With Buybacks Ending, A Market Correction Is Not Off The Table | Lance Roberts

Roberts thinks Republicans could lose the House while retaining the Senate, creating gridlock that Wall Street may favor even as it hinders the Trump administration's agenda; he also would not be surprised by new Iran negotiations within roughly three weeks to gain election leverage. He says the administration could also use gasoline subsidies or household payments, though he warns that such assistance could be highly inflationary.

The 162,000 payroll gain exceeded expectations but remained below the roughly 200,000 monthly replacement rate, while wage growth declined from 3.2% to 3.1%. Against that backdrop, Roberts's best guess is that Kevin Warsh would initially hold rates steady because oil and tariffs may be temporary inflation drivers and an immediate hike could later require a reversal.

An administrative gold revaluation faces an unresolved legal question because the valuation is set by statute, so a Treasury secretary acting alone could trigger an immediate fight over whether Congress must approve it. Roberts says the move could recognize roughly $1 trillion in assets and expand the monetary supply through the Treasury General Account, but would not alter the deficit trajectory and could damage confidence in the dollar.

High-frequency trading firms use colocated computers and algorithms that can process information far faster than people, while algorithms can trade across multiple asset classes as soon as jobs data or other headlines appear. Roberts says this technology gap helps explain rapid rotations and reversals that may not reflect fundamentals and leaves individual day traders at a structural disadvantage.

Several market-support and stability indicators are weakening at the same time: the corporate buyback blackout removes a source of stock demand, RSP is underperforming the headline S&P 500, and the month's largest-ever third-Friday options expiration could raise turnover and volatility across stocks, precious metals, and other assets. Roberts also says S&P puts are relatively cheap because investors are demanding little downside insurance.