In this insightful episode, professional money manager Bill Gundersen delves into the current state of the market, exploring the implications of a recent federal appeals court ruling on Trump’s tariffs. Joined by Barry Kite, a chartered financial analyst, the discussion touches on the volatile market environment, highlighting high market valuations unseen since the dot-com bubble and the critical role of technical analysis in such an atmosphere. The episode also examines the Federal Reserve’s influence and potential interest rate cuts, which hold the power to sway investor sentiment dramatically. Amidst a backdrop of geopolitical tensions and global trade negotiations, Bill
He’s been seen on CNBC, the Fox News Channel, and the Fox Business Channel. His articles can be found on MarketWatch, Seeking Alpha, thestreet.com, and many other places. He’s the author of the weekly Best Stocks Now newsletter and the inventor of the Best Stocks Now app. He’s president of Gundersen Capital Management. Here is professional money manager Bill Gundersen.
SPEAKER 04 :
And welcome to the Monday. It is the Monday, September the 2nd. Welcome to September’s edition of the Best Stocks Now show with professional money manager Bill Gunderson, president of Gunderson Capital Management. And I’m here with Barry Kite, our chartered financial analyst. And in another never a dull moment in the market edition, We have kind of a sloppy start here to the market, as I suppose you could say another big cloud of uncertainty has been thrown over the market for now. But it will dissipate at some point in time, just like all the other clouds have. But right now, the Dow is down 304 points. That puts it at 45,240 after it hit a new all-time high last week. The NASDAQ is down 237 points. That’s a loss of 1.1%. It’s at 21,218. The S&P is down seven eighths of a percent. It’s at 6,403. Small caps down about the same. And we’ve got the bond market is actually up six basis points. There’s a little bit of a bond sell-off here. Yesterday and today, the 10-year is up six basis points to 4.28% today. Gold likes what it sees today, that uncertainty. Gold is up 1%. Crude oil is up 1.5%. And Bitcoin got a little bounce in its step today, up 1,900 to 110,894. So welcome to today’s Best Stocks Now show with professional money manager Bill Gunderson, president of Gunderson Capital Management, a nationwide fee-based only money management firm. I’m on the road one more day here today, actually two more days, and then be back in my home office on Wednesday. The markets kind of finished on a sloppy note on Friday. Marvell Technology, which is a chip stock, kind of at the lower end of the AI sector, but it did get hit hard. I’ve seen some headlines over the weekend and in other articles, and including my newsletter, talking about AI fatigue right now in the market. You know, we’ve come a long, long way since March. Actually, April, early April of this year with the – NASDAQ going on about a 36% run. The S&P 500 on a 25% run. And the valuation is running up against some pretty high numbers right now. We’re going to get into that a little bit in a moment. We’re also in between earnings seasons now. We do have some earnings that will be coming in here this week. I’ll go over the companies that we’ll be reporting. But the big story of the day occurred after the close of the market, Barry, on Friday. I think it was pretty much right after the markets closed, maybe later that evening. A federal appeals court strikes down most of Trump’s tariffs. And, you know, I mean, it seems to be ultimately headed for the Supreme Court. I would just say, Barry, I mean, if the Supreme Court were to say, no, he can’t use the reciprocal tariffs which he imposed in April, isn’t that a good thing for the market, actually?
