Stock Market Correction: Q4 2026 — Transcript

Full transcript

1. 0:00Hey everyone, and thanks for jumping
2. 0:02back into the equity verse. Today we're
3. 0:05going to talk about the continued
4. 0:06selloff in equities in Q4 of 2026. If
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22. 0:48Let's go ahead and jump in. So for
23. 0:50basically the entire year we have talked
24. 0:52about the typical sell-off that will
25. 0:56likely happen in equities in Q4 of the
26. 0:58midterm year. That doesn't mean that it
27. 1:00had to happen but nevertheless it has in
28. 1:03fact happened. We have said to look for
29. 1:06about a 10 to 20% drop more or less plus
30. 1:08or minus. It's not an exact science and
31. 1:10you can already see that the NASDAQ has
32. 1:13already dropped over 10%. Right? So, the
33. 1:17correction is still very much underway.
34. 1:19And when you look at the year-to- date
35. 1:21ROI of the NASDAQ in 2026, it almost
36. 1:25feels like the same playbook as 2018,
37. 1:28right? I mean, it kind of started
38. 1:29selling off right around the same time.
39. 1:31You can see it dropped, but as it
40. 1:33dropped, it would have these occasional
41. 1:35rallies back up, but it did not stop the
42. 1:38market from just continuing to drop to
43. 1:41the downside. So my guess is that we're
44. 1:44going to see more of the same uh in the
45. 1:47short term just occasional rallies
46. 1:49before a sell-off. And I mean even today
47. 1:52I mean the NASDAQ's already down. What
48. 1:54we have seen previously was that the
49. 1:56NASDAQ would rally for the first for the
50. 1:58first part of the week, right? It would
51. 2:00kind of go up at the first part of the
52. 2:01week and then down at the last part and
53. 2:02then up and then down. So I mean that
54. 2:04that's a pattern that is at least worth
55. 2:06noticing to see if it, you know,
56. 2:08continues to repeat itself. But at the
57. 2:09end of the day, we are getting the
58. 2:11correction that we've always seen. And
59. 2:13one of the places we we the reason we
60. 2:14talked about this was because if you
61. 2:16look at the last three midterm years,
62. 2:18right? If you just look at the last
63. 2:19three, you can see that this is how it
64. 2:21played out, right? Like so in 2014, we
65. 2:23first had a correction at the beginning
66. 2:25of the midterm year and then we had a
67. 2:27correction at the end of the midterm
68. 2:29year. And then in 2018, same thing,
69. 2:33right? The beginning of 2018, the stock
70. 2:35market had a correction. And then at the
71. 2:38end of 2018, the stock market had a 23%
72. 2:42correction. And then in 2022, very
73. 2:44similar setup, although that was a
74. 2:45full-on bare market the entire year. We
75. 2:47had a first of 20% drop. And then
76. 2:49starting in Q3, we had another 23% drop
77. 2:53or so. So this is par for the course.
78. 2:56This is what we've seen previously in
79. 2:58midterm years was that you had a
80. 3:00correction in the early part of the year
81. 3:01and then another one at the end of the
82. 3:03year. And you can see we already had the
83. 3:05correction at the beginning of the year.
84. 3:06it was about a 13% drop. So the
85. 3:10correction we had here at the beginning
86. 3:12of the year is not that different from
87. 3:14the one we had at the beginning of 2018.
