The Inflection Point

Adam Turnquist (00:12):

Welcome everyone to the LPL Market Signals podcast. I'm your host this week Adam Turnquist Chief Technical Strategist at LPL Research and I'm super excited to introduce Ryan Isherwood of Significance Capital as a guest on the podcast this week. He is the founder of the firm and has been the CEO CIO and portfolio manager since the inception in June of 2024. Prior to founding Significance Capital he was the portfolio manager and a co-portfolio manager at Calamos Investment for about five years. Prior to joining Calamos he was part of Timpani Capital and he served as a portfolio manager going back to 2008 at Timpani. He also worked at Heritage Growth Team at Wells Cap as a senior research analyst. He has his MBA from the University of Notre Dame and is an undergrad from UW Madison. So Ryan also holds both the CFA and the CMT designations a unique perspective on the market covering fundamental and technical analysis.

Adam Turnquist (01:16):

Ryan welcome to the podcast.

Ryan Isherwood (01:19):

Thanks for having me Adam. It's great to be here.

Adam Turnquist (01:21):

All right. Good to catch up with you as well. And before we dive into the market I think Ryan give us a little more background on your firm and especially your process as a CIO and portfolio manager with your unique background combining fundamentals and technicals.

Ryan Isherwood (01:38):

Sure. So Significance as you mentioned was founded in 2024. We have a couple different strategies. We have a large cap core strategy which we've been running for nine plus years. And then we just launched a couple of hedge funds this year. And the common thread between all of those strategies is a big focus on risk management. I worked on a team at Calamos and Timpani which had very strong price momentum biases within the context of the portfolio. That led us to sort of develop indicators risk sensitivities if you will in markets that allow us to pivot away from risk at the appropriate times to protect investor capital. And so we do a lot of work around momentum and mean reversion within markets and those two sort of countervailing forces if you will. And so that's a little bit about us how we look at the world.

Ryan Isherwood (02:37):

You know we generally are owning best of breed companies positive fundamentals. We look for more extremes from a risk perspective. So we want to own a combination of the best of the best fundamentals coupled with you know some of the most defensive securities that you could potentially own. And blend that together and give investors alpha generation with a smoother ride through the risk cycle if you will of three to five years.

Adam Turnquist (03:09):

All right thanks for the background info. Let's get into the markets a little bit starting with just the big picture. We have the S&P 500 breaking out to record high territory recently. Where are you at in terms of assessing the durability of the breakout maybe from a fundamental and technical perspective?

Ryan Isherwood (03:28):

Well we think it's pretty binary from here with the volatility and momentum unwind that we saw in July which was historic by any measure. I think you have to really look at this. And when we talk about binary it's really relative to the AI trade. And there started to be some controversy some stresses embedded in the markets whether you look at CDS credit default swaps of some of these companies you know obviously high relative strength high strong fundamental profiles got hit pretty hard. They've bounced back now. Whether that bounce back is temporary and rolls over or is you know just a brief shakeout I think determines whether we go continue to move higher from here. We are starting to get into periods of a little bit more negative seasonality which makes us just question you know the strength of the rally.

Ryan Isherwood (04:22):

Can it sustain at this sort of amplitude? We have questions about that. But I think you know ultimately it it comes down to you know whether AI can deliver on the promises in terms of the ROIs, on the investments made thus far. So we know that these companies are building out and thus far the returns have been great. You know there are some fundamental concerns but largely you know the fundamentals in the here and now are outstanding. I think the question becomes whether sometime in the next 12 to 18 months, they become less outstanding or become more problematic. We obviously have the big IPOs in the pipeline like Anthropic and OpenAI. And so as the market sort of digests the AI theme, how much demand there is for those two companies to come public.

Ryan Isherwood (05:18):

You know is it going to be like SpaceX where you get a pop on day one and then it sells off? You know we're not so sure but you know that that's sort of where we stand right now.

