PodcastThe Real Investment ShowLance Roberts

8-17-26 Record Highs: Should You Chase the Rally?

The discussion examines the yen’s slide to roughly 164 per dollar, the mechanics of currency intervention, and the role of dollar swaps in containing financial stress. The host expects the Federal Reserve to hold rates while viewing recent retail weakness as partly timing-related and the consumer as broadly stable. Despite strong market support from ETF flows and buybacks, elevated participation, compressed volatility, and unfavorable near-term risk-reward argue for staying long while shifting toward quality and defensive stocks, keeping cash, and reducing leverage.

CurrenciesMonetary PolicyMarket LiquidityMarket VolatilityInvestment StrategyRisk Management

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Key Takeaways

The yen’s slide to roughly 164 per dollar prompted a joint intervention in which the Treasury bought yen with euros, while the Federal Reserve did not set policy or use its own funds. The episode was framed alongside dollar-swap facilities and the broader reserve-currency responsibility to contain contagion, since exchange-rate instability can reduce purchasing power and spread financial stress.

The host attributes recent retail-sales weakness partly to temporary timing effects, including FIFA spending ending and Amazon Prime Day moving from July to late June, and expects back-to-school and college spending to support August sales. Because retail, employment, and oil-price data remain mixed or temporary, the host expects the Federal Reserve to hold rates and focus on the underlying trend.

The market’s advance followed an upside breakout from a two-month consolidation and has since drifted higher, with year-to-date gains slightly above 13%. ETF flows of about $1.6 trillion and roughly $1 trillion in buyback authorizations provide substantial near-term buying support, even as a Goldman Sachs projection of an additional 3% gain to an S&P 500 level of 8,000 would extend an already strong run.

GEO-POLITICS

Yen Intervention — The yen fell to roughly 164 per dollar, its weakest level in 40 years, prompting a joint intervention to stabilize Japan’s currency and limit broader financial stress. The Treasury bought yen with euros rather than dollars; the Federal Reserve neither set monetary policy nor spent its own funds, while the New York Fed served as the Treasury’s operating desk.

“So, you know, the yen slid to about 164 on the dollar and that was the weakest it's been in 40 years.”—

ECONOMY

Retail Timing — Recent retail-sales weakness is attributed partly to timing effects: FIFA spending ended, and Amazon Prime Day shifted from July last year to late June this year. The host expects August retail sales to rise with back-to-school and college spending and says the consumer remains broadly stable, while noting that higher oil and gasoline prices are contributing to spending growth.

“Now, last week we saw retail sales which were much weaker than expected. that was really due to payback for a couple of different things…”—

Fed Hold — The host expects the Federal Reserve to hold rates at its upcoming meeting rather than hike or cut. Recent retail-sales, employment, and oil-price data include temporary or mixed effects, so the Fed is expected to focus on the underlying trend.

“But for right now, between retail sales, the recent employment report and the reversal in oil prices as of late, just kind of this, you know, hovering around $80 a…”—

Dollar Swaps — The Federal Reserve and Treasury offer dollar swaps to foreign trading partners so they can obtain dollars without selling Treasuries and pushing rates higher. The host says this mechanism helps stabilize currencies, limit inflationary pressure, preserve trade balances, and prevent a financial crisis from spreading.

“yes, keep them from selling treasuries and driving rates up. So we offered them access to dollars, which lets them get access to the things they need…”—

MARKETS

Breakout Consolidation — The market’s sharp advance followed an upside breakout from a two-month consolidation that brought in buyers. It then entered another consolidation period, with prices drifting higher at a slower pace.

“When you get that breakout, you have a decently sharp move. Well, we finally broke out to the upside…”—

Cheap S&P Hedges — S&P 500 puts are described as unusually inexpensive, offering a low-cost way to hedge portfolios while volatility is compressed and complacency is elevated. The puts could expire worthless if the market continues higher.

“This will be a trigger to be paying attention to relative to the S&P because if we start seeing a pickup in volatility, that means we're probably going through a…”—

Gold Liquidity — Central banks may sell gold before Treasuries when they need dollars because gold pays no income. If they then sell Treasuries, the additional supply could push interest rates higher.

“Central banks own gold as an alternative reserve currency, right? So they own gold, they own treasuries, and those are all just forms of reserve currency for them…”—

FORECASTS

S&P Risk-Reward — The S&P 500 is roughly 10% above its 200-day moving average, with estimated downside of about 4%–5% to the 50-day average and about 10% to the 200-day average. Against Goldman Sachs’s target of 8,000, which the host describes as roughly 3% higher, the near-term risk-reward is unfavorable.

“So, you know, again, that risk of downside is between about four and 5% and down to the 50-day moving average and down about 10% down to the 200 day…”—

Volatility Risk — Historically compressed volatility can precede a price spike, and volatility typically rises from roughly September through December. The host says a pickup in volatility would likely signal a correctional cycle in the markets.

“Historically, that's a risk. But we're also moving into the seasonal period for volatility, which typically tends to involve higher levels of volatility through year end…”—

INTRO

The hosts joke about the late-August calendar, Christmas approaching, pumpkin-spice season, and the show’s blend of financial homework and usable market information.

20-Weeks Until Christmas & Pumpkin Spice

Target and Walmart earnings will provide a fresh test of retail spending, while weak July sales largely reflect timing effects from FIFA and Amazon Prime Day.

Target, WalMart, & Retail Spending

Despite isolated weaknesses, inflation-adjusted retail sales and spending among lower-income consumers remain broadly stable, so the Fed is likely to hold rates.

Markets Post Third Week of Gains

After three weeks of gains, the S&P 500’s breakout and continued drift higher have left prices extended above moving averages and exposed to mean reversion.

Volatility & Risk/Reward

Compressed VIX readings, seasonal volatility risks, and an unfavorable upside-versus-downside profile argue for caution and inexpensive portfolio hedges rather than aggressive new bets.

Your vs You're & UR

The hosts use a grammar joke about “your” and “you’re” to discuss pet peeves, texting shorthand, and increasingly cryptic communication.

Yen Interventions & Dollar Swaps

Dollar swaps provide foreign partners with needed dollars, helping prevent Treasury selling, rising global borrowing costs, currency instability, and financial contagion.

The 2011 Japan Crisis

The 2011 Japan intervention followed the earthquake, tsunami, and nuclear crisis, while the current operation similarly seeks to stabilize a severely weakened yen.

Do You Chase this Rally?

The yen intervention used euros rather than Federal Reserve funds or Treasury-market purchases, reflecting ordinary currency-risk management rather than a bond-market bailout.

Money Flow & Market Breadth

Although the market could continue rising toward Goldman Sachs’s 8,000 target, stretched breadth and money flow make chasing new exposure less attractive.

What You Should Do Next

Investors should remain invested but rebalance toward quality and defensive stocks, retain cash, reduce leverage, consider cheap puts, and avoid cutting equities prematurely.

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Important Disclaimers

Not Investment Advice: For education only — not financial, tax or legal advice.

AI-Generated: Made by AI from source transcripts and may contain errors.

No Guarantees: Past performance does not predict future results; investing carries risk.

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