering better risk-reward setup opportunities than the US market currently.

“you know there are their opportunities. You know there's some chart setups we're looking at in Europe right now. Europe had a fantastic year so far as well. Um but that's trading perhaps a bit more cleanly on some levels and Europe is still cheaper so maybe we'll find some nicer setups there uh visa v the US”

The market has made new all-time highs every single day, driven by a recursive cycle of easing financial conditions, with red candles on quarterly charts being extraordinarily rare since 2009—occurring only three times in 16 years

“We make market new market highs every single day. Uh, there's no more downside whatsoever... This is a quarterly chart of the S&P. It's actually quite stunning in terms of the one-way message of of markets. Quarterly charts. Basically, what it shows here is that red candles are so exceedingly rare and you have these big mega rallies that go on and on and on”

The top 10 S&P 500 holdings represent 40% of the index, and on NASDAQ 100 they represent 52%, making passive ETF investors who believe they are diversified actually highly concentrated in mega-cap tech stocks

“Top 10 holdings almost 40% on the S&P. On NASDAQ 100, the top 10 holdings are 52%. No one's diversified. You know, it's it's it's it's amazing.”

Retail margin debt has reached over $1 trillion with people using double, triple, quadruple, and even 50x leverage in crypto, creating systemic risk and comparing poorly to past bubbles

“we got what over a trillion dollars in margin debt now. We got people going leverage in in double, triple, quadruple. Heck, in in crypto, you can get 50 times leverage now on on pressing your luck.”

Highest percentage of investors' portfolio exposure to stocks is occurring at the same time the cohort approaching/in retirement is most heavily invested in stocks, creating demographic risk timing mismatch

“the data is sadly clear that um investors have the highest exposure to stocks in their portfolio than they've ever had percentage-wise. And the cohort that has the greatest exposure to stocks is the cohort that is right at retirement age right when they should be de-risking.”

Housing prices are at all-time record highs with an entire generation priced out, and the Trump administration is discussing declaring a national housing emergency and pushing Fed to cut rates to 1%, which would only further inflate housing prices rather than address the underlying supply and affordability issues.

“we also have a record housing prices with an entire generation priced out, right? And now we're going to ease financial conditions even further and as President Trump promised, boom in the housing market from record levels. I mean, it's it's obscene what's actually happening on that front.”

Market cap to GDP is at 215%, nearly double the historical danger zone of 100-120%, meaning the stock market is valued at more than twice the entire annual economic output—yet the Fed is cutting rates to ease financial conditions further, which is irrational

“I mean obviously market cap to GDP now at 215%. Yeah, let's cut rates. That seems like a good idea because we don't have enough speculative fraud in the market.”

For the first time since 2011, the Sahm Rule triggered over a year ago, but has not preceded a recession, breaking the historical pattern, creating uncertainty about whether traditional recession signals still work

“The SAM rule triggered I think over a year ago. the first time that I can see on a chart that that that hasn't predicted a recession. So everything is different now everything but not permanently.”

April Bessant claimed after 40 years of Wall Street's dominance it was 'Main Street's time,' but four months later he was victory lapping new market record highs, showing the rhetoric doesn't match reality and the system remains 'Wall Street's market'.

“You know, was it April Bessant came out and says after 40 years of Wall Street's time it's now Main Street's time...four months later he's victoring new market record highs victory lapping them come on. Let's let's get real here. It was Main Street's time for about 4 days”

Social media algorithms have a business model based on outrage and negativity, creating systemic distortion of perception where negative events are amplified, triggering division and anger that drive a wedge between people

“if there's a train wreck people will click on it and stare at it...pink fluffy unicorns don't get as many views and so they have actually a vested business interest in in keeping everybody at each other's throats and we're all being manipulated on on that front.”

Tariffs will disproportionately impact lower-income consumers while benefiting corporate margins, exacerbating wealth inequality and creating further downward pressure on the bottom 60% income earners.

“you know it's it's a it's a drop in the bucket uh you know it's going to impact some companies and it's going to impact some consumer and guess who's it going to impact again the lower end of the spectrum the consumer customers, you know, they always get hurt the worst.”

The market will eventually correct sharply in a manner that won't be a quick V-shaped recovery, meaning investors need to be emotionally even-keeled and patient, which is difficult without professional guidance.

