Bad feeling, weak internals, confidence collapse, Nvidia breaking out | WAYT?
Josh Brown and Chart Kid Matt discuss NVIDIA's technical breakout potential with strong momentum, rising Treasury yields creating headwinds for defensive stocks, deteriorating market breadth concentrated in mega-cap tech stocks, and strategies for maintaining perspective during market volatility using historical context.
Summary
The episode opens with Josh Brown and Chart Kid Matt analyzing NVIDIA's technical setup, noting the stock has consolidated below the $235 breakout level after bouncing off the 200-day moving average. They highlight that NVIDIA's RSI (relative strength index) is at 58, providing substantial room for momentum confirmation during a breakout, and emphasize the stock's fundamental strength with potential $360 billion in free cash flow and $96-98 billion in revenue this fiscal year. They discuss Jensen Huang's $150 billion buyback announcement as a powerful capital allocation signal that contradicts calls for slowdown.
The conversation shifts to Treasury yields, which have risen sharply with 75% of the last 24 trading days showing higher 10-year yields—a phenomenon that has occurred only 11 times since 1965. Matt presents research indicating that historically, 80% of the time yields fall within 12 months after such sustained rallies, averaging 90 basis points lower. They explore multiple theories for the yield spike: foreign central banks reducing Treasury purchases, domestic discretionary investors demanding higher compensation, Japanese carry trade unwinding, and corporate debt issuance doubling year-over-year as Big Tech moves from funding CapEx through cash flow to issuing bonds.
They discuss the real yield (nominal yield minus inflation expectations) hitting 2008 highs at 2.85%, creating genuine competition for equities. A chart analysis reveals that P/E multiples compress when 10-year yields exceed 7%, with the S&P 500 trading at 13.6x and NASDAQ at 12.6x in that environment—the lowest across all yield buckets. They note that the 3-7% yield range historically produces higher multiples, suggesting investor discipline drives valuation expansion.
Regarding market breadth, they acknowledge recent deterioration: five stocks (Microsoft, Meta, Apple, Alphabet, NVIDIA) contributed 93% of S&P 500 gains since July, and the percentage of constituents above their 200-day moving average fell from 73% to 51%. However, they provide important nuance: tech shows 66% of stocks above the 50-day moving average with 10% at 4-week lows, while utilities and staples show terrible breadth (3% and 27% respectively above the 50-day). They argue this represents rational rotation from yield-sensitive defensive stocks into growth, not broad-based deterioration. Critically, financials and tech show zero stocks at 52-week lows, while utilities and staples show 45% and 15% respectively—indicating the weakness is concentrated in areas already struggling against Treasury competition.
The hosts address the Barclays research showing similar breadth patterns preceded 9.6% average drawdowns, but contextualize that today's setup differs: the S&P is resilient despite breadth concerns, suggesting either a coming correction or validation that the breadth concern is misplaced. They note consumer confidence hit 12-year lows, creating psychological headwinds separate from economic fundamentals, and reference Alliance Bernstein's "Everything Trade" thesis—that AI's massive capital requirements have tied together equities, credit, the dollar, and foreign flows, reducing diversification benefits.
Matt presents five "desert island charts" to maintain investment perspective: (1) Historical S&P 500 showing 61% of time is spent in 5%+ drawdowns, normalizing volatility; (2) Bear market probability increasing with time horizon—100% likelihood over 15-year periods; (3) Strong relationship between starting 10-year Treasury yields and actual forward returns at roughly 6% currently; (4) Forward earnings up 36.7% year-over-year versus S&P 500 up 17.9%, showing earnings are driving performance; (5) Missing the 10 best days annually turns +8.4% returns into -12% annualized, emphasizing staying invested.
Finally, Josh makes the case against buying the utility sector dip, arguing the 17.3 P/E is 36% above the 10-year historical average of 12, the 2.94% dividend yield is uncompetitive against 5.25% Treasury yields, and the technical charts show deterioration. He demonstrates even his best utility holding in their concentrated momentum strategy looks weak, suggesting the sector offers dead money at best.
