Is The Market Crash Starting?
Big tech stocks are finally capitulating, what's next?
Welcome!
Welcome to The David Lin Report official newsletter, a weekly report summarizing the previous week’s top news and commentaries from the David Lin Report YouTube channel. Featured in every issue is a summary of the video interviews with some of the most influential financial experts in the world, some of our own commentary and analysis, the week’s top market moves, and economic events to watch for the following week.
In our inaugural issue, we analyze the biggest market-moving events from the last month, including the assassination attempt on former President Donald Trump, escalations in the Ukraine War, and the recent renewed rallies of small-cap stocks, gold and Bitcoin.
We hope you enjoy our work and be sure to subscribe so that you never miss out on an issue.
TABLE OF CONTENTS
Market Recap: June to July
*Major Price Movements
*Major News Of The Week
*Market Bull Interviews
*Market Bear Interviews
MARKET RECAP: June to July
Major Price Movements
From June 17th to July 17th, the following assets experienced drastic swings in value.
Gold. The precious metal is up over 20 percent from June, and reached an all-time high of $2,469 per oz.
Cocoa. The commodity dropped 16 percent in price to under $7,900 per tonne.
Tesla. Elon Musk’s EV company rose over 30 percent in a month on the NASDAQ.
State Street. The asset manager gained 18 percent over the last month.
Walgreens. The holding company shed over 20 percent of its value over the last 30-day period.
For major assets, the price movements were as follows (all data is from July 17th at 4:25pm ET):
DXY (U.S. Dollar Index) — down 1.75 percent.
Bitcoin — down 3.16 percent.
U.S. 10-year Treasury yield — down 5.6 percent.
S&P 500 — up 3 percent.
Russell 2000 Index — 10.8 percent.
NASDAQ Composite — 0.8 percent.
YEN/USD - 0.86 percent.
The top-performing stock over the past month was ZAPP (+750%).
The top-performing commodity was gold.
The top-performing cryptocurrency, listed by CoinMarketCap, is Mog Coin (+158%).
Major News Of The Week
On July 13, 2024, former President Donald Trump — the Republican party’s presumptive candidate for President — was speaking at a rally in Butler, Pennsylvania. At 6:11pm ET, a shooter, identified as Thomas Matthew Crooks, attempted to assassinate Trump, but merely grazed his ear with a bullet fired from an AR-15. One man was killed, and two were seriously wounded.
Following the failed assassination, the stock market rallied; on Monday, July 15th, the S&P 500 reached 5,633, a new all-time high. Bitcoin’s price increased by 4 percent, and gold reached a new all-time high of $2,470 per ounce on July 16th. In general, markets were reacting to the increased likelihood of a Trump win in November. A Trump presidency is interpreted as beneficial for Corporate America.
Prediction markets currently have Trump as the frontrunner.
To make more sense of the assassination attempt, we spoke with Marko Papic, Chief Strategist of GeoMacro Strategy at BCA Research.
Papic suggests that assassination attempts typically generate a boost in popularity, increasing support for the affected individual. Historical examples like Reagan's assassination attempt in 1981 showed similar effects. The attempted murder of Trump will galvanize conservatives to rally around the former President, says Papic.
If Trump wins in November, a second term for Trump could differ significantly in terms of foreign policy, says Papic. He suggests that Trump would likely adopt a more practical and less ideological approach, particularly in dealing with conflicts like the Ukraine war and relations with China.
Market Bulls
Here are four of the bulls that we interviewed.
Chris Vermeulen, Chief Market Strategist at TheTechnicalTraders.com
Adam Kobeissi, Publisher and Editor-in-Chief of The Kobeissi Letter
Thomas Hayes, Chairman and Managing Member of Great Hill Capital
Explosive Market Breakout:
Chris Vermeulen (July 16, 2024)
Chris Vermeulen, Chief Market Strategist at TheTechincalTraders.com, is tactically long on the S&P 500 and NASDAQ, even though he sees a potential correction in the long-run.
Vermeulen claims that the tech sector is exhibiting a bear flag pattern, indicating a potential for a significant leg down. He says that “once people start to panic out of the tech, then we're going to see the markets collapse very, very quickly and the small caps will probably just get annihilated.”