“It's going to happen. History says it's going to happen. Protect yourself. Um there's going to be opportunity for everybody. It's not going to be an overnight thing where you have to jump in. Although it's going to feel like people need to jump in because they're so used to the V-shaped recoveries. that's not going to happen this time. So, you're going to have to be emotionally even keeled and um if you're not really used to that, particularly when it comes to investing, you're going to need somebody to lean on, a good adviser”

The administration promised to shrink government spending (DOGE) as a key campaign point, but this year is on track for the third-largest budget deficit in history, showing that regardless of political rhetoric, the same fiscal stimulus program continues.

“that's after an administration that was just elected that during the campaign was one of their key selling points was doge we're going to shrink the size of government spending It's that but this this is the thing you know it doesn't I've been saying this for years doesn't matter who's in charge of doing the same thing and the rest is marketing”

Tariffs disproportionately impact lower-end consumers and customers rather than corporations, ensuring that even if tariffs are implemented, the burden falls on those with least ability to absorb cost increases.

“it's going to impact some companies and it's going to impact some consumer and guess who's it going to impact again the lower end of the spectrum the consumer customers, you know, they always get hurt the worst.”

Unemployment rate is a lagging indicator that turns up sharply near the end of recessions, and recent upticks in unemployment have paralleled historical recession patterns; when unemployment bottoms and turns up, markets typically have already suffered significant decline

“here is a look at the unemployment rate and overlaid with the recessions what what you'll see here and the recess the recessions start and they're usually post-dated after the fact but they start in early phase at the end of recessions is usually when things get the worst in the jobs market. So it's a classic lagging indicator... So point being is you look at these turnups here, uh they don't take very long to to go parab parabolically higher.”

Gap PE ratio is now 30.5, higher than it was at the end of 2024 before the correction, and vastly elevated compared to historical bull market ranges of 15-25; a 20% market drop would still leave valuations at the high end of historical bull market norms

“gap PE is now 30.5 it's now higher than it was here in the tail end of 24 before we had the correction... 30 is massively high, 30.5. So you you could drop 20% on the market and you still be at the top range of what a normal bull market would be like.”

Fed rate cuts, historically the 'quickest solution' to inflation, only work when the solution is a recession—implying that the next recession will be the likely mechanism to bring inflation down, though the market is completely ignoring recession risk

“The quickest solution to inflation is by the way the way it's always been which is a recession. Um and you know there are some like UBS that actually point out to recession risk even though the market is completely ignoring that”

When unemployment rate bottoms and starts rising, and Fed cuts rates, that pattern has historically preceded recessions in 2000, 2008, and is repeating now in 2025; meaning markets ignoring this is unusual

“when the unemployment rate bottoms out and starts increasing again, it tends to then spike up into the next recession. Right. Y similarly with the federal funds rate, when the Fed has been on a hiking regime, plateaus and then starts cutting rates, that also is when usually the next recession starts...Here we are 2025. We're kind of seeing both potentially in process here.”

David Rosenberg documented that any time the Shiller CAPE ratio exceeded 35, subsequent 1, 3, 7, and 10-year returns were negative without exception in history; current levels are well above 35

“David Rosenberg put out a great table. He he he basically put it like this. You know, if if you look at any time that Schiller Cape, you know, Siller Schiller cyclally adjusted PE ratio exceeded 35, every single time I think on a 1 3 7 10 year followon basis, uh the market was was was down in history...valuations aren't very useful in the very short term, but when you start to extend the time frame without fail in all of history, uh when you get above that level, and we're well beyond that level right now”

The natural business cycle has been stunted for years by continuous intervention at the first sign of trouble in ever-increasing amounts, but there's no clear evidence yet that a natural cycle is reasserting itself

“the regular natural business cycle has long been stunted because we always intervene at the first sign of trouble in in ever greater amounts, right? Um, is there still a natural business cycle out there that may be sending a warning signal? But I, you know, I don't have the evidence of of that yet.”

The Schiller CAPE ratio (cyclically adjusted P/E) exceeding 35 has historically predicted negative buy-and-hold returns on 1, 3, 7, and 10-year forward bases; current valuation is well above 35 and indicates poor expected forward returns regardless of near-term price action

“if if you look at any time that Schiller Cape, you know, Siller Schiller cyclally adjusted PE ratio exceeded 35, every single time I think on a 1 3 7 10 year followon basis, uh the market was was was down in history... at the very least, if there's one thing Mike and I would love to get across, if if folks have have adopted a passive buy and hold approach, now's the time to really question that”

The central bank has been forced into a structural bind where they must either allow markets to correct (which would cause political/economic chaos given debt levels) or continue intervening with increasing amounts just to hold the system together, creating an escalating dynamic that eventually becomes unsustainable.