Adam Turnquist (05:29):

All right. So we didn't get too far into the podcast without talking about AI. Obviously, a big driver of earnings growth when you look at the S&P 500 earnings growth and AI-related names doing a lot of the heavy lifting. When you look at the broader market in the fundamental story on earnings, how do you square up the AI contributions versus the rest of the market? How's the S&P 493 or the non-AI exposed companies doing from your perspective?

Ryan Isherwood (06:00):

I think they're doing well and I think that's reflective of when we had this momentum unwind and money came out of the AI trade and the momentum trade, that it did percolate into different areas of the market. And many of those were what we would consider offensive places to put your money. Things like transportation and financials, generally pro-cyclical. And we think the economy is is relatively healthy you know for the time being. And so visibility there looks pretty good. I mean what we worry about in terms of AI, one is the valuations are not extreme by any by any means. But fundamentals have driven this and earnings this has been an earnings story. And when you think about the incremental margins on many of these companies that are in the AI complex, they're some of the best incremental margin businesses that exist in markets.

Ryan Isherwood (06:52):

So when you have this massive amount of spend it's driven earnings up you know commensurate at a rapid rate. A little factoid that Q2 has been the best single earnings season ever that isn't coming out of a recession. And so for like a mid-cycle earnings, like that puts into context how strong the gains have been and how strong the earnings growth. Now when we looked at that and peel back the onion a little bit, 40% of that earnings growth is being driven by mark-to-market on a lot of these underlying investments in equity in either private equity firms like Anthropic and OpenAI or some of the other public peer set where there's you know NVIDIA's got their fingers in a lot of different pots as far as partial ownership in many different companies. And so those mark-to-market things are boosting earnings as well.

Ryan Isherwood (07:45):

If that goes the other way that becomes problematic. But even if you X out that the earnings are what we would describe as robust. I mean also you look at the trend of the earnings revision. They are as good as I've ever seen in my career over the last 20 plus years both for 2026 and 2027. So investors are seeing sort of sustainability or the companies are talking about that that this should be up and to the right you know for another you know at least another year.

Adam Turnquist (08:17):

Right. It seems like the narrative is as good as it gets maybe in terms of the earnings story. It's hard to look at the market from a fundamental view and especially Q2 earnings against a backdrop really that's been challenging on the macro side. When you look at the style box we've talked a little bit about AI. How does that play out how you view the world in terms of growth value or maybe large cap versus small cap from your portfolio manager perspective?

Ryan Isherwood (08:47):

Sure. I think when we are focused really heavily right now on you know growth versus value. And what we're looking at is the peak of that ratio happened late last October, where the market entered a mean reversion or corrective phase. And then off of the March lows we had a historic momentum blowoff. And you know but even that historic momentum blowoff was not able to push growth to new highs versus value. So we think there's something bigger happening under the surface of the indices outside of just AI. And we see capital you know migrating to value. We kind of asked the question of ourselves of you know if all of these things are so great and that it's going to deliver on all the promises, then why is that relative ratio not pushing to new highs? That seems contradictory relative to the fundamentals.

Ryan Isherwood (09:42):

And one reason, I mean we're both CMTs, we know that markets tend to react before the fundamentals actually turn. And so we're especially attentive right now to the technical side of the profile because some of the things we've seen you know growth value break below deliberation day lows. That to us is concerning and now we're trading right around those levels. But if we reject from that level, we think it's reflective of a larger move that's potentially longer lasting towards value. And we think generally speaking, small has been correlated, large has been correlated with that largely because of the mega caps. Again the mega caps peaked when the growth value relationship did. It's starting to have that look of a rollover in relative terms. And tying it back to the fundamentals we know that free cashflow is going from you know a huge driver of those stocks performance and it's going to be negative next year.

Ryan Isherwood (10:41):

Google just printed its first negative free cash flow quarter ever. And so we think the fundamentals align with that idea and the free cash flows quite honestly align with the idea that investors may have a shifting preference toward value despite what are robust fundamentals. And we've looked back in history at numerous CapEx booms, whether you look at the telecom boom, the shale boom, or the housing bubble. In each of those instances investors started to shun those stocks when free cash flow generation peaked. And so if we're at that peak or just past the peak, it would fit with the historical analog that investors are maybe not as enamored with these names. And further increases in CapEx may cause these companies to be penalized rather than rewarded. And so we pay very close attention to how investors react to each one of these quarters when the CapEx increases.

