Wall Street JUST Issued Warning: Correction Imminent

hey in this video we're going to break

down what RBC Capital markets has to say

about the state of the economy and S&P

500 price targets for next year we're

going to talk about their bare case

scenario where we look at a potential

Market correction why that might happen

we'll also look at some charts to

understand what's driving this market

and where might some opportunities be

compared to other options let's jump

into it so RBC Capital markets put

together this about

I it's about 55 is Page report actually

it might be a little longer than that uh

but either way oh no I'm sorry 95 page

report uh and they start with a nice

little summary and then what we're going

to do is we're going to go through the

summary and then we'll jump into some of

the details that we have including uh

some of the charts they give us which

are really incredible so 10 things as

the New Year comes into view first they

think that the S&P 500 first and

foremost is going to go up to 6,000 600

which would represent about a 10.6%

year-over-year

gain they do think that there is a

chance that their bare case will end up

leaving us below 6,000 for next year but

that is not their base case in fact they

think there's actually a chance for a 10

uh 5 to 10% pullback in the S&P 500

primarily due to elevated positioning

recent froth and sentiment and valuation

that has gotten the little over at skis

for

2024 uh now in other places they mention

a potential 15% draw down but the

argument here is simple they on their

base case think the stock market will go

up by the end of

2025 but they do think we are a bit

vulnerable to some bad news when and if

we get bad news and that the market

might be primed for a breather

especially since we've got fed rate cut

expectations that are being dialed back

only a 66% chance now being priced in

that will actually end up getting uh a

25 basis point cut in December we're

sitting at uh 10year yields which are

finally off some of their Highs but I

mean we ran all the way up to 4 and a

half and a bit there for a moment until

um bassent was chosen by Donald Trump

for Secretary of Treasury which is great

you know subject to confirmation and

might help calm uh some of the Tariff

concerns down uh but markets are also

only pricing in a little bit more than a

coin toss for that 25 in December that

they do think that seasonally we should

be good in November and December but

we're prone to weakness in January and

February now there's something

interesting to pay attention to here

first of all the yield curve is only

uninverted by about two basis points and

usually if you get some bad news some

kind of shock that's going to shoot up

50 to 90 basis points that could be

recessionary in itself but I'll tell you

we've gotten a lot of insulation and I

want to be really clear about this

because I think it's remarkable but if

you look at the NASDAQ the NASDAQ 100 we

have done the unthinkable which is we

accomplished the Nike Swoosh look at it

throughout the end of 2022 when I

launched my exchange traded fund I

talked about the Nike Swoosh coming and

the Nike Swoosh is exactly what we got

which is remarkable now that doesn't

mean that I don't make mistakes I move

to bonds a little bit early I think we

all already know that that's because I

like to be as where's the screenshot

there it is I like to be as transparent

as possible with what's going on uh so

that way we can learn from mistakes that

are made or learn from things that are

called correctly and so what I'd like to

point out uh is if we take a peek at

where we began calling the Nike Swoosh

we saw that happening right about here

uh and unfortunately I started getting

more nervous for recession in July which

was really before the August sell down

was right about there uh now obviously

we've recovered from then but what's

remarkable is we're actually not that

much higher than where we were in July

in fact right now we sit just

1.5% above where we sat in July which

means from July to November the NASDAQ

really only gave us

1.5% as an index in total most of the

gain happened at the beginning of the

year and this has some folks wondering

okay we're getting this expansion but

things are definitely starting to get a

little bit rich and we don't mean rich

like Justin trudo now showing up at

maralago to try to maybe uh how should

we put it um cozy up to Donald Trump to

limit those tariffs no we literally mean

that from a valuation point of view if

you ever follow the Channel or the the

group bar chart on X they have a pretty

decent uh Outlook frequently and they

give you some charts that are

interesting take a look at this the

Warren Buffett indicator has hit a an

all-time high more than

203% surpassing the dot bubble

surpassing the global financial crisis

and uh you know obviously uh well well

above the uh bare Market or I should say

the um uh sort of peak euphoria that we

had in 200 uh 21 I think that's what

they mean to say with this so pretty

remarkable in terms of where we sit in

valuation pretty expensive this is the

Willshire 5000 to GDP ratio uh you know

a lot of people look at this and say

okay yeah we could definitely afford a

pullback the question is will a pullback

be recessionary see when you get a

pullback in the stock market that's when

you could lead to unemployment rising

and unemployment Rising could

potentially coincide with the seasonal

weakness that you tend to get in January

and February and that to me is a big

risk factor we'll want to pay attention

to uh so they also mentioned that

there's a lot of froth that has been

sort of baked in in October and November

and that sentiment is constructive but

they do recognize there's a very clear

potential here of a near-term pullback

and so at least if we're listening to

them you've got to buy the dip

opportunity potentially coming up with

just a little bit of bad news so far

though a lot of things seem very

tactically bullish every single one of

these appointments that we keep hearing

about from Donald Trump continue to be

supportive to the idea that Donald Trump

is going to push for a strong business

friendly and stock friendly environment

talks about him working with Jamie

Diamond or some of the appointments to

ex the example treasury like we

mentioned earlier these are bullish to

both stocks and bonds now they do see

here or they do say here that we don't

see a lot of room for price to earn

earnings multiple expansion but they do

think stocks can still go up and that's

because they still see earnings somewhat

moving up next year though not much more

than bonds and this is an interesting

note because this is sort of my case

right here they say us equities May soon

lose their appeal relative to bonds but

have not done so yet so even though

we've got earnings coming up we've got

margin margins that are doing better at

companies we're still in a position

where valuations are so high that the

expected return of equities in the

s&p500 compared to the Bond Market Today

just isn't that good and then it makes

you sort of question okay well why not

buy risk free bonds and I'll give you a

trade we've talked about many times

before we talked about this quite a

while ago on in our course member group

and we talked about this many times

we'll talk about it in just a moment

right after I give a quick shout out to

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Friday all right so look right now

