Don't Chase This Rally | Lance Roberts

Top-line market view

Lance Roberts and host Adam noted that markets have rallied quickly (S&P at all‑time highs during the discussion), led by mega‑caps/tech. Their shop moved from defensive to “full offense” and added exposure back toward target weights.

Key points:

• Don’t chase the current move. If you missed the rally, wait for a pullback to support and add exposure on weakness to work off short‑term overbought conditions.
• Expect a near‑term pullback but not a retest of prior lows in the current scenario.
• Intermediate outlook: likely a mid‑summer dip (commonly 5–10%; Lance flagged a possible 10–15% drawdown into the midterm election window), followed by an end‑of‑year run. Outcomes depend on geopolitics (Iraq/Iran/Strait), oil path, and earnings/estimate revisions.

Tickers, assets, sectors, and instruments mentioned

• Indices: S&P 500, NASDAQ, Russell (small caps)
• ETFs / sectors: XLE (Energy ETF)
• Commodities: WTI crude oil (WTI futures)
• Stocks: Microsoft, Google/Alphabet, Meta (broadly “mega‑caps” / tech)
• Credit / alternatives: private credit (private loans), BDCs (business development companies)
• Instruments / metrics: S&P 500 ETF (generic), options/put volume, short positions, moving averages, RSI, Fibonacci retracements, breadth measures

Technical framework, rules and methodology

• 200‑day moving average rule:
  • Timing matters — if the market stays below the 200‑day MA longer than ~4 weeks, forward returns tend to be negative.
  • If it gets back above the 200‑day MA in under ~4 weeks, historical forward returns have been strong (presenters cited double‑digit gains by 12 months in those cases).
• Death cross: watch 50‑day crossing below 200‑day MA. In the current sequence this did not occur; the 200‑day MA is sloping higher (bullish).
• Relative strength / RSI:
  • Monitor negative divergences (price up while RS down) and their resolution.
  • RS > 70 is treated as bullish.
• Breadth: improvement from ~30% to ~60% is a meaningful confirmation of rally participation.
• Moving averages for pullback/support: 20‑day, 50‑day, 100‑day, 200‑day. Pullbacks often cluster at the 50–100 day MA or prior breakout levels (Fibonacci retracements).
• Fibonacci example: from recent low to all‑time high, a 23% retracement target ~6,941 was cited.
• Cash deployment approach: dollar‑cost back in — example given was splitting cash into six tranches and investing one tranche now, then one each month for six months.
• Portfolio risk management: hedge but avoid going 100% cash; trim winners, raise cash, buy favored names on pullbacks, and maintain diversification and an income sleeve where appropriate.

Tactical recommendations / buy & sell guidance

• Do not chase the rally; wait for pullbacks to add exposure.
• If fully in cash: re‑enter gradually (example: 1/6 per month over six months).
• If you own stocks: trim winners and hedge rather than going to zero.
• Buy the market on pullbacks to support (50–100 day MA or prior highs‑turned‑support), not at the peak of the ramp.
• They added back into mega‑cap tech (Microsoft, Google/Alphabet, etc.) due to discounts and strong earnings growth; plan to add more on pullbacks.
• For broad exposure: a simple S&P 500 ETF is recommended for re‑entry.
• For income investors: consider selective BDCs / private credit with large, experienced managers and diversification.

Key numbers, levels, timelines and statistics

Technical / market stats:

• NASDAQ: up 13 days in a row; S&P: up 12 days — historically long streaks.
• Breadth: ~60% (up from ~30%).
• Example S&P chart level cited: around 7,150.
• Fibonacci 23% retracement: ~6,941 (first pullback area on their chart).
• 200‑day MA timing rule: 4‑week threshold.
• Relative strength: >70 (first time since the prior September).
• Historical observation cited:

  “100% win rate” for forward returns over 12 and 24 months when the market rallies above the 200‑day MA inside the <4‑week window (presented as historical, not a guarantee).

