Chris Verrone on Gold, the S&P 500 and the Recession Nobody Wants to Call

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April 7th, Tuesday, 11:00 a.m. There is risk, and we're going to have the opportunity to speak with Chris Verrone, Dan. He's the head strategist there. I believe it's Strategas. Is that correct?

You believe? You've known Chris Verrone for years, maybe decades. I don't know, more than a decade. He's a Delbarton grad, and obviously I'm not getting into great, great detail, but Chris is one of the greats. He's on the sort of the Parthenon as well, Pantheon, Parthenon, one of those things. But that's Dan Nathan, I'm Swizzel. Um, little bit of a dental situation last night, but I'm fine, man. Show everybody. Show everybody. I don't know if you can tell.

What were you, what were you eating? It was, I wasn't. I was sitting watching the Michigan Wolverines against the University of Connecticut Huskies. Horrible game. I thought it was a great game.

What are you talking about? Like at one point in like with like 17 minutes left in the, in the second, it was over. I mean literally it was over.

No, stop it. No, you're still there. You're still Hoffman there.

Bill, what do you... Well, oh by the way, Bill, you won our pool. Wow. Bill came... [cheering] Well, he didn't win. He came in number two, I want to say out of, number two out of 70. He had...

He didn't win.

No, he did, but number two gets 20% of the pot. Well, look at him. All right. Listen, let, let's, let's speak... We don't, we don't have a lot of time.

No, we don't. I'm sorry. So that we have Chris Verrone coming. All right. So today's letter J, by the way, Tuesday. Yeah. Markets lower. I guess, I guess is because there's been no, there's been no reconciliation. There's been no agreement between United States and whatever parties they're negotiating with. Obviously with each passing minute we get closer to whatever deadline already happened, etched in stone. So here we are, Dan. I think it's already happening is, is the, is the main point. I think that there's been a bunch of explosions on Kharg Island. It looks like the Israelis have been bombing, you know, infrastructure sites. So I, I think, you know, again, they shoot the hostage, and I don't mean that literally, you know, you give these deadlines and then you don't follow through and you start bombing beforehand. You give no incentive for anything else to happen. So I, I guess the question here, guys, we had that bounce 4 and 1/2 or so percent off of the lows from Friday morning. Here we are, the S&P is down 1%.

You know, the Nasdaq is down 1 and 1/2%. It feels like the Nasdaq guy is down for different reasons. Apple is down 5%. This is fascinating, actually. Apple down 5%. You don't see that, you don't see that all that often, by the way.

For the A, you're right for that, but B, because of the headline that they actually hit a snag in design of doing a foldable iPhone, which seems insane because it's not like the stock had rallied off of that. It's not like that was the reason for the stock's relative strength. So down 5%, you got Nvidia down 2% on a headline that we saw on Fast Money that last night, I think it came out that, um, Anthropic and Google and Broadcom are in a deal to do custom TPUs for Anthropic, and it's a big, you know, compute deal in the like here. But again, Nvidia is just kind of stuck here. Broadcom's up a little bit. You know, Google showing relative strength because it's obviously a good deal for Google. Tesla guy falling out of bed. Tesla falling out of bed. So interesting stuff on the mega caps, and then the odd thing to me is that you have the banks showing relative strength in an environment like this. Energy is obviously up with crude. So it's just one of these funky sort of... Oh, look at retail. So retail is getting hammered today. Walmart down nearly 3%. Target down 3%. Nike down 3 and 1/2%. That's crazy. Home Depot, Lowe's. So like there's a lot of funky action in the markets today.