there's a in my opinion this this

commentary here about bonds creates a

trade opportunity see in other words

they say stocks appeal relative to bonds

has diminished it has not eroded enough

to call for a decline in stocks but a

lot of people are looking for a

potential rotation to where bonds could

potentially outperform

it's the stock market next year and I

actually think that's exactly what's

going to happen in fact I'm a big

believer that uh inflation is basically

dead we have an over supply of inflation

or or of products rather and Supply

chains and therefore we're going to

continue to see disinflation in goods

and services not necessarily in food

which is much more volatile energy we

expect to come down Housing Services we

expect to come down but this is a very

interesting one because when we look at

something like a TLT

and we compare back to the pandemic we

can see that during the pandemic when

rates moved all the way down to uh well

essentially zero and we were printing

money like crazy to get out of a

recession we saw TLT move all the way to

$160 per share this security has about

an average maturity of about 25 years

people see it as the 20year to 30-year

Bond ETF and what you've got here is

really a stock that's an ETF essentially

that's bobbing around what I call the

Jerome Powell floor this floor over here

uh was the depth of sort of uh uh the

the stock market sell-off at the end of

2022 the chips recession and still not

peaked out yet on interest rates from

the Federal Reserve this floor over here

at the end of 2023 was the bill Amman 10

years are going to shoot past 5% and as

soon as they got to 4.9% he covered his

shorts and went long bonds calling him

the Great greatest opportunity ever this

low over here was representative of the

beginning of

2024 second wave of inflation fears this

drop over here was representative of

Donald Trump oh no he's going to have

tariffs and he's going to cause all this

Trump flation oh no oh no oh no and now

folks on the weak Candlestick we are

finally creating our first bounce off of

again what I call the jpow floor I

believe 98 is an easy in the bag move

for TLT potentially even by the end of

January Jan 17th for options right but I

actually think that by the end of

2025 the Nike Swoosh that we've had in

the NASDAQ 100 will end up being the

Nike Swoosh of TLT and as I was right

about the q's I think I'm going to be

right about TLT if not in 2025 then in

2026 but I think we're going to Trend in

this direction throughout all of 2025

yeah there'll be volatility just like

with the Nike Swoosh the volatile Nike

Swoosh but I think it'll come and we'll

see yields basically full as we try to

support and prevent the economy from

going into recession and so therefore my

base case is 110 on TLT though I kind of

think we're probably closer to 120 130

if we go into a recession we will

probably revisit the 130 to 144 maybe

even 160 range and the way some people

are playing this is call options no

guarantees uh I hope the best for

everybody who makes Investments as

always I just can't make any guarantees

for you anything can happen so going in

over here it's interesting to see them

comment on this though because that that

is a thesis that's been circulating

let's take a look at this the US economy

is at an important Crossroads from a

stock market perspective okay

interesting tell us more please all

right so uh they mention here that real

GDP is expected to come in at 2% in 2025

a number that's been moving up recently

so in other words estimates have been

coming up for GDP which is fine people

are more bullish but RBC actually thinks

that we're only going to see about a

1.9% level in GDP which is still pretty

positive and aligns with their base case

scenario but they're a bit more bearish

than markets are right now one of the

reasons for that is they think that

elevated interest rates may start biting

into the amount of spending that people

are capable of doing right now they

think people are sort of running on

fumes and that the last bit of spending

might disappear and that while markets

have priced in all the upsides for

Donald Trump they may not have actually

priced in some of the risky downsides of

what ends up happening if we end up

getting a 2018 where the stock market

returned negative 6.2% in in you know

the only down year in Donald Trump's

first term and all of a sudden that same

thing happens next year now is a 6%

downturn really scary 5 to even 15% no

of course not the Market's up way more

than that so who cares but the question

is not okay who cares about a 5 to 6%

downturn the question is does

potentially a 5 to 15%

downturn become the straw that broke the

Campbell's back and it ends up leading

to a 40% downt that's the question now

what do you have over here uh they uh

give an edge to Value over the growth

they say but it's a little unclear and

they expect small cap to stay pretty

choppy mostly because they think GDP has

to grow a lot more than it has been uh

in order for small caps to kind of keep

benefiting now here's some interesting

charts that you want to pay attention to

AI in particular appears to be

benefiting larger firms firms more than

smaller firms this is not a surprise to

me since larger firms have more capacity

to say hey let's Institute an AI policy

and wow we're going to save so much more

money you a small company isn't going to

save as much money from artificial

intelligence as a large company so it

makes sense that when asked over the

past 12 months has your firm utilized AI

to automate tasks previously completed

by employees you had over 50% of large

firms saying yes and only about 25% of