He is bullish on precious metals, expecting gold to reach $2,650 to $2,750 an ounce and silver to have 18% upside potential. "I think gold is going to $2,650, $2,750.” He said. On silver, Vermeulen said “I think Silver's got quite a bit of upside like 18% upside from here."
Vermeulen is bullish on Bitcoin, seeing potential for it to reach $113,000. "This chart pattern points to about $133,000 a Bitcoin,” he said.
Mass Bankruptcies Starting?
Adam Kobeissi (July 3, 2024)
Adam Kobeissi, Publisher and Editor-in-Chief of The Kobeissi Letter expects that the American economy will see declining growth, but nevertheless remains bullish on stocks due to gains in the tech sector. He said that he would be buying dips in the S&P 500, and pointed to NVIDIA driving 30 percent of the S&P’s gain in Q1 and Q2 of 2024.
However, he cited small business struggles and a weakening labour market as reasons to be concerned.
“The number of people working multiple jobs in the U.S. is now near an all-time high of 8.4 million people in May of 2024,” observed Kobeissi. “Full-time employment actually fell by 625,000 in May, while part-time employment jumped by 286,000… Americans are actually struggling.”
Kobeissi also remarked that small businesses, which are “44 percent of U.S. GDP,” were struggling with expenses.
“43% of small businesses in the US were unable to fully pay their rent in April,” he said. “If small businesses continue to feel this pain and continue to collapse, you could see more banks start to collapse. You can see more consolidation and I think the large banks will just keep getting bigger.”
Fed To Abandon 2% ‘Fantasy’
Thomas Hayes (July 2, 2024)
Thomas Hayes, Chairman and Managing Member of Great Hill Capital, believes that central banks like the Federal Reserve will cut interest rates before reaching their 2 percent inflation target. Hayes states, "100% will the Fed cut rates this year even if the inflation rate doesn’t go back down to the 2% target."
Hayes believes that the expected Fed pivot will be bullish for markets. He expects a "dramatic rotation away from that concentrated crowded trade" involving the Magnificent 7 stocks (NVIDIA, Apple, etc.), favoring the broader market.
Hayes is particularly optimistic about small caps and underperforming sectors. He projects small caps will grow earnings by 17.7% next year compared to 14.2% for large caps. He foresees a "tidal wave sea change" benefiting small caps and other undervalued stocks.
50% Stock Market Melt-Up?
Ed Yardeni (June 21, 2024)
Ed Yardeni, President of Yardeni Research attributes the market's strong performance to continued economic growth and rising earnings. The technology sector, driven by excitement around artificial intelligence, has been a significant contributor, with companies like Oracle, Broadcom, and NVIDIA reporting strong earnings.
Yardeni remains bullish on the stock market. He predicts the S&P 500 will reach 6,000 by the end of 2024, 6,500 by 2026, and 8,000 by the end of the decade. Yardeni's base case scenario has a 60% probability of this “Roaring 2020s” outlook.
He argues that the Federal Reserve does not need to cut rates this year, given the economy's solid performance. He predicts that inflation will reach the Fed's 2% target by the end of the year, driven by declining shelter costs and easing supply chain disruptions.
However, Yardeni identifies protectionism, such as tariffs, as a significant risk to his market outlook. He compares potential future tariffs to the Smoot-Hawley Tariff Act of 1930, which he believes was a primary cause of the Great Depression. He warns that modern protectionist measures could lead to similar economic disruptions.
Market Bears
We also interviewed four bears:
Gareth Soloway, Chief Market Strategist of Verified Investing
Mike McGlone, Senior Commodity Strategist at Bloomberg Intelligence
David Rosenberg, Founder and President of Rosenberg Research
S&P 500 To 3,750
Peter Berezin (July 5, 2024)
Peter Berezin, Chief Global Strategist of BCA Research, calls for the S&P 500 to fall as much as 30 percent, as the economy eventually tips into recession. He says that the economy was hot two years ago, but monetary policy tightening has cooled it down significantly. "Unfortunately, that glass of water is very close to freezing over,” he remarks.
