PodcastThe Real Investment ShowLance Roberts

9-23-26 Q&A Wednesday: Rates, Risks, & Record Highs

The discussion weighs geopolitical and inflation risks against still-solid consumption, business investment, and liquidity conditions. Speakers debate whether lower-income households are improving, while survey data show a sharp gap between personal finances and perceptions of the broader economy. Market views are more cautious: elevated earnings expectations, low equity risk premiums, possible quarter-end rebalancing, and stretched positioning could increase downside risk even as liquidity supports asset prices.

Risk ManagementInflationInvestor SentimentMarket ValuationsMarket LiquidityConsumer Spending

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Key Takeaways

The host expects the Trump-Xi summit to be primarily a public-relations event, while saying that Iran-related disruption could keep oil prices and inflation elevated. In that scenario, the Federal Reserve would remain inclined to raise rates, with the market expecting at least one additional hike before year-end.

The discussion presents the Fed and Treasury as providing dollar liquidity to prevent Japan- or Iran-related disruptions from becoming crises, while arguing that the recent rate hike was driven mainly by market conditions rather than Japan. The speaker also says M2 should be evaluated relative to GDP, which is currently growing faster than M2.

The speakers disagree over whether the economy is genuinely K-shaped: one sees wage growth and greater asset ownership improving conditions for the lower half, while another emphasizes persistent inequality and says the bottom 50% primarily hold wealth through housing. Strong August retail sales, continued consumer spending, and business investment equal to about 15% of GDP nevertheless continue to support demand.

The speakers attribute persistent inflation to pandemic cash transfers and the shutdown-driven supply-demand imbalance, arguing that prices do not quickly reverse after a spike and that disinflation is preferable to deflation because deflation could worsen unemployment. This concern contrasts with relatively stable personal finances in the 10,000-person survey, where the share saying they were financially fine fell only from 75% in 2019 to 73% today, despite a sharp decline in perceptions that the economy was doing well.

Markets are being supported by abundant liquidity flowing into financial assets, but the roughly 40% earnings-growth expectation for the next year raises the risk of disappointment and a less favorable environment next year. The factor model has also shifted from large-cap growth toward value, with MGK at an all-time high and described as very overbought while VTV is under pressure and oversold.

GEO-POLITICS

Summit Impact — The host expects the Trump-Xi summit to be primarily a public-relations event and doubts it will produce major market-moving developments.

“Honestly, nothing much is going to come out of this summit. It'll be a lot of handshaking, a lot of conversation about AI, etc…”—

ECONOMY

Oil-Fed Pressure — The host says continued Iran-related disruption could keep oil prices and inflation elevated, leaving the Federal Reserve inclined to raise rates. The market expects at least one additional hike before year-end.

“But as long as this Iran situation is continuing on, it's going to be it's it's going to keep oil prices elevated, which of course is going to keep inflation…”—

Dollar Liquidity — The speaker says the Fed’s rate hike was primarily market-driven rather than directly related to Japan. The Fed and Treasury provide dollar liquidity to prevent Japan- or Iran-related disruptions from becoming crises.

“It really didn't have that much to do with what was going on in Japan. that's a kind of a different issue…”—

K-Shaped Economy — The speakers disagree about the K-shaped economy. One argues that the lower half is improving through wage growth and greater asset ownership, while another identifies persistent inequality and says the bottom 50% primarily hold wealth through housing.

“So consumers are actually much better off and this was the whole function you know there's there's this there's this whole idea of this K-shaped economy and actually we just…”—

MARKETS

Earnings Risk — Earnings estimates imply roughly 40% growth over the next year, supporting current valuations but increasing disappointment risk because expectations are elevated. The host also says a year-end rally could be followed by a less favorable environment next year.

“So the expectations are very large which is fine because that supports valuations right now but that's also a risk because when expectations are very high that leaves a lot…”—

Factor Rotation — The factor-rotation model shifted away from large-cap growth toward value. VTV is under pressure and oversold, while MGK has reached an all-time high and is described as very overbought.

“So this is the Vanguard large cap value that's been under some pressure here as of late…”—

Excess Liquidity — The speaker argues that abundant liquidity is flowing into financial assets because it has few other destinations, supporting rising markets rather than signaling a liquidity crisis.

“And you and again so you know a lot of these super bearish narratives of it's a crisis this is happening it's a crisis it's it's not a crisis there's…”—

FORECASTS

Applied Materials — The host presents Applied Materials as a possible short-term trading setup after a correction, with a stop near 418 at the 200-day moving average. However, the prior semiconductor-driven parabolic move may take one to two years to unwind, and semiconductor demand could weaken after the data-center buildout.