SPEAKER 03 :
Yeah, it’s almost a mixed bag because you’ve got, you know, absurd on the bond side, which is why we’ve got, you know, the 30-year U.S. Treasury almost hitting just two basis points under 5% today. But, you know, you’ve got global bond yields kind of rising on the fact that, you know, you’ve talked about it. The government was going to, you know, stand to bring in, you know, $2 trillion to $3 trillion in terms of tariff revenue, which helps offset, you know, the cost of, uh the big beautiful bill and uh you know a lot of other you know spending that’s been continual in in the u.s and so trying to reverse this going back the other way i mean you know the changes the math you know greatly and that’s obviously a new new layer of uncertainty when you throw in legal legal uh framework so yes well the controversial part of it is that he used
SPEAKER 04 :
a 1977 law known as the International Emergency Economic Powers Act. And it was always expected that the issue of legality of this, using this act to impose tariffs, it’s been expected to eventually end up in the Supreme Court for a final decision. And I think that’s a pretty big one. I think the Supreme Court would fast-track that very quickly. But in the interim, it does cast another cloud over the market for now. Markets don’t like uncertainty. They like to know what they’re dealing with. And right now we are in that little bit of the cloudy area where we have that uncertainty, and the market is reacting accordingly. But at the same time, that’s not the only thing that is opposing the market right now. I wrote on Friday or Saturday’s newsletter about the valuations of the market. I’m going to go through those here today. I studied them quite a bit in depth on Friday. I went through all of the well-known valuation measures and where they stand today. And you’ve got to go back really to the year 2000 to find some of those ratios as high as they are today. But some also have not reached the level that we reached in 2021 yet. which was the COVID, what would you call that, all that money, the COVID, all the benefits, all of the money, all of the stimulus that was put into the market. Zero percent rates. Yeah, and we just saw that tremendous speculation boom there for several months before the Fed stepped in and quieted that down real quick. with those 75-point basis rate hikes in a row, taking interest rates up 3% very, very quickly. That certainly cooled off that speculation, and we’re still kind of reeling from that, starting to come back, obviously, as far as the rates go. But the market… is at some very high lofty valuations right now, and you have to be aware of that. You can’t just close a blind eye. On the one hand, we do not have an earnings problem in the market. We’re going to have record earnings this year, somewhere in the $265 per share area for the S&P 500. And to put that into context, When we began this whole bull market back in 2009, we were at $60 per share in earnings. And now we’re at 250, 260, somewhere in there this year. And we’re looking for record earnings next year and the year after that. That’s at least on what we know now and what the companies are telling the analysts now. So we don’t have an earnings problem. I would add on top of that also that we just came through one of the best earnings seasons we’ve had in a long time. That’s several in a row right now. When we started the quarter, we were expecting 4.8% growth in earnings, and by the end of the quarter, it was up to 11.8%. That’s a huge, huge, dramatic increase in earnings expectations, actual earnings, actually. But those actual earnings also translated to bumps higher in the anticipated earnings going forward. So earnings are not the problem at all. The two problems, number one, are the multiples, which we’re going to get into here when we come back. The multiples on those earnings, on those sales, on that cash flow, on that book value, and on the forward expected earnings, And interest rates is the other big part of that because it impacts and affects those multiples. So that’s where the problem lies. And we’re also in this little vortex in between earnings seasons, which always can be a little bit more volatile. You don’t have a lot of catalysts. Most of the catalysts seem to be negative when you’re in between earnings seasons. And now you’ve got this tariff uncertainty issue. And so, you know, a little bit of a rebalancing here in the markets, a little bit of consolidation, I guess you could say. And you’ve got the drama again, not only in the tariff area. But you’ve also got a little bit of drama going on at the Fed, where Trump is trying to reshape the Fed by firing a member of the Fed and replacing her with one that has a little more depth. So that’s where we sit as we begin a new month in the market. This is Bill Gunnarsson. Very nice. The Best Stocks Now show. We’ll be right back. And welcome back here to the second quarter of today’s Best Stocks Now show. Well, I took a deep dive on Saturday into the current multiples on the market. There’s actually six different measures that we use to gauge the valuation of the overall markets today. The four most common ones are price-to-earnings, price-to-book value, price-to-cash flow, and price-to-sales. I also look at price-to-future earnings, which is the forward P-E ratio, and I also look at the PEG ratio, which is the price-to-earnings divided by growth. So there’s actually six valuation measures here. And any way we look at it, they’re all a pretty high multiples. Let’s just take a look at the four big ones first. We’re currently trading at a price to book value. This is the S&P 500. We’re trading at a five-year high of 5.3x. And price to book value may not be as relevant today, especially in the tech sector. But it does come into play very much still in individual stocks, financials especially. And it comes into play in indexes. The current price to book value at 5.3, you’ve got to go back to the year 2021. That was the COVID excess year. And then you’ve got to go clear back to the year 2000. which was the dot-com bubble to find a price-to-book value ratio as high as it is right now. Okay, the price-to-earnings ratio is probably the most common valuation measure that we look at. I add in the forward PE ratio because the price-to-earnings ratio is looking backwards in the rearview mirror over the last 12 months. But still, on a relative basis, we have to compare where today’s S&P 500 PE ratio is as opposed to where it has traded at historically. It’s currently trading at 27.1 times earnings. That’s the S&P 500. That’s just below its five-year high, which we got back in the COVID year. We got to 27.5, somewhere in there. We’re currently at 27.1. The five-year average is 25, and we’re currently at 27.1. The 10-year average P-E ratio of the S&P 500 is 22.5, and we’re currently at 27.1. If you go back to that 1999-2000 dot-com bubble, we got up to about 35 during that bubble.