Oil and energy:

• Oil spiked toward ~$100 during Iran conflict, then fell to low‑$80s / $70s on de‑escalation talk.
• Lance’s ranges if supply normalizes: mid‑$60s to low‑$70s (quick normalization) or mid‑$70s (if bottlenecks persist). A $30–40 downside would require a recession.
• XLE (energy ETF) was in the mid‑$50s in the discussion; XLE could fall to the high‑$40s / low‑$50s (they mentioned ~$46–47 as possible in a retrenchment).

Earnings / macro:

• Goldman Sachs year‑end S&P earnings estimate cited: $39 per share.
• Small & mid‑cap growth earnings: expected to grow ~49% (down from ~60% in January); last year small/mid grew ~5% — highlighting a large gap to close.

Private credit / BDCs:

• Private credit pool size cited: $1.7 trillion (compared with $62 trillion figure referenced for subprime derivatives to emphasize scale difference).
• Historical default levels for referenced loans were small (memory cited ~3–4%). Many private credit loans are over‑collateralized relative to subprime mortgages.

Risk factors, caveats and what to watch

• Geopolitics: Iran / Strait of Hormuz developments remain a key swing factor — de‑escalation reduced the war premium; reversal would re‑introduce risk.
• Earnings revisions: Wall Street may not have fully marked down Q2–Q4 yet; forward estimate cuts during earnings season are a primary catalyst for further downside.
• Small & mid‑cap sensitivity: smaller companies are more economically sensitive; watch Russell / small caps for early warning signs.
• Energy / reflation trade: an oil spike causing a material slowdown could derail reflation; monitor real retail sales (inflation‑adjusted), gasoline pass‑through, and capex delays.
• Private credit stress: funds gating redemptions has occurred; scale is smaller than 2008 subprime but opacity and manager quality are concerns — monitor leverage and collateralization.
• Technical risk: expect an overbought unwind with a likely pullback to 50–100 day MA or prior breakout area.

Portfolio construction and income sleeve ideas

• Tactical re‑allocation: trim winners, raise cash and hedges when risk rises; add back on weakness.
• Maintain some equity exposure; avoid 100% cash. Hedging and partial cash raises are preferred.
• Income sleeve: BDCs / private credit can be used for higher yield — favor large managers with track records and diversified funds/ETFs. Lance’s firm is constructing an income sleeve/product to capture higher yield while managing risk.

Performance and behavioral observations

• Markets are historically biased to the upside ~80% of the time (their view) — this argues for weighting the upside while still managing risk.
• Behavioral advice: avoid confirmation bias and media echo chambers; evaluate bull and bear cases from raw data and avoid “selling the bottom / buying the top.”

Explicit recommendations & cautions (short)

• Don’t chase the rally; wait for a pullback to add.
• If in cash and reallocating, dollar‑cost in over months (example: 1/6 per month for six months).
• If holding equities, trim and hedge rather than go 100% cash.
• Watch earnings season and forward estimate changes — they will likely drive the next market move.
• Monitor WTI and XLE for impacts on consumer/inflation and cyclical sectors.
• Private credit / BDCs: not viewed as the next systemic crisis by Lance; consider as income opportunities but pick managers and diversify.

Key disclosures and caveats

• Nothing is guaranteed; historical patterns are probabilistic and outcomes can change with new information (war re‑escalation, earnings disappointments, etc.).
• Not personalized financial advice — viewers are encouraged to consult advisors.

Presenters and primary sources referenced

• Presenters: Lance Roberts (portfolio manager, Real Investment Advice / RAA) and Adam (Thoughtful Money founder & host).
• Other referenced contributors and sources: Mike (colleague), Michael Liwitch, Craig Fuller (FreightWaves), Rick Rule, Yon Vanek, Stephen Bavaria, Bloomberg, Goldman Sachs, and various analysts/data providers.

Additional note: the episode referenced chart‑level technicals (20/50/100/200 MA values and Fibonacci anchors) and suggested a short re‑entry checklist (50‑day MA, 100‑day MA, breadth >50%, rolling 20‑day RSI normalization, and early earnings beats/raises) as practical alerts for investors.