“The market literally has to correct. Really, history says this. Our debt situation and the world's debt situation says that we can't allow it to correct. So, this is the battle that's going on. Central bankers are trying to keep this thing up and going more and more and more.”

Google's daily RSI is at 87 (overbought), the stock is a $3 trillion market cap with no precedent, and Oracle gained $350 billion in market cap in 30 minutes on a PowerPoint slide, exemplifying dangerous retail mania and speculation

“the daily RSR is 8.87. 87. Um, you know, I don't know how much more optimism you can get...this is a $3 trillion market cap stock now. Um, and you know, there's no precedence for this other than maybe to point it out towards 2007...And you know, there's no precedence for this other than maybe to point it out towards 2007, you know, when when we had also a lot of speculation in in the market. Um, and and that that's kind of, you know, another one of those warning signs that hasn't really mattered so far...you know, we saw what would happen with Oracle the other day. You know, $350 billion in new market cap based on a PowerPoint deck on one slide.”

The US dollar sold off hard post-FOMC, taking out the April lows, though it is regaining some ground; dollar weakness is a key pillar of the risk asset rally and the dollar getting oversold could set up for footing and correction

“the big uh move of the day here uh was the dollar. Uh this is a chart of the US dollar. It sold off pretty hard here. Took out the recent low I think back in April...Sven called out the US dollar weakness is a key pillar in this kind of rally of risk assets. You know we agree. I mean that's that's been certainly a fuel and um so far the path of least resistance seems for a weaker dollar though we are getting a bit oversold”

M2 money supply is at record highs again, roughly $5 trillion higher than pre-COVID levels, representing a return beyond even the peak post-COVID printing levels, creating disconnection of all assets from fundamental reality

“M2 money supply at record highs again um which is $5 trillion higher than it was precoid you know when it absolutely went vertical. You know, we we're back back beyond actually where we were post the COVID printing”

The pattern from 2017 is repeating now: a falling dollar, record valuations, a year-end rally driven by technical momentum rather than fundamentals, followed by a significant correction in January 2018 (10%) when the dollar stabilized

“I want to highlight this because this is exactly what we saw in 2017. This was Trump's first term and there was also tariffs and this and that and the other and the dollar just dropped non-stop... there was not and this is to your question about you know thinking about year end um there was not a proper correction in the market until January 2018. It was a when the dollar pivoted that's when we had a quick 10% correction”

Fewer adults are having sex on a weekly basis, having dropped dramatically, which Sven worries reflects excessive time on devices and social media warping reality perceptions

“there was this chart out there about you know this may sound quaint but you know apparently fewer and fewer adults are having sex on a weekly basis. I mean it's dropped off dramatically and uh you know I I do worry about how much time everyone is spending on devices every day and social media”

Gap PE is now 30.5, higher than before the 2024 correction and far above the typical 15-25 range for bull markets, with only previous spikes during bubble peaks or earnings collapses

“gap PE is now 30.5 it's now higher than it was here in the tail end of 24 before we had the correction just so everybody body understands 30.5. If you look at the bull market markets over the last 30 years, your typical range in bull markets between on the low end about 15 to a high end of about 25. Okay, that's that's your range in terms of normal bull market behavior.”

The Fed statement removed reference to export-related noise from tariffs and instead focused on the weakening jobs market, with the balance of risks now shifted toward employment protection over inflation

“they kind of remove any kind of reference to export, you know, uh, noise related to tariffs and things like that. And they really focus on the weakening in the job market...the committee is attentive to their to their two two main objectives, inflation and job job market. And they clearly say here that the they they they view the balance of risk has has soundly shifted towards the job market”

Tariff revenue of $30 billion is a drop in the bucket versus a $345 billion monthly deficit (excluding tariffs would be even larger), so tariffs will not materially address the deficit or stimulus dynamic

“$345 billion deficit in August and that is despite what 30 billion odd in tariff revenue. So that would even be larger. And net net, you know, the the deficit's running basically close to two trillion...you know this is the thing you know it doesn't I've been saying this for years doesn't matter who's in charge of doing the same thing and the rest is marketing and and and narratives...you know this is the thing you know it doesn't matter who's in charge...you know it I just can't at this point take these tariffs too seriously you know because what 30 billion tariffs income visav 345 billion budget deficit it's it's a it's a it's a drop in the bucket”

The S&P 500 market cap to GDP ratio stands at 215%, well above the traditional 100-120% threshold that historically signaled overvaluation, indicating massive speculative excess that requires 'not enough speculative fraud' in the market per Sven's sarcasm.