88. 3:17Now what's fascinating is if you go look
89. 3:20at the presidential term return path for
90. 3:25something like the NASDAQ or actually
91. 3:27let's just look at the S&P 500 that's
92. 3:29going to go ahead and load on here. If
93. 3:31you look at that, you can see that the
94. 3:33actual return of the S&P at this point
95. 3:36is basically what it was during Donald
96. 3:38Trump's first term. And you can see how
97. 3:40that Q1 correction lined up and now the
98. 3:43Q4 correction is lined up. The only
99. 3:45thing that's different between this
100. 3:47current term and Trump's first term is
101. 3:49that we had the sell off also way back
102. 3:52over here at the beginning of 2025. That
103. 3:54corresponded to all of the tariffs,
104. 3:56right? So that was the tariffs back in
105. 3:58early 2025, but then we had the same
106. 4:00correction in early 2018 as we did in
107. 4:03early 2026, more or less. And now it
108. 4:05looks like we're having a very similar
109. 4:06correction uh in late 20 late 2026 that
110. 4:10we had in late 2018. So what are the
111. 4:15reasons for the correction? Well, one of
112. 4:16the things to remember is that a lot of
113. 4:19times the markets will correct when the
114. 4:21long end is going down and it's because
115. 4:23of a growth scare, right? it's the
116. 4:24growth scare that often is the reason
117. 4:26because a lot of times people would
118. 4:27think oh well if the long end goes down
119. 4:29that's bullish for risk assets but not
120. 4:31not if it's because of a growth scare or
121. 4:33because of other concerns that are
122. 4:35occurring. So the market was generally
123. 4:38going up as the long end went up. But
124. 4:40you'll notice when the long end went
125. 4:41down in Q1 of 2026 that corresponded to
126. 4:45the NASDAQ getting that drop that we
127. 4:47just talked about, right? Like that
128. 4:48actually corresponded to a low in the
129. 4:50market more or less. And so perhaps
130. 4:52we're seeing or we're witnessing the
131. 4:54same thing happen again. Now I would
132. 4:56expect some type of mean reversion on
133. 4:58the long end. Not necessarily to a new
134. 5:00high, but just more of like a
135. 5:01complacency bounce before it likely were
136. 5:03to head lower. That's at least my guess
137. 5:05as to how this is going to play out. But
138. 5:07you can see the NASDAQ's already had a
139. 5:09sizable drop. And then if you look at
140. 5:12other markets, right? If you look at uh
141. 5:14the Russell, the Russell already had a
142. 5:16big drop. And and now it's arguably back
143. 5:20testing its 21week EMA. But this is
144. 5:22common, right? If you go back and look
145. 5:24at at um 2018, you can see it it dropped
146. 5:28and then had a bounce and then had a
147. 5:29sort of a second drop, right? And I
148. 5:31wonder if we're just kind of we had the
149. 5:32first drop, we're bouncing, and now
150. 5:33we're perhaps about to go into the
151. 5:35second drop. And if you look at at other
152. 5:38times in the market, right? If you go
153. 5:39look at, you know, 2024 into 2025, it
154. 5:42was the same thing, right? You had your
155. 5:43initial drop and then sort of a back
156. 5:44test of the bull market and then you had
157. 5:46the the second leg of that drop. So that
158. 5:49would be my guess as to what happens
159. 5:51with the Russell. Um and then you could
160. 5:53also look at the Dow Jones. The Dow has,
161. 5:56you know, been doing something very,
162. 5:57very similar as well where you get, you
163. 6:00know, sort of your initial drop here in
164. 6:012018 and then you bounce and then you
165. 6:03get a larger drop
166. 6:05and then you continue on.
167. 6:08That's what I think is currently
168. 6:09happening. Now, the Dow and the Russell
169. 6:12have had large drops already, right?
170. 6:15The Dow already dropped about 7%.
171. 6:20The Russell already dropped about 11 to
172. 6:2312%. The thing that hasn't dropped a
173. 6:26whole lot yet
174. 6:28is the S&P 500, right? It's only down
175. 6:30about 4%. Now, my guess is that will
176. 6:34continue, right? I I would I'm guessing
177. 6:35that it'll continue uh even though it
178. 6:38has it hasn't, you know, yet
179. 6:40accelerated, but if you look at the S&P
180. 6:43here in terms of like the year-to- date
181. 6:45ROI, let's actually just go over to
182. 6:46indices um and look at S&P 500 and look
183. 6:51at 2026 compared to 2018. It's not as
184. 6:53bad of a sell-off at this point, right?