SPEAKER 03 :
That’s because there wasn’t that many earnings in any of those companies, right?
SPEAKER 04 :
That’s right. Yeah, the earnings weren’t as powerful back then as they were today. So you were trading the price of the S&P 500 into much lower earnings patterns. In fact, these days, the average profit margin for the S&P 500 companies is about 12, over 12%. And that’s record numbers as far as profit margins go. The current price to cash flow of the S&P 500 is 18.4. The ratio got as high as 18.9 during the dot-com bubble craze. back in the year 2000, so we’re almost there once again. The one that is the most concerning here to me, the price to sales ratio, that’s even higher right now than the bubble of 2000. The price to sales ratio is currently 3.2. We got it at 3.2 back in July of 2021, the COVID year. but you go back to the dot-com bubble. There were plenty of sales back then. There weren’t a lot of earnings, so maybe that’s not a good comparison, but we never got above three during the dot-com bubble, and here we are sitting at 3.2. And then the other one I would look to would be the PEG ratio, which right now in the S&P 500 is 2.4%. That’s bumping its head against its five-year high. And the other one would be forward P.E. ratio is 22.3, 22.3 right now. If you take the price of the S&P 500 today, and divide it by the forward earnings, which look to be terrific. I mean, the earnings look to be terrific.
SPEAKER 03 :
Well, especially in names like NVIDIA, right? I mean, NVIDIA has basically a one as a peg ratio. You could even argue it has even a little bit less than a one peg ratio versus, you know, we talked about it before, Procter & Gamble has about an 11 peg ratio at the moment. So, It’s interesting to see, I think, where we always hear about rotation to value names. To me, you’ve almost got valuation issues more along the lines of the non-growth companies than you do on the companies that are actually growing earnings.
SPEAKER 04 :
Yeah. So, I mean, this obviously is not a time to be throwing money at high PE stocks in the markets. My posture is definitely much more on, you know, look out. You know, this is where technical analysis really comes in, because you look for those support levels. You’ve got a lot of stocks that obviously have been going up since early April. The NASDAQ’s up about 35%. And now they’re starting to level off, okay? And what you don’t want to see and what you want to watch for very carefully is that kind of rolling over. and breaking those support levels. So this is where technical analysis comes into play. Because when you’re in rarefied air with some of these stocks, and the valuations are quite high, you really don’t have anything else to go on. You could have made the same argument, you know, three months ago, and I have been in the newsletter talking about how high the multiples are, but but stop them from going higher. and we’re in that same situation today, they could still go higher. And that’s why you kind of have to resort here to technical analysis, uh, because momentum is a difficult thing to measure. You know, we measure it through relative strength, but I measure it more through visual, a visual, uh, look at the, at the individual stocks. And you can kind of see when the air is starting to come out of the balloon. of some of these stocks that are trading up in rarefied air. Okay. Then the other issue we have obviously is the interest rates. You saw how sensitive the market is to interest rates. When, uh, when, when was it that he hinted at the, uh, Wasn’t that just last Friday when he hinted at the rate cut and the market hit new all-time? No, it was two weeks ago.
SPEAKER 03 :
Yeah, essentially two Fridays ago. Yeah, it’s time flies, but yeah, it’s been about two weeks, two Fridays ago now.