“obviously market cap to GDP now at 215%. Yeah, let's cut rates. That seems like a good idea because we don't have enough speculative fraud in the market.”

The percentage of S&P 500 components trading above their 50-day moving average has declined with each new high since June, now only 56%, indicating weakening breadth internally despite new index highs

“every new every new high since then on the S&P has seen fewer and fewer components above the 50 MA...we see ever fewer components above the 50 MA. I mean to be here at this level after this continued rally and only be barely see 50% 56% of components above the 50 MA. That's that points to some sort of weakening.”

M2 money supply is at record highs again, $5 trillion higher than pre-COVID levels, with financial conditions as easy as they were during zero rates and full QE, creating disconnection of all assets from fundamental reality

“look at M2 money supply at record highs again um which is $5 trillion higher than it was precoid you know when it absolutely went vertical. You know, we we're back back beyond actually where we were post the COVID printing and financial conditions are as easy in markets as they were when they ran zero rates and full QE.”

Gold has reached 88 RSI on the monthly chart, the highest since 1979-1980, indicating extreme overbought conditions, though historically such extreme readings do not predict imminent reversals and do reflect crisis-level gold demand

“here's gold and it's one of your favorites um monthly chart 88 RSI history for that very little you know I mean got close to it here and then we have to go back all the way to 1979 1980...And if I it's it's like with any charts, you know, it's not bearish until something happens.”

Universal Basic Income (UBI) implementation could offset job displacement effects by recycling government spending to the bottom 60%, potentially allowing consumer spending to remain stable even if employment deteriorates, further extending the current cycle.

“if if the government wakes up to the fact that we're creating this permanent underclass and it starts implementing some sort of UBI, well then maybe consumer spending doesn't actually suffer because that money is getting recycled.”

If stable coins increase in adoption and buy more treasuries, they could pull down long-term yields, which would further support asset prices and crypto valuations, creating a self-reinforcing cycle aligned with crypto-friendly policy goals.

“if we have more stable coins, they can buy more treasuries and they can pull yields down, right? So, I mean, there's there you're right. There's there's a whole um either self- serving at least in in terms of the political goals.”

For equity valuations and pullbacks to become relevant to market pricing, what fundamentally matters is whether earnings actually peak and start declining; as long as earnings growth expectations remain positive for next year, bulls can justify multiple expansion even with slowing economy.

“You need to see earnings actually drop... need to see gap earnings peak and start showing a slowing that gap... As long as earnings keep going higher, you will find some bull that wants to, you know, justify multiple expansion, right?”

Google (Alphabet) is trading with a daily RSI of 87, monthly price near the top of Bollinger Bands at a $3 trillion market capitalization, with no historical precedent for such valuations except the 2007 pre-crisis period, representing extremely risky positioning for a stock that represents a disproportionate portion of market gains

“you know, the daily RSR is 8.87. 87... this is a $3 trillion market cap stock now. Um, and you know, there's no precedence for this other than maybe to point it out towards 2007, you know, when when we had also a lot of speculation in in the market.”

The 10-year cycle pattern shows the fifth year of each decade is most bullish, with consistency from 1897 onward; 2025 is the fifth year of the 2020s decade, which explains the continued strength

“the fifth year of this 10ear cycle just kicks in. I mean, it's it's actually quite amazing how simplistic everything is on on this basis, right?...It goes all the way back to 1897. And for some reason that I don't know, but it just happens...in that article back then, I outlined all kinds of fifth year examples. they just went up, you know, and it hasn't really changed on on that basis, right?”

The fifth year of a decade in stock market cycles shows a strong historical pattern of bullish performance going back to at least 1897, with 2015 (5th year of 2010s) and 2025 (5th year of 2020s) showing this pattern continuing, though 2015 was slightly shaky late year.