Ryan Isherwood (11:38):

And so you know we think that is one of the defining things that's going to make a huge difference the second part of this year and into the election in the fall.

Adam Turnquist (11:49):

Right. And I think a lot of investors are surprised given the AI narrative is everywhere. And the fact that large cap value, if you use the Russell 1000, is up 23% or 22% I think on the year verse growth up 6%. <Laugh> So value - Right. Outperforming, small caps outperforming, in a world that is completely I guess saturated with the AI trade. Going back to the some of the analogs that you mentioned in prior CapEx cycles where free cash flow actually turned negative what happened to the earnings story during those periods? Do you have any color there?

Ryan Isherwood (12:31):

Yeah the earnings story was still quite robust for a couple years after that and the multiples just continued to compress. And so this is why we are saying right now we think the outcomes for the markets are quite binary. And the reason we say that is because the multiples like in the hyperscalers have compressed closer to a market multiple. So either these things are going to continue to provide robust fundamentals and be rewarded by investors or that multiple compression is already telling us that investors are starting to shun these names because they're not going to be producing the prodigious free cash flow that they have historically. And so either they're great buys or they're not. And we don't think you know we don't think they're likely to model along. We think it's likely to be one outcome or another. And we're going to see.

Ryan Isherwood (13:21):

Our belief is we see momentum kickoff very soon in terms of growth versus value in one direction or the other. And we believe that for a number of reasons but you know one of them is on July 29th we got a large signal, a trigger if you will, to watch what happens from momentum at that point. Now we had a similar signal at the beginning of the momentum unwind in June. And so that sort of bookended that. And so now we've had this retracement rally. And all of these ratios that we watch to manage our risk are right back to those levels. And either they're going to break higher or break lower depending on the ratio and the market's going to make a decision. And so we think like all of this sort of consternation churning if you will that has happened the last couple months and markets have broken to new highs we think it's going to result in a sustained move in growth versus value one way or the other starting fairly soon here.

Adam Turnquist (14:22):

Right. And certainly a chart that I'm watching closely stacking up growth versus value as you mentioned at this inflection point. Whether it breaks back above support or rejected there certainly going to dictate the next move but it's going to be an interesting one to watch over the coming weeks and months. Let's talk a little bit about the macro environment and how you view the world from whether it's interest rates or commodities. How's that playing into your overall thesis?

Ryan Isherwood (14:51):

So I think when we look at past value periods of outperformance, sustained periods of outperformance, you generally are going to have some form of commodity leadership coupled with that. And so we're watching that very closely. And also importantly that's tied into interest rates. So we've seen 30-year yields break out to new highs and have sort of digesting that for the last couple weeks. We also have a recent weakening of the dollar which is generally good for commodities. Now it's unusual to see rates ticking up at the same time the dollar is declining. And we think that's worth noting for investors largely because this has happened at a time where now the Treasury has had to step in and intervene in Japan. And so we have some concerns that some of the fixed income markets are starting to price in the risk of some of these sovereign nations who have run up massive debt bills.

Ryan Isherwood (15:53):

I think Japan is close to 250% debt to GDP. It's roughly double where the U.S. is. But what one thing we've watched is interest rate differentials between the U.S. and Japan and that had dictated currency moves for many years. And that has completely dislocated over the last six, eight months. And that's why the Treasury's had to step in to support the yen. So we wonder if dollar weakness, if our supporting the yen, will feed back into some of those historical relationships and it won't work quite as normal as it always has or what people are used to. And if that happens that really screws up investors because how people manage risk is they look at what's happened over the last decade or two decades and they assume that that's the reality of like how it's always going to work. And this is why quants tend to blow up over time.