Yeah, well Nike's... So I'll try to sort of work from backwards to forwards. So Nike has been a problem for a while. We've, we've documented their trials and tribulations, and they seemingly can't get out of their own way. I think there will be a day we'll talk about Nike in terms of some sort of bearish to bullish reversal, but we're not there yet. Retail, and I don't know if Jacob or Amanda, by the way, Amanda is doing great, can find us, but President Trump put out a very odd tweet earlier. It was a video seemingly of the late 1920s, early 1930s in the United States, which I'm hard pressed to sort of understand what's going on there, and I'm not suggesting retail is trading off on the back of that, but that was a little bit disturbing. Let's throw up that S&P chart because we had Carterworth on yesterday, and he talked about how five down weeks followed by an up week, and then the subsequent weeks what was going to happen, and we talked about the fact that the S&P 500 broke through the 200-day moving average was the likelihood that it would bounce and find its way back to the 200-day, and then we'll see what happens if and when. I thought we would fail there. It appears as though that's happening, although anything can still happen, but I think there's something going on. And in terms of technology, I think yesterday with Micron, if Amanda wants to throw that chart up, that to me was the tell because you obviously had that huge upgrade in SanDisk. You saw what that stock did, but Micron on the back of that really didn't go anywhere, and now obviously today we're seeing a 3% move to the downside. So I think the lack of performance in Micron yesterday was definitely a bit of a tell in terms of that side of the equation.

Yeah. It just, again, it's one of those days where we've talked about the sell-off in and around this war as orderly. I think that Micron chart on a single stock basis shows anything but that, and it just happens to court, you know, be over the same time period. And to your point about the S&P 500 and the role, you know, I feel like there's a potential for things to get ugly. Yesterday we highlighted David Rosenberg's work about, you know, recessions and what preceded them. This is going back, you know, post-war period, and it was basically a doubling of crude oil prior. It's, it's interesting except the pandemic, right? This one feels different, and I don't mean like a recession's coming, who the hell knows, you know, that sort of thing, but it's all happening at a time where again, the major indices feel like pretty decently intact. We can see them kind of reversing at some point or holding ground, but if you look at, we can talk to Chris about this in a second, just so much damage has been done under the surface that it just feels like at least parts of the stock market are placing much higher odds on a recession than if you were just to look at the indices, if that makes some sense.

Feels worse than it is, and we also, Carter two weeks ago I think talked about how 20, I think it was 25.9% of all stocks in the S&P 500 were down 40% or more from their all-time high. So think about that. So one in four stocks down 40% from its all-time high with an S&P at the time that was only down about 7 and 1/2 or 8% from its all-time high. So what we tried to sort of figure out is were those stocks trying to sort of be a precursor or something, and was the broader market going to catch up, or was that a bit of an outlier? So that remains to be seen, but the, the indices are always seemingly the last to go. So that it's, it's all out there, and I think that's one of the reasons why it feels worse than it is.

Yeah. Again, you know, it's like it's kind of a fool's errand trying to like price in what a recession, you know, what are the odds of a recession, what it means for the markets, that sort of thing. And I guess, you know, it doesn't matter where you look, whether it's electricity from AI, whether it's, you know, crude oil going into your car, whether it's diesel going into the trucks that, you know, ship your packages, all that sort of the jet fuel, right? Helium for this, you know, LNG for that, food prices because of fertilizers. It's just like there's so much stacking up right now. It's hard to discount what the inflationary, you know, repercussions of that and really how long they stick around. I guess is the, you know, and that's the thing, and you know, so you know, there's a lot of sectors, a lot of individual names under the surface I think are reflecting some of the input pressures that we've seen. There, we haven't even talked about demand destruction yet. You know, I think that's a big impact that would feed into recessions. I think Q1 earnings and Q2 guidance, if we do hear a lot of it, or for the balance of '26, should represent a good deal of caution, and then the question is how do investors in the stock market react to that caution, right? They're clearly given them all again. If you were, you know, a company like you're, you're not going to get punished unless there's ways to draw lines to misexecution or, you know, like a whole handful of things. And I think it really does come back to AI spend. I think that the mulligan does not get treated the same way if you are a mega cap tech, right? And you're talking about, you know, you know, global uncertainty, geopolitical uncertainty because there already is a lot of skepticism about the benefits of the CapEx spend at this juncture because when we got Q1 guidance or balance of the '26 going back three months ago, it was a scenario where companies were not being rewarded for raising their 2026 CapEx.