“going back all the way to, you know, January of 24 when I put out this cynics guide to market and I put out this chart that just says the fifth year of this 10ear cycle just kicks in. I mean, it's it's actually quite amazing how simplistic everything is on on this basis...the fifth year examples. they just went up, you know, and it hasn't really changed on on that basis...going back from the 2009 lows”

The normal sequence that hasn't happened recently is that unemployment rises, which impacts consumer spending, which impacts earnings, which then triggers major corrections and bear markets, but this sequence has been interrupted by AI-driven efficiency and top-10% wealth concentration effects.

“in past cycles when you have the unemployment rate rising and that then impacts filters into consumer spending that then in filters into earnings and then you have these big big corrections bare markets that type of thing...they are able to lay off people and replace them with AI”

S&P 500 components trading above the 50-day moving average have declined from 95%+ at the April 2025 lows to 56% currently despite new highs, indicating internal market deterioration and weakening participation in the rally.

“This neverending rally um this is the S&P components above the 50 MA. You know kept screaming back from the April lows and then I made a new high here in the in the June time frame. But every new every new high since then on the S&P has seen fewer and fewer components above the 50 MA. In fact, you know, we got close to 666 this week and maybe we'll still hit it. I don't know. Um I'm just using that as a historical reference... but you know as we make these new highs we see ever fewer components above the 50 MA. I mean to be here at this level after this continued rally and only be barely see 50% 56% of components above the 50 MA. That's that points to some sort of weakening.”

Adam Tagert proposes the concept of a lowercase 'i'-shaped economy where a tiny elite has advantages totally removed from everyone else, versus the K-shaped economy analogy which implies two balanced groups

“I've put out this concept of a lowercase eyes-shaped economy where you have, you know, a very small number of people with all the advantage totally removed from everybody else doing just great and then everybody else is the on that down part of the lowercase I just being increasingly left behind.”

The Trump family has made approximately $4.5 billion in crypto gains in 2025, and crypto ventures benefit from lower rates and liquidity, creating a potential conflict of interest for Fed policy

“the Trump family is completely all in on crypto ventures. I guess they made four and a half billion dollars so far in crypto gains this year. And what is the one thing you want if you're running crypto ventures? You want liquidity, right? And you want lower rates, a lot of lower rates. And guess what? That's what's being pushed.”

S&P 500 daily chart shows that the low of the month has been made on the first trading day of the month for four consecutive months (June, July, August, September), creating a suspiciously consistent pattern of precise market control and artificial buy support at month-end that defies random market behavior.

“if you look at that in the last four months, when was the low of the month made? You're not going to believe it. first trading day each month. June, the low is in. July, the low is in for the month. August, the low is in. And here we are in September. We're basically repeating the same program.”

Fed dot plot shows only 6 members calling for no more rate cuts for remainder of year, while 9 members expect two additional 25 bps cuts by year-end, and 1 member expects five additional cuts—showing consensus for easing is stronger than markets had priced

“six uh these each dot here represents a a voting member. So um you know basically six so as you as you mentioned um it was unanimous except for one descent that a 25 basis point drop but if you look here uh six members uh basically feel that we should stand pat for the rest of the year like in other words no more rate cuts for the rest of the year but a full nine are calling for the two you know quarter point drops”

Federal Reserve did not alter the pace of quantitative tightening (QT) in the latest FOMC statement, though there have been interesting Treasury buyback operations by the Treasury that may come up in Powell's press conference

“I don't think they spoke to that. that may come up in the presser...there's been some interesting dynamics, shall we say, going on in the Treasury market...there's been some charts making the rounds...performing what are called Treasury buyback operations.”

The Fed dot plot shows median expectations for two more 25-basis-point cuts by end of year, with 9 members calling for two more cuts, 6 calling for no more cuts, and 1 outlier calling for 5 more cuts

“six members uh basically feel that we should stand pat for the rest of the year like in other words no more rate cuts for the rest of the year but a full nine are calling for two you know quarter point drops uh so two more quarter point drops before the end of the year. one member is calling, you know, calling for another five five drops”

Market implied probabilities shifted dramatically after the FOMC statement: October meeting probability jumped from 74% to 93% for a cut, and December probability jumped from 70% to 92% for having two additional cuts by then

“there was only about a 74% chance or probability deemed by the market for uh you know another drop uh at the October meeting. Now that's a near certainty 93%...there was only 70% chance that there will have been two additional cuts by December uh as of yesterday. Now it's uh uh 92%.”