Ryan Isherwood (16:44):

And we've seen that you know recently because they don't pay attention to these subtle changes in these relationships and then all of a sudden something moves quick and it blows someone up because their risk is offsides. And so it's another reason why we think you know coupling the fundamentals with the technicals is really important to get a sense of the big picture.

Adam Turnquist (17:07):

Right. When you look at where nominal rates are, for example, the 10-year we're talking about it's Monday well just after 12 Eastern here and the 10-year trading 4.70, 4.71. How concerning is that? We're going to get further upside from here when you look at the lack of reaction in the long end of the curve or 10 years and out to the recent repricing of reduced Fed rate hikes. I guess the message there is that from your perspective more and more concerns on the fiscal side, the supply side from the Treasury. And what's your view of where do we go from here?

Ryan Isherwood (17:48):

Well I mean I do think we're getting in that neighborhood of where you have to start getting concerned for equity valuations when Treasuries get to these rates because it starts to compete capital away from equity markets. And historically when you look when the 10-year gets over 5% equity and bond relationships are inverted or you know they're negatively correlated. And so when rates go up and bonds go down equities also go down in that environment. We saw that in 2022 and it sort of decimated the 60/40 portfolio which had been for the prior you know 40 years the best way to invest in times of trouble. And that gets back into you know commodities if we're in an inflationary environment and we're going to get you know presumably that relationship as we are more leveraged than we've been historically as a nation that sort of line in the sand may come down.

Ryan Isherwood (18:47):

Do we know that it's you know could it be 4.7 4.8? Is it always going to be five? You know that's sort of parsing out of like we're you know potentially early in a secular trend towards inflation. But it's something to keep an eye on because we think that that rate is probably a little bit lower than it's been historically where we're going to see that you know those negative correlations kick in. And it has massive implications for how people construct portfolios for risk. And we think you know as a result the more effective hedge is probably commodities if inflation is the main risk because what happens in inflationary environments like we saw in 2022 is commodities are a much better hedge to the downside in equity markets than what bonds are.

Ryan Isherwood (19:37):

And so you know we watch very closely a ratio of commodities to treasuries and that broke out earlier this year. It retested and now we're seeing resuming strength. And we believe that inflation isn't a true risk in markets unless you have two things happening, commodities rising and rates rising at the same time. And we've broken out of a range like I said a multi-year range. And so our position is you know that is a risk for investors out there in the here and now. And even if equity markets are at all-time highs you know we don't think they stay that for very long if we continue to see rates tick higher.

Adam Turnquist (20:19):

All right. Would you go as far as saying commodity super cycle underway here?

Ryan Isherwood (20:24):

We are a believer in the commodity super cycle. So by our work, you know commodities put in a secular bottom in 2020. And after 2022 we've had a multi-year sideways digestion phase. And so you know we think there is a lot of potential or more risk than we think most market participants think that we could have another wave up of inflation and commodity inflation coupled with rates moving higher. And probably the catalyst for that or the highest correlated to that is typically oil. And fundamentally what we know is from the disruption in the Middle East this year, global inventories are drawn down to critically low levels, where if there is any disruption from here it has potential to cause a sort of super spike in oil prices. And it's not out of the question to think that oil could go to 150 or $200 a barrel in short order because of how tight the global inventory complex is.

Ryan Isherwood (21:29):

And so the longer this stays a problem we just think the rubber band keeps getting stretched tighter and tighter and tighter. And if it breaks you know it's going to happen probably very quickly. The history of oil spikes has been that they're you know that they're very quick. And so we don't think that necessarily enough geopolitical premium is being priced into the oil markets here for what we see as risk. And that's a concern. I mean we also see areas like gold and copper which have cooled off. You know copper's pushing in new highs but you know the precious metals obviously had a massive peak earlier this year. A digestion phase of you know six months is relatively normal you know if you're going to resume a secular uptrend.