Berezin argues that the Fed is hesitant to cut rates due to fears of resurgent inflation. This, in turn, has affected consumer spending. Pandemic savings are depleted, current income is not sufficient due to low savings rates, and borrowing is becoming more difficult due to rising delinquency rates and tightening lending standards.
Furthermore, small business are struggling with higher costs and depleting revenues, and the unemployment rate is ticking upwards.
From an investment standpoint, Berezin recommends sticking with defensive sectors like utilities, consumer staples, and healthcare. “Healthcare is my favorite sector because it's relatively cheap, it's going to have some pricing power,” he says. Berezin also suggests lightening up on stocks and increasing exposure to long-term bonds. He says, “I bought some TLT for my portfolio yesterday. I like that purchase. I want to be going into long duration bonds now, away from stocks.”
70% Market Crash
Gareth Soloway (July 1, 2024)
Gareth Soloway, Chief Market Strategist of Verified Investing, is bearish on NVIDIA and the overall market. He says, “I think the overall stock market is due for a correction. We’ve had this massive run, but valuations are stretched, and I think we could see a pullback of 20-30%.”
When it comes to high-tech manufacturer NVIDIA, Gareth remarked, “Are margins going to stay at 77 percent when they [Nvidia] can sell a chip for thirty to forty thousand dollars?… The answer is no, not even close, and that’s assuming we don’t see slowdowns in data centres. I mean, the economy is clearly weakening.”
Indeed, Soloway expresses concerns in his macroeconomic outlook, observing that “ 401k plans saw a 40% increase in the last 12 months of hardship withdrawals... from 2021 it’s up 100%.” He expects that the economy will soon experience a recession.
However, Soloway is bullish on gold, Bitcoin, and the U.S. dollar. He says that if the U.S. dollar breaks out above 106.20, then it could reach as high as 114; he especially highlights that other currencies are weaker relative to the dollar. Soloway anticipates gold prices of $2,800 to $3,000 in the long term, and he is cautiously optimistic about Bitcoin in the medium to long-term.
Market Pivot Incoming
Mike McGlone (June 17, 2024)
“The US stock market's total market capitalization is about two times GDP, similar to 1929,” observes Mike McGlone, Senior Commodity Strategist for Bloomberg Intelligence. This suggests the likelihood of a market correction; historically, such valuations are unsustainable for a long time.
Indeed, McGlone points to deflationary pressures, claiming that key commodities like oil, natural gas, and copper have reached peak prices and are likely to trend lower. "All my indicators from a commodity standpoint are tilting towards recessionary deflation,” he remarks. He says that global bond yields are lower than U.S. yields, which predicts a global economic slowdown, further contributing to deflation.
When it comes to specific assets, McGlone is bullish on gold, Bitcoin, and U.S. Treasuries, and bearish on crude oil, copper, and the S&P 500. He expects gold to reach $3,000 in the long-term amidst central bank buying and geopolitical volatility. When it comes to Bitcoin, he is bullish due to its limited supply and increased adoption, and he is optimistic about treasuries due to higher interest rates.
However, he sees crude oil falling to $40 per barrel due to technological advancements in alternative energy, which reduce demand for oil. He also sees copper falling to $4 per pound or lower due to lower demand from China.
Rate Cuts Towards 0%
David Rosenberg (June 1, 2024)
David Rosenberg, Founder and President of Rosenberg Research, is bearish towards the stock market and economy, while being bullish towards bonds and treasuries. He emphasizes that the core flexible CPI reading from the Atlanta Fed points towards deflation, and that this is not yet fully priced into the market.
He maintains that if a recession occurs, the Fed will cut rates significantly, possibly by up to 500 basis points, bringing the funds rate back to the zero bound. Even without a recession, he expects the Fed to lower rates towards its neutral estimate of 2.5%.
Due to lower expected interest rates, Rosenberg is bullish on long-term bonds. He suggests buying long-duration zero-coupon bonds for the biggest returns, estimating that a 100 basis point decrease in yields could result in a nearly 30% return on long bonds.
Describing the stock market as momentum-driven, speculative, and overvalued by over 30%, Rosenberg warns of a possible market correction due to overconfidence and the AI boom. He recommends focusing on defensive, non-cyclical sectors like utilities and consumer staples. He advises against broad equity indices like the S&P.