There is no precedent for the current valuations; even if the market drops 50%, it would still be richly valued versus all of history, showing extreme overvaluation on both absolute and relative basis

“there's no precedence for the valuations we've seen right I mean this market could drop 50% and we would still be richly valued visav all of history right”

The political component is present: the Trump family has made approximately $4.5 billion in crypto gains in 2025 and benefits from liquidity and lower rates, creating aligned incentives where crypto ventures and lower Fed rates would benefit the administration

“the Trump family is completely all in on crypto ventures. I guess they made four and a half billion dollars so far in crypto gains this year. And what is the one thing you want if you're running crypto ventures? You want liquidity... And you want lower rates, a lot of lower rates. And guess what? That's what's being pushed.”

The Reverse Repo Facility has been drained from its $2.5 trillion peak in 2022 to near zero, providing $2.5 trillion of liquidity into markets, but this well is nearly dry and could represent a missing leg of liquidity support going forward

“this facility has been drained to now a smidgen right so basically when the facility drains when you have the occasional spikes here that introduce some volatility in markets because it takes liquidity out...But the major message is this is $2.5 trillion almost of liquidity that got pushed into these markets since 22. No wonder we're seeing this continued meltup in asset prices.”

April Bessent announced that after 40 years of Wall Street's time it was now Main Street's time, but only 4 days later he was victoring (celebrating) new market record highs, showing the rapid reversal of any populist narrative back to status quo market support.

“was it April Bessant came out and says after 40 years of Wall Street's time it's now Main Street's time uh four months later he's victoring new market record highs victory lapping them come on. Let's let's get real here. It was Main Street's time for about 4 days and that was the end of it.”

New Harbor Financial uses a 45% equity allocation significantly below industry norms, maintains hedges, holds gold/silver positions, and suggests rebalancing gains and using dollar-cost averaging with hedging for new investors rather than deploying full capital at peak valuations

“Here at New Harbor, we have a an equity allocation that's relatively low compared to industry norms. We're at around 45%. And we have some hedges around that as well... We can help you dollar cost average into a model that's hedged if you want to. But don't make decisions based on emotions”

Oracle's stock spiked from $650 billion to nearly $1 trillion market cap in 30 minutes based on a single PowerPoint slide promising future AI revenues, gaining $350 billion in market capitalization on non-binding future revenue expectations—exemplifying speculative bubble dynamics

“you saw what would happen with Oracle the other day. You know, $350 billion in new market cap based on a PowerPoint deck on one slide. You know, we're going to make so much money in five years. Okay, here's $350 billion. You know, so stock goes from 650 billion to nearly a trillion in 30 minutes.”

Bitcoin and the S&P 500 have been highly correlated 'same trade' since the October 2022 bottom, moving together when liquidity is positive and falling together when liquidity contracts, but recently Bitcoin has failed to make new highs alongside new S&P highs, potentially signaling a divergence worth watching

“I do note once in a while something happens. Uh, and that's to me of interest as you may have noticed by at the moment, at least for now, Bitcoin has not made a new high here recently despite the S&P making a new high. We've seen that in the last few years a couple of times.”

A key technical trend line in the US dollar index has held for 14 years (since 2011) and has also been tested in 2021; breaking this line would require the dollar to continue falling, which is what would need to happen for the equity rally to sustain without hiccup into year-end

“In order for the equity rally to really sustain into year end without any hiccup, it needs to continue to see a lower dollar. Okay. Which means we'd have to punch through that trend line that's been in place for 14 years.”

Sven personally limits social media exposure and recommends others do the same, and that 99%+ of people are peaceful and want to live their lives, but social media amplifies the small violent minority

“the ideal situation is at least for myself is to say uh I want to take personal responsibility on this front and say I'm going to very much limit my exposure to this. I actually happen to believe in my heart that 99% plus of people are perfectly peaceful. They want to live their lives and take care of their families. But there is obviously in every society there is this element that's not peaceful.”

T-bills currently pay 4% guaranteed with no downside risk, representing an alternative to stock market participation for risk-averse investors

“Guaranteed 4% with no downside risk...You there's a lot of people out there that are in treasury bills and the T- bill and chill trade. That's not so bad either.”

Gold is at an RSI level of 88 on monthly timeframe, approaching levels not seen since 1979-1980, indicating extreme overbought conditions despite not being 'bearish until something happens'—suggesting high probability of pullback even if prices continue higher

“here's gold and it's one of your favorites um monthly chart 88 RSI history for that very little you know I mean got close to it here and then we have to go back all the way to 1979 1980... it shows you how incredibly powerful the price action has been.”