In this environment, there's, unless you have absolute clarity, which I think very few companies or very few sectors do, there's absolutely no reason to give, um, forward guidance that somehow paints a rosy picture. You're not going to be penalized to your point if you're cautious going forward. With that said, your point about CapEx, if you see a pullback in CapEx, regardless of the merit of it or not, that's going to be, I think in a word, potentially catastrophic to that whole AI trade. And the whole thing, and I've said it and I think you would agree with this, you've said it, hinges on the sanctity of CapEx. And if you start to see, for whatever reason, companies pull back or start to say, 'You know what? We're going to, we're taking a fresh look,' or whatever terminology they want to use, that's when I think the dominoes start to fall.

Yeah, and you know, just going back to Apple really quickly. I mean, here was a, a company that, you know, was punished a little bit going back to '24 into '25 for not having an AI strategy, for not detailing CapEx that was going to lead them to, you know, a, a product like Apple Intelligence, which was going to basically spur hardware sales, but also services, right? And so, here we are right now. I just think it's fascinating that the stock can trade off like this, not based on an AI headline or lack thereof, especially as we get, you know, 2 months away from WWDC, where they're meant to launch this or relaunch this product.

By the way. We know. Um, every, listen, everybody knows that it's your favorite. I, is that the Apple chart? Like, that doesn't look like the Apple chart. Like, uh, that, that, that is an Apple chart.

Yeah, how, what are we doing here? Well, what are we... That's Danny Moses, by the way. What are we doing? That's the Apple chart you were looking for. And it's not the, the Apple cart. But, here we are, and Chris can maybe speak to this a little bit. I just think that it's a weird place to be right now. Here's a company that I think to some degree was showing decent relative strength over the last few months, where because they don't spend 25% of the revenue on CapEx, or they have not been doing it. They spend, you know, low single digits or mid single digits. All right, Guy, now...

Leave, hold on. Leave that up real quick. We'll bring Chris in. Amanda, draw a horizontal line across those bottoms, and they're going to line up, by the way, with the top that we saw in September. Um, and you'll see what I'm talking about. The prior resistance, prior support. I mean, go a little bit lower, and that's where... Yeah, boom. Stop. That's it. You see where we stopped out on the way up, right? You see that we got traded through it. We stopped on the way down. That's your line of demarcation. So, whatever the hell that is, 242 or something. That's, that's a huge level. Yeah.

Um, it is. Well, it's, uh, it'll be interesting to see like what the analyst community has to say from a product standpoint. By the way, I'm sitting down this afternoon with Gene Munster. Love Gene. Gene of Deepwater Asset Management. We're going to go through all this. It's going to drop in the, uh, Risk Reversal podcast feed tomorrow morning. All right, here it is. He's a partner, and he's the head market strategist at Strategas. His name is Chris Verrone. Y'all know him. Y'all love him. We see him on the Fast Money often with us. So, by the way, Chris, so welcome to Market Call.

But, but Guy, you know how this got booked. Uh, Chris has been on with us a bunch in the past. You know, we're getting ready to go on Fast Money maybe a week or so ago, and all of a sudden, I see Chris Verrone on the Fast Money set. But before our show started, he was on the Overtime.

Yeah, I know. Couldn't grace us with his presence on Fast Money. I feel like he's cheating on us a little bit. What do you think? You know, now that... Don't, hold on. Before you start to, to explain yourself. Yeah. You know, now that that show is at the Nasdaq, we're able to see in real time the people that are two-timing us. And obviously, Chris falls in that category. Although, I give him a huge pass, because as I mentioned earlier, he's a proud Delbarton grad. And you know, I, I'm a fan of Villanova, but for a lot of different reasons. And he obviously matriculated and graduated from that fine university. So, hello, Chris.

We'll have you, we'll have you back, Chris. I mean, I don't know if you heard what we were talking about. You know, funky market day, and I think it's, it's, it's important for our viewers, our listeners to know that obviously, a lot of them know you as a technical analyst, but you also do some heavy, heavy lifting on the market strategist front at Strategas. So, wrap up a, you know, like, like drop some knowledge on us. You heard us, you know, kind of opining on the different sector stuff, the under the hood stuff, what the indices are showing, that sort of thing. Like, where are you at on a lot of this stuff?