He also finds compelling valuations in non-US markets, specifically mentioning Japan, India, Brazil, and Mexico as attractive investment opportunities due to positive secular tailwinds and structural reforms.
GEOPOLITICS
Two geopolitics interviewees gained attention over the last month: Peter Zeihan, Founder of Zeihan on Geopolitics and bestselling author, and Richard Wolff, Professor Emeritus at the University of Massachusetts Amherst and founder of Democracy at Work.
Russia’s Next Invasion?
Peter Zeihan (June 11, 2024)
Peter Zeihan focused much of the interview on the ongoing conflict in Ukraine. He emphasized that for Russia, the Ukraine war was inevitable and only the beginning of a broader conflict. He stated, "For the Russians to feel safe, they have to occupy a lot of territory... a lot of that territory is in NATO." Zeihan believes that Russia’s ambitions extend to Poland, The Baltics, and Romania.
Zeihan predicted the presence of Western troops, particularly French, in Ukraine by the end of 2024, emphasizing the strategic importance for Europe. "Getting French forces into Ukraine... makes a lot of sense for staking out the future of Europe and for defending Europe as a whole."
He discussed Ukraine's missile strikes on Belgorod and suggested that further strikes into Russian territory might be necessary to disrupt Russian logistics. "There is no way that Ukraine eventually ends this war on something that would be satisfactory to Ukraine and Europe without taking the war into Russia proper."
When it comes to China, Zeihan is skeptical about China's ability to rise as a global power, citing its dependency on globalization and the U.S. Navy for securing trade routes. He said, "China is the country most dependent on globalization." He also predicts a severe decline in the working-age population.
Closest to WW3 Since Cold War
Richard Wolff (June 2, 2024)
Unlike Zeihan, Wolff sounded the alarm on NATO actions in Ukraine, and called for a reduction in escalations. Warning that “nuclear” war and World War III are real possibilities, Wolff said, “We have the worst confrontation between the United States and Russia in the last 50 years... you'd have to go back to the so-called Cuban Missile Crisis in 1962.”
After a recent policy change which allows Ukraine to strike within Russian territory, Wolff warned that Russia faces two choices: expanding their control 500 kilometers westward to create a buffer zone, effectively ending Ukraine as a nation, or escalating the conflict to include the U.S. and Europe. "Russia will be entitled to hit back at the United States and Europe if in fact these missiles are sent into Russia."
He stressed that Europe would likely bear the brunt of Russian retaliation, leading to a split between the U.S. and its European allies. "The Americans are going to have to confront, do we really want to risk a nuclear war with Russia after it does something awful in Western Europe?"
When it comes to the ongoing Israel-Gaza conflict, Wolff noted, “The United States is the only significant support Israel has; even the other countries that don't yet recognize Palestine give it at best nominal support." In particular, Wolff condemned Israel's response to Hamas’s October 7th attack, arguing that it constitutes collective punishment. "You're angry at Hamas, you're angry at the political movement of Hamas, its objectives, and so you are punishing a vast array of women and children because you're angry at Hamas. You can't do that."
ENERGY
Dangerous Energy Chaos:
Doomberg & Paul Sankey, June 16, 2024
Energy experts Paul Sankey, President of Sankey Research, and Doomberg, Author of
, joined David Lin to discuss the state of the energy markets, starting with an oil price outlook.OIL PRICE FORECAST.
Doomberg reaffirmed his medium-term forecast that oil will trade in the $50 to $80 per barrel range — barring a major geopolitical event, such as escalations in the Ukraine war. In the case of ‘geopolitical apocalypse,’ Doomberg claimed that oil could reach $200 per barrel. In a bearish scenario, he predicted that if Donald Trump wins the 2024 U.S. presidential election, oil will trade in the low $50s, because Trump would broker peace between the Ukraine and Russia.
Sankey agreed, stating that “The market view is that a Trump win is extremely bearish for oil.”
IEA SUPPLY PROJECTION.
The International Energy Agency’s June 12th market report claims that oil supply will outpace demand by the end of the decade, causing a major supply glut, with excess capacity of 8 million barrels per day by 2030. The IEA claims that this will be driven by the boom in electric vehicles, fuel efficiencies, and green energy.