“So, if you wanted to try to buy it here, you've got a pretty decent setup…”—

Quarter-End Rebalancing — The speakers expect quarter-end rebalancing to create additional pressure as large funds sell equities and buy bonds to restore allocations. They explicitly say this does not necessarily imply a 5% market decline.

“And at the end of this month, there will be a decently large amount of rebalancing because they've got to sell equities to buy bonds to rebalance those two.”—

INTRO

The hosts introduce the live Q&A show and frame the discussion around markets, current events, and viewer questions.

Trump - Xi Summit - Much ado about nothing

Lance expects the Trump-Xi summit to produce diplomacy and publicity but little immediately market-moving substance.

Possible Export Ban on Diesel Exports?

A possible diesel export ban briefly affects commodity markets, while oil, Iran-related risks, inflation, and prospective Fed tightening remain connected concerns.

Earnings Growth Estimates are Very Large - That's a Risk

Forward earnings expectations imply roughly 40% growth, supporting valuations but creating substantial downside risk if elevated forecasts disappoint.

Markets Hold Up Above Moving Averages

The market remains within a broad trading range, has reclaimed moving averages, and recently triggered a MACD momentum buy signal.

Factor Rotation Model performance

The factor rotation model shifted from large-cap growth toward value after growth became overbought and value comparatively oversold.

Fed Rate Hike Coordinated for Yen Carry Trade? (No, a martket-driven rate hike)

The Fed hike was primarily market-driven rather than coordinated with Japan, while dollar liquidity facilities are intended to prevent disruptions from becoming crises.

Gold Correlation with Real Interest Rates

Gold's relevant real-rate comparison is tied to Treasury yields, particularly the 10-year, rather than simply nominal policy rates.

Why Rotate into Financials? (Factor Rotation Model)

Financials were added because the factor model responds to relative overbought and oversold conditions, not because rates are guaranteed to stop rising.

How do Earnings Grow When the Middle Class is Getting Squeezed? (K-Shaped Economy)

The speakers argue that earnings can grow despite middle-class concerns because consumers remain resilient and business investment is adding materially to GDP.

Stock Analysis: AMD (NOT a recommendation)

Applied Materials has good earnings and a constructive setup after a correction, but its prior semiconductor surge means any trade should use tight risk controls.

Income Producing ETF's in Preparation for Retirement (JPQ) (NOT a Recommendation)

Income ETFs such as JPQ can distribute high yields, but option decay and principal erosion may make an S&P 500 strategy superior when income is withdrawn.

Money Moving Out of Stocks into Fixed Income? (charts)

Flows are moving substantially into investment-grade bonds and Treasuries as low equity risk premiums make fixed income more attractive relative to stocks.

Tracking Forward Earnings Estimates Revisions

Investors can monitor forward earnings revisions through online data and recurring global-revision charts, watching for reversals that could pressure markets.

Dealing with Gloom-and-Doom Narratives

The hosts caution that doom-and-gloom media often monetizes fear and encourage investors to assess facts, plans, behavior, and required returns instead.

Series: Investing for the Long Term (link is below)

Long-term investing requires controlling emotion, avoiding FOMO, and using a personal plan rather than reacting to daily headlines or speculative narratives.

Cryptocurrency-A (Tether) Holding US Treasuries; StableCoin, Solana

A recommended long-term investing series explains how psychology and emotion can undermine decisions and why focusing on fundamentals improves discipline.

How much Higher Will Rates Run this Year?

Tether holds large Treasury positions to back stablecoins, while stablecoin networks such as Solana could make global dollar transfers faster and cheaper.

M2 Correlation with Inflation? (All money is lent into existence)

Stablecoin Treasury demand is meaningful but currently measured in billions rather than trillions, so it is not yet large enough to control the market.

RSP vs SPY and Sector Rotation

Future interest rates depend heavily on oil prices; a major oil spike could push the 10-year Treasury yield materially higher.

Late Year Market Dip Yet?

M2 growth must be compared with economic growth because money is lent into existence, and current economic growth is outpacing money-supply expansion.

Lance is rich and out of touch?? (There will always be the poor among us...)

RSP versus SPY can reveal whether capital is broadening beyond the largest market-cap stocks, although relative performance alone does not prove rotation.

Where did this inflation come from? (We don't want deflation)

A late-September or early-October dip remains possible because quarter-end funds may sell equities and buy bonds during scheduled rebalancing.

How We're (really) Doing Financially (chart)

The discussion disputes simplistic claims that lower-income households are uniformly worsening, citing improved asset ownership while acknowledging persistent hardship.

What Danny Wears as Market Indicator

Inflation followed pandemic transfers and supply disruptions, while deflation could worsen unemployment; survey data show people feel personally stable despite increasingly negative views of the broader economy.

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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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