185. 6:55But you can see that there's that
186. 6:57potential window of weakness could
187. 6:59continue and and it does seemingly match
188. 7:01somewhat what we saw back in 2018. Okay.
189. 7:04So, I I think the S&P is kind of one of
190. 7:07the last things to fall probably before
191. 7:09you see some type of policy response
192. 7:11from the administration. On the daily
193. 7:13time frame, you can see that the S&P has
194. 7:16already sort of fallen below the 50-day
195. 7:18moving average. It's now at the bull
196. 7:19market support band. My guess is that
197. 7:21it's likely going to continue down and
198. 7:23check in with the 200 day moving average
199. 7:25before too long. And that's currently at
200. 7:27around 7,300.
201. 7:29That's at least what I'm thinking.
202. 7:30Again, there are bounces. Remember, one
203. 7:32of the things with the markets, and
204. 7:34we've seen this, the NASDAQ do this a
205. 7:35number of times, is that it often sets a
206. 7:37high
207. 7:39and then spends a lot of time below that
208. 7:40high and then heads back up to it and
209. 7:42then the correction happens. You can see
210. 7:44it happened over here in 2024, 2025. It
211. 7:46sort of happened over here as well. It
212. 7:47wasn't a high, but it rallied back up.
213. 7:49And then it's happened another time. So,
214. 7:51you can see this pattern that's been
215. 7:53going on, right? Go up to a high, drop,
216. 7:56head back up to the high, and then a
217. 7:57bigger drop. And then it happened again
218. 7:59in 2026 and early 2026, and now it looks
219. 8:02like it's happened again in late 2026.
220. 8:04So, it's a common pattern. We've talked
221. 8:06about it for a while. Uh, but regardless
222. 8:08of all the narratives, the Q4 correction
223. 8:10arrived just the same. Just a few weeks
224. 8:12ago, there was a lot of speculation by
225. 8:14people that, you know, said that, well,
226. 8:15because everyone's expecting it, it
227. 8:17won't actually happen. But this just
228. 8:18goes to show you why that stuff can
229. 8:22often still be incorrect, right? Like
230. 8:23people will think like, oh, everyone's
231. 8:24expecting it, therefore it won't happen.
232. 8:26And yet it happens anyways. And this is
233. 8:28the thing I've talked about with Bitcoin
234. 8:29a lot, right? Like we've talked about
235. 8:31the Q4 dump for Bitcoin and people say,
236. 8:33well, it's not going to happen because
237. 8:34everyone's expecting it. But we said the
238. 8:37same thing back in February and the same
239. 8:39thing back in the summer for Bitcoin,
240. 8:40right? that it tends to form lows in Q
241. 8:43in February and like Q1 in the summer
242. 8:47and then in Q4 and every single time
243. 8:48people like well if everyone's expecting
244. 8:50it it won't happen and then it happens
245. 8:52anyways. So I would still defer to the
246. 8:54charts here. I mean as long as this as
247. 8:56long as this continues like this I mean
248. 8:58I would just simply lean into it because
249. 9:02there there's no shortage of shortage of
250. 9:04uncertainty. Obviously there's the war
251. 9:06in Iran. there is um uh you know the
252. 9:10midterms coming up tomorrow so expect
253. 9:12some volatility around that. The the the
254. 9:14war in Ron is is the more difficult
255. 9:15thing right because like if you look at
256. 9:18uh you know WTI and you just look at the
257. 9:21chart right like you can see that it
258. 9:23arguably still remains sort of more or
259. 9:25less in this uptrend channel. I mean I
260. 9:27don't know how you want to draw the line
261. 9:28but it looks to me like it more or less
262. 9:30is is sort of in this channel. And I
263. 9:33would argue that the most likely spot
264. 9:35that we are is kind of like here cuz you
265. 9:37can see that we had there's this larger
266. 9:40move to the upside of this trend line,
267. 9:42right? You have sort of a larger move to
268. 9:45it