SPEAKER 04 :
Yeah, and that sent the market flying, just basically hinting at a quarter of a point rate cut. If the Fed were to go on, and if the panel were to get changed to 4 to 3 in Trump’s favor, that would help with the multiple. So you’re kind of betwixt and between right now. And for me, technical analysis comes into play at this point. Okay, when we come back… Take a look at some global issues that are brewing, not going away. This is Bill Gunderson. Thank you for tuning in to today’s Best Stocks Now, Best Inverse Funds Now show. I put several hours of research in during the wee hours of the morning each day to bring you the very best cutting-edge stories that I can. To get two free weeks of my newsletter, go to GundersonCapital.com. To talk to us about our fee-based only money management services… Call us at 855-611-BEST. Now, back to the second half of the show. Welcome back here to the second half of today’s Best Stocks Now show. I’m seeing some buying coming in, actually, as I look at individual charts of the market. Definitely some buying coming into the sell-off, off of the lows of the day, as we head into yet another black cloud, I guess, or I don’t know. I mean, I’d look at it if they were to rule the tariffs were unconstitutional. I mean, that would just lower the tariffs, take them back to where they were before all of this happened. So we’ll just have to see. India is an issue. That seems to be a big issue. They are trying to negotiate with the U.S. saying, hey, we’ll offer zero tariffs on U.S. goods coming into our country, but On the other hand, they’re doing business with Russia, and China is also doing business with Russia. So the world seems to be dividing along political lines. Over the weekend, you had North Korea, China, India, and Russia all kind of ganging up. And over on the other side, you’ve got the U.S. and kind of the rest of the world. So that’s not a good development. We have, uh, the Trump family notching $5 billion after they launched their crypto at W L F I W L F I, uh, that, uh, we’ll be trading now on the crypto markets. And of course, Trump has been very pro crypto and, uh, those that you can now buy and sell those tokens, the very world Liberty financial. I don’t know what they’re calling the coins here. Let’s see if I can find the name of the coins. But I would just say I think I’ll pass. That is taking place today. Ukraine had a swarm of drones attack Russia, and the drones were talking amongst themselves using AI. What can go wrong with this, Barry? I mean, you know, drones? talking amongst themselves using artificial intelligence. It’s like an army that is driven by technology and AI and who knows what they’ll attack. That’s just a little bit on the scary side. As far as the earnings week ahead goes, on Monday, Nothing really. Well, that was yesterday. Tuesday, we had NIO has reported. That’s a Chinese electric vehicle stock. And, of course, Tesla continues to sell off, or Tesla continues to lose market share in China. And I read that Tesla launched their vehicle in India in only 600. They have 600 orders, which was even lower than what… than what our friend Elon Musk was expecting. We’re going to get Zscaler reporting. That’s a pretty good cybersecurity stock. Salesforce is going to report tomorrow. That’s probably the last member of the Dow that will be reporting this quarter. CRM is set to announce results after the market closed on Wednesday. It has not been a very good performing stock recently. Hewlett Packard Enterprises, ChargePoint, Macy’s, Dollar Tree, Campbell’s Soup, American Eagle Outfitters also scheduled to report tomorrow. Wednesday is a pretty big one, actually. Broadcom, probably the second best stock. The third best, you’ve got NVIDIA, you’ve got AMD, and Broadcom right up there. Broadcom is going to report earnings on Wednesday, along with DocuSign, Lululemon, UiPath, Sienna, a few others. And then it’s about over.
SPEAKER 03 :
A few more out there than I thought.
SPEAKER 04 :
Yeah, there’s a few more. I mean, Broadcom’s a big one. I’ll tell you what else I noticed over the weekend and in trading last week is the strength in the silver and gold stocks. Boy, they seem to like this environment that we’re currently in more than any other asset class. Silver surged past $40 per ounce for the first time since 2011. And what silver and gold were rallying on was the hope for rate cuts. They like to see a fiscal house that’s in disarray. We’ve had plenty of that recently. But they like to see massive debt piling up and a weak dollar. And they’ve been getting trade uncertainty. And the precious metals have been getting what they want. I can’t believe the strength in the gold stocks. I kind of thought the run was over. with all of the trade deals kind of put to bed. But guess what? They haven’t been put to bed. Now they’ve woken up on the other side of the bed, and you’ve got the appeals court ruling that the tariffs are unconstitutional using that act that Trump used. Trump’s demanding answers from Pfizer and Moderna. You’ve got kind of chaos going on at the CDC level. A lot of the head people resigned because of the changes in the COVID vaccine protocol. And, you know, coming into question is just how effective were those vaccines? Some would say they were miracle drugs. I can’t see that myself. And some would say that they lost a lot of lives or they saved a lot of lives. Others would say that there were a lot of people that died. because of the effects from the vaccines. Well, anyway, nothing’s like better than the truth.