Ryan Isherwood (22:20):

And so you know we've pushed out to that normal timing band. And so you know will we see some of those things sort of coalesce and unite together? We think that's very possible and that fits with the whole you know binary thesis right now is that either these risks that we see present are going to dissipate and that will lead to further resumption of the AI trade or they're not going to dissipate and they're going to rear their ugly heads and that's where the commodity supercycle would come in and long duration assets would get punished in an environment like that. And that's where you see could see a large move of value versus growth.

Adam Turnquist (23:00):

Right. And you think about the setup like that where you envision rates move higher commodity supercycle underway maybe the market mispricing some of the oil risk, the impact on rates, and then you tie that back to this AI CapEx cycle. What are your thoughts there in terms of the financing? So we've seen companies like Alphabet do equity raises to finance their AI CapEx. They've done debt offerings. In your view, do the economics change if for example the 10-year Treasury yield's above 5%? Do you think you'll see more equity issuance or just higher volatility, higher scrutiny on the actual spending in terms of the return on invested capital in those hyperscalers?

Ryan Isherwood (23:50):

Great question. I mean I think from our perspective right now the scrutiny has already increased. And there's already a lot of debt in the system. I think one estimate I saw is that the hyperscalers have like 1.6 trillion of off-balance sheet obligations. And so there is a lot of debt already built up in the whole AI build-out. And so that's why we're watching things like NVIDIA, CDS, credit default swaps, as well as Oracle. I mean it's interesting to note Oracle their credit default swaps are pushing the highs that it saw during the financial crisis. Now that was when markets were at you know lows, credit was frozen. Essentially the economy was plunging and now Oracle's you know credit default swaps are trading the same now as they were then. Well that tells us that the market is seeing some sort of risk out into the future in the next couple of years and that's problematic.

Ryan Isherwood (24:49):

We also look at NVIDIA, where there we've seen you know credit default swaps go from 40, 50 basis points which is normal up to around 80. And so you know that's a breakout of a technical pattern multi-year that is concerning to us as it pertains to what investors are willing to underwrite for AI. I think from a fundamental perspective you have to keep a real eye on what's going on with these Chinese models that are you know perhaps able to do something similar. You don't need them to be as good. You need them to be good enough if the cost is you know extremely much lower. And if it is much lower what that does is it throws the whole question of the ROI out there and it becomes a real problem that there's been so much debt extended out into this ecosystem.

Ryan Isherwood (25:42):

And if the ability to pay that back is diminished materially the whole ROI picture becomes very problematic for these companies. Right. And so

Adam Turnquist (25:53):

While

Ryan Isherwood (25:53):

While I think the hyperscalers are okay because they have other businesses that can produce cash flow and they can cut back spending the sort of through the windshield effect for the rest of the AI complex might be severe if they do cut back spending.

Adam Turnquist (26:07):

Right. This is a curve ball. There's been a chart floating around in the macro community on the token index. Mm-Hmm. And which is essentially a measure of pricing power by hyperscalers and how tokens the cost is per one million tokens has gone down considerably and dislocated from semiconductors or the AI hyperscalers. Have you seen the chart? And what are your thoughts there? If not - Yeah. We can skip it and move on.

Ryan Isherwood (26:38):

No I've seen the chart. And that's I mean I think that's what investors are trying to digest and how problematic is that. I think at the same time you're having the adoption curve accelerating. And so you're not really feeling that decline in pricing yet I don't think because the adoption curve is making up for that. But at some point that does slow and then you do feel it. And I think if it starts to overwhelm the adoption curve that becomes problematic. And you know I was listening to another podcast where Chamath was talking about talking to his CFO and that they've been essentially doubling their token usage approximately every few months. It's doubling. And the costs are the costs are going up by close to double as well.

Ryan Isherwood (27:33):

Even though prices are coming down, the usage is going up so much. And I think like what he was saying is like "Well how much has this increased productivity by?" He asked the CFO. And the CFO said "Well about 5%." And so he's like "This math is unsustainable." And he's like "We're realizing this now but other companies will realize that as well." And I think that's the concern is there's more antidotes like that. That chart that sort of story floating around markets where people are saying "Okay wait a second here. Is this really going to have the ROIs that we expect?" I mean the other case I've heard made to me by a sell side analyst was just that it's quite possible that software coding essentially is the number one use case for AI. And that everyone is extrapolating all these adoption curves to an industry and a group of individuals who are A, tech-savvy B, embracing new tech and C, where the ROIs are going to be show up the fastest.