the larger firms or sorry the smaller

firms saying yes more of those smaller

firms closer to 70% of them actually

saying no I found that very interesting

uh this was another one deep cuts and

lengthy recessions are usually what

makes a small cap stock outperform

however if you have a soft Landing or a

quick recession you generally don't end

up having small cap out performance you

tend to have large cap out performance

so they're basically saying hey if

you're betting on small caps to

outperform small caps would do better

with deep recession not quick soft

Landing that is in their opinion so I'm

going to make that little note there uh

some of the other ones I highlighted

over here small caps have underperformed

in the past when job growth has slowed

we're about to get a jobs report one

week from today so we'll see what we get

who knows maybe everybody's hiring again

because things are booming look at the

inflows from small caps and large caps

massive inflows at small caps and large

caps here uh some of the highest that we

have seen since quite frankly June which

actually hold on is that true that's a

little bit scary because look at this if

I

take oh let's see here let's grab this

Arrow let's draw that straight down yeah

look at that that's right there about

the beginning of July that's that level

right there that was the top of the

market so that's a little bit scary that

were sort of aligned with that uh along

with inflows over here in March that was

also a local top of the market so uh

those inflows you know people tend to

buy stocks right when they're at their

highest right anyway uh okay let's look

at some other pages that have been

highlighted patience is really hard in

the stock market history suggests above

average GDP needed to help small beat

large small cap speed

large uh top 10 names have much better

balance sheets than the rest of the S&P

500 yeah I mean this is just really

saying like hey large cap is is just

beating you know the reason the mag 7

are beating is because their balance

sheets are so much stronger totally

agree uh buy side positioning in mega

cap growth funds Futures back to

all-time highs yep uh it's safe place to

be and it makes uh you know when you go

all in on the mag 7 it's really hard to

lag the S&P 500 or

QQQ uh you know the asq 100 a lot of

people are very Benchmark sensitive and

they just sort of compare your

performance to a benchmark

but that really sucks when the

benchmarks are losing money and the

strategy that people should have been in

is now making a lot of money but

everybody's just comparing to The

Benchmark oh well the Benchmark is down

10% you're down 11 ah okay close enough

for nine oh you're beating the S&P 500

so how about positive I actually think

the more exposure you have to bonds uh

we could potentially get you

outperforming the market next year we'll

see Trump's favorability has been

improving uh as so has uh consumer

sentiment uh big boosts in consumer

sentiment by the way uh after the

election and we were covering that a

little bit this morning on the channel

as well looking for oh what was this one

the S&P 500 recovery has been tracking

the recovery of consumer sentiment well

that does sort of imply that because

consumer sentiment has been booming

after Trump that it's possible the

recovery just keeps going right earnings

yield Gap is heading towards a

Troublesome range for stocks this is

just basically a way of saying if you

take the S&P 500 earnings yield and you

subtract the yield on the tenear

treasury you've actually gone negative

and going negative means bonds are

expected to yield you more money than

stocks the last time we had that was

over here in like the dot bubble right

before the Doom bubble

recession which is not good uh We've

also seen this sort of

negativity briefly here in 1994 which

was associated with soft Landing uh and

you did also have that leading into the

91 recession but you did not have that

in the 2008 recession

so little things to pay attention to and

then the last chart we have right here

is their bease price Target we already

have their bull case price Target so

here's the be bare case price Target

5775 it's really just not that bad like

really there's there's no reason to dump

the S&P 500 or the NASDAQ with with that

sort of forecast right like that that

just says hey man just buy the dip like

whatever again the biggest concern is

just is it possible that a correction

leads to a

recession who knows I think we are on

the edge of a lot of joblessness so

personally I'm nervous but I'm I'm

hopeful because I trust me for all the

the startups and all the businesses that

we've got going on the last thing we

want is a recession we will benefit from

not a recession as most people

would so yeah there we have it so with

that said make sure you are part of the

Trump course a lot of people by the way

are missing this section right here

where I talk about we expect 70% of the

course to be Live December 17th 30% is

going to be reserved for future updates

now that's really important because if

Trump comes out with new policies I want

you to know you're going to get those

updates for free and what a lot of

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what a lot of people are doing is

they're jumping in over here and they're

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that out it's all over at mein.com

thanks for watching happy Black Friday

everyone goodbye good luck do not

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congratulations man you have done so

much people love you people look up to

you Kevin P there financial analyst and

YouTuber meet Kevin always great to get

your take