SPEAKER 03 :
Well, the problem is the word vaccine, right? I mean, vaccine.
SPEAKER 04 :
Even using the word vaccine is questionable because, you know.
SPEAKER 03 :
Preventative may be a better word if the science even is, you know, is proven correct. And it would be more of a preventative than a, you know, it’s not a polio vaccine, for example, right? Or, you know. what we think of as a traditional vaccine.
SPEAKER 04 :
Well, Trump says it’s very important that the drug companies justify the success of their various COVID drugs after he fired former CDC Chief Susan Monteraz. And, of course, you’ve had kind of a chaotic situation there in the CDC, which has been kind of ripped apart over this issue. I’ve never seen a vaccine, I’ve never seen it fall on a political line where you’ve got one side saying that, you know, everybody should be vaccinated and vaccines should be forced on people. You should have to get them. The other side is just the opposite. Well, hopefully we’ll get to the bottom of it as to whether or not they were effective, whether we should continue to vaccinate people, whether they should continue to be used and what harm they may have caused to people after they got vaccinated. I’ll tell you, the stock that’s really woken up with a vengeance is Alibaba. Number one, late last week, they announced that they were coming up with their own chip to substitute for the H2O or H20 chip, 00 chip from NVIDIA. That gave the stock a big breakout last week. And now they also are reporting that they’ve had very strong growth on their earnings report. They had a triple-digit surge in revenue from AI-related products, along with a stronger-than-expected 26% increase in the cloud division sales. And, I mean, this is a stock that has really been sleepy for a long, long time, really ever since Jack Ma disappeared and then reappeared, then disappeared, then reappeared. Alibaba is back in play and becoming a major player in AI. And while U.S. tech stocks have been selling off a little bit and consolidating, You know, Tencent’s held up pretty well. Alibaba’s held up really well. In fact, it’s breaking out, and PDD has also held up pretty well. If you look at their P.E. ratios, you don’t have the valuation problems that the U.S. tech stocks have. Alibaba, for instance, if you look at its P.E. ratio and forward P.E. ratio right now, it’s trading at 15 times earnings. Nvidia is trading at 51 times earnings, and Alibaba is trading at a forward P-E ratio of about the same, about 15, while we’re trading a lot greater than that on our AI stocks here in the U.S. So, anyways, that’s a good solid chart, too, if you look at Alibaba, the $317 billion company. Okay, when we come back, we’re going to take a look at a company looking to refine and boost nuclear fuel security. And Elliott Management takes a big stake in a big Dow company. And Tesla’s European sales numbers are in. We’ll be right back.
SPEAKER 06 :
We’ll see you next time.
SPEAKER 04 :
And welcome back here to the final segment of today’s Best Docs Now show. And, of course, nuclear continues to be in the news. Uranium continues to be in the news. I saw that Rolls-Royce is thinking of spinning off their division that makes the small modular reactors and making that a company on its own. I also see today that Uranium Energy, UEC, is launching a new subsidiary called United States Uranium Refining and Conversion Corp. Okay, that’s a big deal to explore the possibility of building a modern uranium refining and conversion facility in the United States. I’m guessing we don’t currently have that capability. And positioning UAC, here’s what the CEO says, positioning UEC as the only vertically integrated U.S. company with uranium mining, processing, refining, and conversion capabilities is both a significant commercial opportunity and a strategic necessity for the United States. I think I’d have to agree with that. Barry, we need to be able to refine UEC. and convert our own uranium here in the U.S. and not rely on other countries. So that’s definitely worth taking a look at. But I don’t know where they would build it, but that is the news out of UEC, which is definitely in that nuclear sector. Does anybody care? Elliott Management is taking a $4 billion stake in Pepsi. The push for changes. I don’t know what you would change. You know, it’s a 3% grower. It’s a 2% grower, growth company. But, you know, that always boosts the stock when someone big like Elliott comes in. It seems to me, Barry, that the one thing that these large companies can do, and GE proved that, is to break it up. Break it up into segments.