About this episode
On this episode of What Are Your Thoughts, Downtown Josh Brown and Chart Kid Matt discuss Nvidia breaking out and its massive new buyback plan, rising Treasury yields and the bond market’s demand problem, how the AI spending boom is reshaping both stocks and corporate credit, and whether weakening market breadth is finally flashing a warning sign. This episode is sponsored by Betterment Advisor Solutions and Janus Henderson Investors. Get started at https://www.betterment.com/advisors Visit https://www.janushenderson.com/ for more information. Please take our 2026 audience survey HERE. Sign up for The Compound Newsletter and never miss out! Instagram: https://instagram.com/thecompoundnews Twitter: https://twitter.com/thecompoundnews LinkedIn: https://www.linkedin.com/company/the-compound-media/ TikTok: https://www.tiktok.com/@thecompoundnews Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Learn more about your ad choices. Visit megaphone.fm/adchoices
Key Insights
- NVIDIA's RSI at 58 provides unusual momentum confirmation opportunity, as technicians typically prefer 60+ for new highs but the current level allows substantial room for breakout conviction without overextension.
- Foreign central banks have substantially reduced Treasury purchases, shifting the marginal buyer responsibility to domestic discretionary investors who demand higher yields for compensation—a structural shift explaining persistent yield pressure.
- The 3-7% Treasury yield range historically produced higher equity P/E multiples than the 0-3% range, suggesting investor discipline and forced capital allocation decisions at moderate rates drive valuation expansion.
- Real yields (post-inflation) reaching 2.85% represent genuine competition for equities by offering risk-free returns, creating a structural headwind for yield-sensitive defensive sectors regardless of nominal economic performance.
- Market breadth deterioration is concentrated in utilities (3% above 50-day MA) and staples (27% above 50-day MA) rather than broad-based weakness, reflecting rational capital rotation from dividend-vulnerable stocks to Treasury alternatives.
- Tech and financials showing zero stocks at 52-week lows despite market breadth concerns suggests these sectors are sustaining performance during the rotation, contradicting narrative of broad market decay.
- The "Everything Trade" thesis interconnects AI CapEx funding across equities, corporate debt, foreign flows, and currencies, reducing natural diversification as investors cannot escape AI exposure through traditional hedges.
- Seventy-five percent of the last 24 trading days saw positive 10-year yield movement—a pattern occurring only 11 times since 1965—historically followed by 90 basis points of yield decline over 12 months in 80% of cases.
- Forward earnings growth of 36.7% year-over-year vastly exceeds S&P 500 price appreciation of 17.9%, indicating substantial multiple compression despite strong fundamentals and suggesting market resilience rather than overvaluation.
- Consumer confidence hitting 12-year lows represents sentiment deterioration disconnected from employment strength and economic expansion, creating psychological headwinds that can persist independently of macro data.
- Utility sector multiples at 17.3x P/E represent 36% premium to 10-year historical averages despite 2.94% dividend yields below 5.25% Treasury alternatives, indicating valuation adjustment incomplete and risk/reward unfavorable.
- Sixty-one percent of S&P 500 history involves 5%+ drawdowns from highs, and 100% of 15-year rolling periods experience bear markets, establishing that volatility and corrections are normal portfolio experiences rather than anomalies.
Topics
Transcript
Yep, here we are. You asked for the best, I brought you the very best. Ladies and gentlemen, I got chart kid Matt here today. Matt, I feel like everybody left me this week except for you. Never leaving you. That's it. We're here. We got a packed dock. Let's do it. I got Michael Batnick on a flight to Austin right now. Shout out to Michael. Nicole is in Paris living out her shopping fantasies. Right, right. Ladies and gentlemen, we got John Grayson in the background controlling the show tonight. John's going to crush it for us because we have charts on charts on charts. For those of you listening on Spotify, two things. Number number one just…
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