269. 9:47and then you move up kind of to like the
270. 9:49midpoint and then fall back down. It
271. 9:50kind of looks like that's what's
272. 9:51happening here. I speculate dubiously of
273. 9:55course that we'll likely see oil
274. 9:57continue to head back up perhaps after
275. 9:58the midterms. Now, of course, that could
276. 10:00change if they have a deal done, but I
277. 10:03also think to to a large extent the
278. 10:05market is getting exhausted by this sort
279. 10:08of elusive deal. And I do wonder how
280. 10:11much longer the market will entertain
281. 10:14the sort of these headlines because, you
282. 10:17know, throughout throughout all of 2026,
283. 10:19we've basically seen headlines that the
284. 10:21war is over and that a deal is done and
285. 10:24let the oil flow and then a a month
286. 10:26later it's like we're back at square
287. 10:28one. So, how long until the markets
288. 10:32revolt against that? I don't know if
289. 10:34we're at that point yet, but I do think
290. 10:36it's coming. Probably within the next
291. 10:38like 12 to 18 months where the market
292. 10:40will revolt against that and stop
293. 10:42believing the headlines. Uh because the
294. 10:45headlines have have been, you know, very
295. 10:47misleading and in what's actually
296. 10:49happening. And when you look back, when
297. 10:51you actually think about what was said
298. 10:53this year, right, and how many times
299. 10:55this supposedly is over, you start to
300. 10:58wonder like at what point do we think,
301. 11:00hey, maybe this isn't actually true, you
302. 11:03know? Um,
303. 11:06I'm just going to say that. I mean,
304. 11:07like, you know, at what point do the
305. 11:09markets sort of rebuke all those
306. 11:10headlines and stop believing what's even
307. 11:13being said? And I I think it's probably
308. 11:14going to happen again. I think we'll see
309. 11:16that transition, you know, sometime over
310. 11:19the next year or so, but I don't I don't
311. 11:21know if we're there yet. I mean, it
312. 11:22certainly seems like the market is is
313. 11:24still very much reactive uh to what's
314. 11:26coming out and um at least for now. At
315. 11:29least for now. So, watch the stock
316. 11:33market. I mean, watch the NASDAQ. I
317. 11:35think the corrections are likely to
318. 11:37continue uh at least in the short term.
319. 11:40And I'd be looking for a a low to form
320. 11:43sometime within the next couple of
321. 11:45months or so. And then from there, I I
322. 11:47would expect sort of a bounce off of
323. 11:48that low. And then the next discussion
324. 11:50will turn into the OpenAI IPO that'll
325. 11:52likely be occurring in, you know,
326. 11:54sometime early 2027 would be my guess.
327. 11:57Uh but this is this is how the markets
328. 12:01behave normally in Q4 of a midterm year,
329. 12:04right? This is what they normally do.
330. 12:06And when you start getting these big
331. 12:08drops on on names like Google, right,
332. 12:10where you're dropping 10% overnight on
333. 12:12earnings, you know, it's pretty clear
334. 12:14that the correction is in fact there,
335. 12:16right? So, this is playing out and we've
336. 12:19talked about it all year. I know at
337. 12:21times it seemed like it would not
338. 12:23happen, but yet it arrived just the
339. 12:26same. It arrived just the same. So,
340. 12:29we'll talk more about this at the
341. 12:30conference. Make sure you guys get your
342. 12:32ticket. Link is in the description below
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346. 12:39feel free to go ahead and get a ticket.
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349. 12:45have you guys there. And that'll wrap it
350. 12:47up. So, make sure you subscribe, give
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352. 12:50in Miami for the discussion about where
353. 12:53we are in the market cycle and in the
354. 12:55business cycle. I'll see you guys next
355. 12:56time. Bye.