SPEAKER 03 :
You turn it into, yeah, I mean, it’s a bit of financial engineering, right? You put the good, you know, I heard them talking. I think what Kraft Heinz is actually breaking up. I think that was announced, you know, today or this weekend as well. But, yeah, I mean, you know. But Pepsi, I mean, the problem with the company is they’ve got a big GLP-1 headwind, right? I mean, folks aren’t eating as many snacks as they used to. And that’s where, you know, that’s that headwind for growth. And, you know, from what I hear, they may put all the bad stuff together and then put all the good stuff into one, you know, one company. And so you essentially are kind of pawning off the parts of the business you don’t want, essentially.
SPEAKER 04 :
Yeah, and the trick for them is finding the one growth area that they do have, if they have one. I don’t know what the growth area would be. I read that for Kraft Foods, it was like their ketchup and mayonnaise, because now you’re coming up with all these different flavors of ketchup and mayonnaise, chipotle ketchup, cayenne pepper ketchup, all this different stuff. And that GLP-1 is also showing up with Constellation Brands, which is down 7%. right now, and my wife and I are in San Diego this weekend watching a few Padre games. Boy, they look bad, really bad. They’re falling apart. I don’t know if they’re going to make it to the finish line, really. But anyways, Ballast Point was a big brand here in San Diego that got bought out. I remember it got bought out for a billion dollars by Constellation Brands. Constellation Brands is down 7.1% today after their earnings report. Man, I’ll tell you what, that’s a terrible report. Their sales were down 6% year over year, and their earnings are down 10% year over year. And the stock is hitting a new 52-week low. I remember when Constellation Brands was humming along on all cylinders, but it’s really fallen on hard times. You know, I’ve noticed that the Padre game, I’m not a drinker, but those crap beers are $19 a can, Barry. You know, that pays Manny Machado’s salary, I’m sure, just the beer sales from those. But I don’t see the line as being very long.
SPEAKER 03 :
They had that big growth from seltzers, right? I mean, seltzer, that whole area has gotten saturated. No pun intended.
SPEAKER 04 :
Yes. Few people have become saturated, too. I know this one guy not walking too straight there up the stairs. Tesla’s registrations in Sweden plunge 84% in August. Suffice it to say that they don’t like Musk in Sweden. You know, Musk hurt his brand, I’ve got to say. It wasn’t a good thing. He backed out of that role in Doge, but it definitely hurt his brand. But he’s got the Chinese competition, I think, which is even bigger. Now the question is the cryptos. They’ve been on a run. They’ve had a big sell-off, and now they’ve got some lift underneath them today, quite a bit of lift. with this rollout of the trump family’s uh new uh cryptocurrency uh so we’ll see uh you know whether or not that can kind of turn the the sell-off around in the cryptos uh i personally i just remain very very skeptical i just don’t feel like putting the uh too much into those other than just kind of speculation myself, and I still fail to find the intrinsic value there. Okay, well, we’re out of time. In two weeks from today, we’ll be catching flights for the Bay Area. I’ll be coming back out here to the West Coast. I know that we’ve got a full house at the workshop. We’ll get a bigger room if we have to. That’s Tuesday night, two weeks from tomorrow. Or two weeks from today, actually, because it’s already Tuesday. Two weeks today, that’s right. Today’s Tuesday. And the appointments, we added an extra day on Thursday, and that’s filling up. So Tuesday, Wednesday, Thursday, full docket of one-hour appointments with folks. But there may be a few left. You can call Edie at 855-611-BEST. 855-611-BEST. In the meantime, we’ve got another little cloud of uncertainty to wrestle with. Are the tariffs constitutional, or are they not? And if they aren’t, I guess Besson is saying they have a plan B. I don’t know what that would be, but they have a plan B. Well, the question would be, how do you give the money back? Well, all the money you collected, you have to spend it back. You have to give them a refund. I don’t know. That’s part of the black cloud right now. Okay, in the meantime, I take it one day at a time and one stock at a time. I’ll be very active in the markets today. You get a four-week trial to the newsletter, 855-611-BEST or GundersenCapital.com. Have a great day, everybody.
SPEAKER 01 :
This show is not a solicitation to buy or sell any securities. Bill Gunderson or clients of Gunderson Capital Management may have long or short positions in stocks mentioned during the show. Past performance is not indicative of future performance. Gunderson Capital Management is a fee-based registered investment advisory firm. All accounts are held at Charles Schwab. Schwab is a member of SIPC and FINRA.