Ryan Isherwood (28:36):

And so it's kind of like if you put you know if you're building out a restaurant and you put it in you know Manhattan you're going to have tremendous numbers but does that then scale to the rest of the country? You know will it do the same in a you know metropolitan area that's a quarter of the size of New York? And that's the question. And so in some of these areas where you're talking about displacing people and labor and things of that nature, there could be a lot more friction and it could just take longer to play out, which again does impact the ROIs. But if everyone's basing their assumptions upon what is potentially the best use case and extrapolating that linearly, which is often what happens in markets, that is where you could have a major dislocation or disconnect as to you know what these ROIs end up looking like.

Adam Turnquist (29:25):

All right. Since you went down the road sort of talking about software a little bit do you have a view on semiconductors versus software in terms of positioning? What are your thoughts there?

Ryan Isherwood (29:39):

Yeah. I mean we're not terribly positive on either one of them right here as far as that ratio goes. We suspect I mean software's had a crazy bounce off the bottom. It's rallied for several months now. Semiconductors obviously had the massive bout of volatility. If we could just stay away from both of those areas right now we would. If we had to pick one side of it to be on we'd probably be on the software side but I would say there's not high conviction there. You know I do think the sort of risk it's, AI is going to get built out. That's not the risk. The risk is that AI gets built out there's no profitability and in the meantime AI is able to destroy a bunch of cash generative businesses in the meantime, which would be software companies.

Ryan Isherwood (30:32):

And so that would be the sort of most negative scenario that you could possibly cook up is that hey there's this new technology. It's great. No one's going to make money off it and it's going to displace all these other technology businesses, which oh by the way are the most cash generative businesses in the market and where most of the earnings power comes from and earnings growth comes from. If you impede that or impair that that's where we have concerns. And like when we're talking about you talk about commodity super cycle earlier and when we look at things like we looked at recently the performance of momentum versus quality as a factor. It's the second most extreme over 12 months that it's ever been in history. And by history I mean let's just say the last 60 years. The three other times that we had moves this extreme one was at the peak of the tech bubble not surprising.

Ryan Isherwood (31:26):

That was the biggest spike. This is the second. The other two largest spikes were in the early '80s at the peak of inflation, peak of commodities. Again, a major secular shift. And the other one was in the 60s at a major secular peak in equity markets and beginning of that inflationary wave. And so when you look back and granted that's a small sample set, but the extremes are such that investors ought to be considering that the next 10 years are going to look very different from the last 10. And we're starting to see that in evidence in some of these charts and some of these ratios that we're talking about with growth value and you know that the fundamentals aren't aligning with what's going on on the technical side. And when that happens we get to be very concerned or suspicious that you know maybe some of the fundamental underpinnings are being kicked out from this tech-driven bull market.

Adam Turnquist (32:18):

Right. And I think a lot of assumptions baked into the current market right now in terms of performance, earnings story. When you look at volatility we'll call it just use the VIX for example. I think Friday it closed at 14, 14 and a quarter, obviously historically low, ball backdrop. Are you surprised by where the VIX is? I get it, the market's at new highs but just hearing some of your, the themes you outlined today clearly some risk I guess we'll call it longer term, that's fair to say. What are what are your thoughts on just broader volatility? And especially you mentioned earlier as we go into election season coming up in November.

Ryan Isherwood (33:01):

Yeah. I mean we had we do a weekly you know webcast called Charting the Course. And a few weeks ago I think it was like mid late July we titled it Storm Beneath the Surface. And it gets to your question about the VIX. So we've seen historic volatility on an individual security basis and that churning that I referenced earlier at a time when the markets are relatively calm. We can't find a similar situation in history that is a perfect analog. But we believe that volatility is the enemy of trend. And so we believe something big is going on under the surface despite the VIX being down. If you look at the volatility relative to you know the broad equity indexes, it's more than double, it was in July at least, more than double any other period of history of like a three or four-week look back.