Doomberg alleged that the IEA “used to be known for its impartiality and data quality,” but has recently taken a “political stance” in favour of green energy. Using a broader definition of oil to “include hydrocarbons and natural gas,” he suggested that oil supply and demand would balance out without any long-lasting glut.
Sankey, who once worked for the IEA, agreed and added that an excess capacity of 8 million barrels per day would be difficult to sustain without the price adjusting:
“Over time what you came to realize is that the price will solve for this, which is why we’re bearish on price,” said Sankey.
GOLD
Another 100% Rally
Ronald-Peter Stoeferle (July 7, 2024)
Ronald-Peter Stoeferle, managing partner at Incrementum AG, has a price target for gold of $2,665 by the end of 2024, and $4,800 by 2030. This is driven by central bank gold purchases and emerging market demand. Stoeferle said that gold’s breakout “ could be triggered by three different sources: interest rates, recession risks, and geopolitics.”
Based on the latest Incrementum report, “In Gold We Trust 2024,” Stoeferle said that a 16-19% portfolio allocation to gold optimizes investment performance. He also sees potential in gold mining stocks as they have not yet caught up with the gold price surge. "We think the gold mining space will continue to have a hard time but at some point...you can now really find potential five to ten baggers without taking too much risk."
When it comes to macroeconomic factors driving gold demand, Stoeferle highlights inflationary pressures and rising debt levels. Despite recent declines in CPI, long-term inflationary risks remain due to factors like de-globalization, demographics, and rising defense spending. Rising debt levels in developed countries, on the other hand, could trigger a crisis similar to the UK in 2022, driving gold demand.
BITCOIN
Bitcoin to $1 Million
Jack Mallers (April 24, 2024)
Jack Mallers, founder and CEO of Strike, discusses his optimistic view on Bitcoin, expecting its value to reach between $250,000 and $1 million. His thesis is grounded in the idea that as central banks and governments inject liquidity to save the troubled bond market, it will drive up asset prices, including Bitcoin.
He believes that Bitcoin’s fixed supply means it will continue to trend upward, regardless of the macroeconomic environment. Mallers discusses the potential for Bitcoin to become less correlated with traditional markets over time but acknowledges that it is still influenced by liquidity cycles. Finally, he emphasizes that the Lightning Network is key to making Bitcoin practical for everyday transactions.
Mallers said, “Bitcoin is the most advanced money ever created in human history because it's the hardest money.”
WHAT TO WATCH
Over the next week, several significant U.S. economic events and data releases are scheduled. Here are some of the major ones:
Friday, July 19, 2024
Existing Home Sales: This report from the National Association of Realtors measures the sales and prices of existing single-family homes, providing a gauge of the housing market's health.
Leading Economic Index: The Conference Board’s Leading Economic Index (LEI) for the United States provides an early indication of future economic activity.
Monday, July 24, 2024
Chicago Fed National Activity Index (June 2024): Provides an overall economic activity and related inflationary pressure indicator.
Tuesday, July 25, 2024
U.S. Gross Domestic Product (GDP), Q2 2024 (Advance Estimate): Released at 8:30 AM, this is a critical indicator of the economy's performance.
Consumer Confidence Index (July 2024): Measures consumer confidence in economic activity.
Wednesday, July 26, 2024
Durable Goods Orders (June 2024): Released at 8:30 AM, this report gives insights into new orders placed with domestic manufacturers.
Personal Income and Outlays (June 2024): Released at 8:30 AM, it includes data on personal income, consumer spending, and the Personal Consumption Expenditures (PCE) Price Index.
Thursday, July 27, 2024
Initial Jobless Claims: Released at 8:30 AM, providing information on the number of individuals who filed for unemployment insurance for the first time during the past week.
Pending Home Sales Index (June 2024): Measures the number of home sales based on contract signings.
Friday, July 28, 2024
Employment Cost Index (Q2 2024): Provides data on the costs of labor, including wages and benefits.
University of Michigan Consumer Sentiment Index (July 2024): Final release, offering insights into consumer confidence and economic expectations.
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Spectacular David! Thanks!