An Opportunity Like This Won’t Come Again… (Emergency Update)

The US stock market has wiped out $4.1

trillion in value since the beginning of

2026, and it's now sitting at a pivotal

level where investors have come in to

buy the market previously. If this level

breaks, it could set off some pretty

violent moves on US stocks in the coming

weeks. It's not just the S&P 500. The

NASDAQ 100 is sitting in a very similar

vulnerable posture. Now, in the last

week, Donald Trump has been trying to

accelerate a ceasefire with Iran in the

hope to reverse all of the damage that's

been done since the onset of the war.

Indeed, if we look at the price of oil

following Donald Trump's announcement,

it declined by roughly 9%. Now, that

might sound significant, but putting

this move into its context, oil prices

remain roughly 40% higher than they were

before the conflict erupted, telling us

that the energy market has not really

been put at ease by this recent

announcement. If we zoom out a little

further and we overlay the US rate of

inflation, we know that headline

inflation data in the US is heavily

influenced by the price of oil. Oil is

both a direct component of the consumer

price index, but it's also an indirect

input for all of the goods and services

around us through the energy that it

provides to power our economy. And all

of this is exacerbated by its

volatility. Oil's price is much more

volatile than any other major component

of the consumer price index like shelter

for example that rarely moves more than

a percentage point a month. Now, this

spike in oil has not yet been reflected

by the actual government inflation data

from March simply because the

government's data gets released a month

later. So, the data for March will only

be released in early April. But the 40%

jump in oil prices is almost certainly

going to lead to a considerable jump in

the government's inflation data, likely

taking the inflation rate up to 3.5 or

4% in the next inflation print. If we're

right about this, it's going to

completely change how the US stock

market is priced. One of the reasons for

why we've been so optimistic on the

performance of the stock market over the

last few years is that inflationary

pressure has been consistently moving

lower. Lower inflation numbers has been

associated with some of the strongest

market rallies in history. And it's been

our primary thesis for the last three

years now. But in just a few short

weeks, we've radically changed our

stance on the stock market because of

what's happening to inflation. Inflation

is at the center of the financial

system. Depending on whether inflation

moves up or down, it will make certain

asset classes more attractive or less

attractive. A big jump in inflation data

can fundamentally shift how investors

are allocating their capital. Take an

investor that is holding a stock for

example. Ideally, he will want the

return on investment that he is getting

from being invested in that company to

be higher than the rate of inflation.

For example, let's say you invest a $100

into the share of a company. And that

company produces $5 of earnings per

share. Your return on investment is 5%.

If inflation is at 2%, you have a real

return, meaning adjusted for inflation,

equivalent to 3%. So, you have a

positive return on investment. If on the

other hand inflation all of a sudden

jumps to 6% then your real return

becomes -1%. So now you are losing money

by being invested in that stock and it

would probably be a good idea for you

not to be invested in that company. This

is the exact shift that is about to take

place on the US stock market. For each

share of the S&P 500 that you buy, you

currently pay $6,600.

The underlying companies within the

index generate $234 per year. So, the

return on investment of being invested

in the S&P 500 or what's known as the

earnings yield is currently sitting at

3.5%. Inflation in early 2026 was

averaging around 2.5%. So, before the

war broke out, the S&P 500 index was

generating a real return on investment

of 1%. In other words, because of low

inflation, investors have gotten used to

not needing to ask themselves whether

the market is actually too expensive.

Because when inflation is low and

trending down, that's really not a

concern. But now inflation is jumping.

And as we discussed earlier, it could

jump to roughly 4% quite quickly. This

will completely wipe out the real return

on investment of the S&P 500 index. In

fact, it will very likely go negative,

and that's something that almost never

happens. And history shows us that when

it does happen, it is absolutely

catastrophic for the stock market. This

is a chart showing us the real earnings

yield of the S&P 500 index going back to

the 1960s. And we see there's only a

handful of moments where the earnings

yield dipped negative. We've highlighted

the dates of all of the moments where

this actually happened. And you might

recognize some of these. There's 1987,

there's 1999, there's 2007. And that's

because if we look at where each of

these moments were on a chart of the S&P

500, it has systematically coincided

with bare markets. There's literally not

one exception. That means that every

single time where the real earnings

yield went negative, the stock market

experienced at least a 20% correction

from its all-time high and in some cases

much more than that. The reason for this

is pretty straightforward. When

investors realize that they are

literally losing money by staying

invested in the stock market, they begin

to sell and that selling causes the

price of stocks to go down. In other

words, this is when valuations really

start to matter. For the last 3 years,

investors have gotten used to seeing

stock market valuations rise for no

apparent reason. Famous metrics like the

Schiller PE ratio have reached

incredible heights in the last few

years, leaving many confused regarding

how the stock market could actually

manage to continue rising to such

expensive levels despite a struggling

economy underneath. And again, we have

been advocating that valuations would

continue to rise as long as inflation

remains low. But as soon as inflation

comes back into the picture, that's when

high valuations can start to unwind.

This is exactly what happened at these

valuation peaks in 1999 and in 1967. In

both of these cases, low and stable

levels of inflation led to a large runup

in the valuations of the stock market

and then a sudden jump in inflation data

led to a reversal of those valuations.

The jump in energy prices that we're

currently experiencing absolutely has

the power to deliver the same type of

pain. Now, let's be objective here.

There is still a scenario where the

stock market can actually make it out.

Okay? If oil prices come back below $80

a barrel, we think that everything that

was highlighted in this video would be

invalidated. And the reason for that is

twofold. If we look at the last three

moments where oil prices were above $80

a barrel, we see that the S&P 500 index

was actually falling in every single one

of these instances, just like we're

seeing today. On the flip side, every

time that oil prices were below $80 a

barrel, the stock market for the most

part was actually rising. $80 a barrel

seems to have been marked as the

imaginary line for investors to be

concerned about the impact of higher oil

or unconcerned. The second reason is

that if oil prices quickly come back

down, the overall impact on inflation

would be very limited. Yes, there would

likely be a temporary jump, but it would

be quickly faded and the stock market

would be able to see the light at the

end of the tunnel, allowing stock market

valuations to remain elevated. The