Ryan Isherwood (34:00):

Now that's more volatile than the most volatile bear markets. So we look at the VIX at being low as maybe mispriced risk at the index level that's being priced in you know perhaps in individual securities. And so when you look at like call skew and you know all of these different option metrics, it's telling you something very unique is going on. And you know our job is to figure that out and what the risks are. But I do think you know the low VIX is certainly a point in the column for the bulls. So as long as that stays muted as it is we also pay attention to the MOVE Index which is the volatility of bonds. And when you look back at 2022, the VIX stayed relatively muted compared to the size of the market decline.

Ryan Isherwood (34:54):

But the bond index was the thing that was showing all the volatility. If inflation is a risk and if that's what is sort of causes the correction, we believe that you'll probably see it most in the volatility of the bond market before you see it in earnest in the equity market. Now that being said, it will tick up. It's just you know volatility you know of equities may not be as important as it's looked historically. And I would argue you know the volatility of the individual securities relative to the market has been extreme by any measure relative to history. So we think that could be, in retrospect, if we do get some broader pullback, we think that's the warning shot across the bow if you will. And sort of the sign that like "Hey things are a problem." In a similar way that the Powell pivot was in 2021 when you know we're not going to use transitory.

Ryan Isherwood (35:47):

Well it took the market a month and a half before it topped out after all of that after Powell said that right? And then people were sitting there in May and June saying "Well we should've known. They told us like you know how did this just happen?" Right? And so volatility tends to stay low around these turning points until it doesn't. And then when it ticks up then it's a problem. But we've looked a lot at the time period sequencing between these momentum meltdowns and when you get a second leg lower which is typically worse. And so when you look at from beginning to end you know the sequence does tend, the rebounds tend to last you know about half as long as the you know half to about equal to what the first down leg was.

Ryan Isherwood (36:37):

And so we've retraced in like we look at momentum versus low vol, we've retraced over 50% of the move. So we're in that neighborhood now of where again we think you're going to start to see some evidence of either risk aversion very soon or the restarting of momentum and the AI trade. And we think one or the other is going to is going to happen certainly before the fall of the midterm elections. We note seasonality we're typically into the weaker period of seasonality now. So our bias is to give a little bit of an advantage to the bears right here. But until we start to see price action confirming that you know like I said all of our risk gauges are sort of you know at these inflection points and all aligned together. So we suspect they're all going to break together and there's going to be pretty material momentum.

Ryan Isherwood (37:31):

All right. So we're running up on time. I know we could go longer. <Laugh> But I think painting a great story and certainly setting up for an interesting few months I think in equity markets. I certainly subscribe to that idea as well. Before we wrap up Ryan give our listeners some I guess where do we learn more about your firm? How do they find you?

Ryan Isherwood (37:57):

Yeah. You can find us at www.significancecapital.com. We put on a weekly webinar for what I would call institutional or educated investors of which you know much of the LPL network would qualify. We have something called Charting the Course and you can sign up for that free, you'll get a link. And then you'll see our weekly charting where we have conversations I would say very similar to this of how we've talked today Adam. And I have the other two members of the team on with me. And we sort of go through the happenings of the week what we maybe saw fundamentally what we're seeing on some of these secular trends inflection points. We lay out what we think is important. You know it's basically a good view into you know how we do our research and how we manage risk.

Ryan Isherwood (38:54):

And for anyone who's interested in the strategies you know they can they can learn more on the site as well. But certainly I'd encourage anyone who's found this to be interesting to sign up for our webinar because I think it's a really timely period to be watching what's going on. And we think there's going to be a lot of ways to potentially make money or lose money here in the coming quarter or two.

Adam Turnquist (39:22):

All right thanks so much for joining us Ryan. We'll leave it there. And join us next week for our next LPL Market Signals podcast. Thanks everyone.