There is a 98% weekly correlation between the S&P 500 and junk bond ETF (JNK) since October 2022, indicating financial conditions easing dominates price discovery and all assets are joined at the hip in a liquidity-driven market

“this is a chart overlays S&P 500 with junk high yield bond ETF they're joined at the hip and to me it's one of the measures of financial conditions, easing of financial conditions...we now have a flatlined 98% weekly correlation between the two. It's just dominating everything easing of financial conditions.”

London, a major metropolitan city where Sven lives nearby and visits regularly, has a perception on social media and among media figures of being crime-ridden and dangerous with riots and stabbings, but in Sven's actual experience it remains peaceful and the social media narrative greatly exaggerates reality.

“I've seen a lot of tweets this year about hor horrible London is and the riots and stabbings and this and that and the other. I've been actually to London a bunch of times...But everywhere I go and I've been in all kinds of sections of London this year. I I've never ever felt threatened, nor have I seen any trouble, nor have I seen any crime...Now, I'm not naive enough to to say, well, there's no crime in London. It's a major metropolitan city. Of course, there's crime.”

Corporate buybacks are projected to increase 38% year-over-year in 2025 to $1.9 trillion, with $1.5 trillion already deployed, creating structural demand that reduces available shares and inflates earnings per share growth artificially

“JP Morgan has a potential 38% increase over last year. Um we had already record buybacks...For 1.9 $1.9 trillion in 2025 alone. That's kind of the potential that they see for this year. And they've they're saying they're already at a 1.5 trillion for this year.”

Cumulative new highs/new lows indicator has never even approached the COVID lows despite new record highs in September, with lower readings in September than in February 2025, suggesting the bull market participation is much narrower than the breadth indicator would suggest

“This is one of the wildest charts out there. I think it's cumulative new highs, new lows. Uh absolutely baffling... We haven't even approached the lows of COVID on that indicator. And as we're making new highs again here in September, we're actually having a lower reading again visav February of 25.”

There have been 12 open gaps since the April lows with no gap fills, which is unusual market functioning and suggests imbalance because markets like balance; historically gaps fill or at least some of them get filled, making this another expression of market imbalance and potential gap-filling risk

“I mean, you know, we we had this even here. Um and you know, again, this can be minor. can mean mean nothing. But I find it interesting that this is a fairly aggressive spike... this is a fairly aggressive spike and it goes in the face of a rollover in new highs, new lows. I pointed that out on Twitter yesterday as well. I mean the you know I've seen many stupid rallies before, but this one really takes the cake on on one level and that is open gaps. Um 12 open gaps since the April lows.”

Most reasonable technical case for a correction would be a retest of February highs, which would represent a 7-8% pullback, would fill some gaps, get the market oversold, and clean up some of the excesses, without necessarily breaking the bull trend

“if something matters in the dollar rallies one could make maybe the most obvious case the most obvious technical case would be a retest of the February highs right... this would be kind of a 7 8% pullback. Um that would get us quickly oversold would fill some gaps.”

ODTE (0-Day-To-Expiration) options trading has become so prevalent that people joke Las Vegas casinos are losing business to options trading, indicating extreme speculation and leverage.

“we have the systemic issue of ODTE, right? I mean, I'm I'm I'm I'm actually feel kind of bad for Las Vegas because who wants to go to a casino where you can lose money, you know?”

At New Harbor, they maintain a 45% equity allocation versus industry norms, hedge that allocation, and expect to underperform if there's a huge meltup while benefiting from their gold/silver positions during correction scenarios

“Here at New Harbor, we have a an equity allocation that's relatively low compared to industry norms. We're at around 45%. And we have some hedges around that as well. And so that means if we get a huge meltup, we'll probably underperform the S&P. We've got other parts that are doing pretty well like gold, silver, and mining stocks”

Bitcoin has not made a new high recently despite the S&P making new highs, representing a potential divergence that occurred in late 2024 and at the tail end of 2021 before corrections; this may signal something is afoot

“Bitcoin has not made a new high here recently despite the S&P making a new high. We've seen that in the last few years a couple of times. One was here uh in the end of 24, beginning of 25. S&P made a new high. Bitcoin did not quite a new high correction. We had that here the tail end of 21. S&P made a new high famously January 22. Bitcoin did not.”