Stock Market Growth or Collapse

Añadido: 2026-05-26

[00:00:00]I'm going to tackle a subject today which is a little bit different. So I want you to hang in there with me because I think you'll find this interesting. I'm looking at valuation and the question is are we at we're at an all-time high but are we overvalued meaning that the market has big risk on the downside or are we at a level I won't say undervalued but were we at a level where it will just keep on going at this level and produce you know higher and higher returns. Two very different views. So, I'm going to unpack that from a perspective I think you have not looked at.

[00:00:52]I'm Ben Rep. Thank you for watching my video um and being on my channel. Uh today is May 26, 2026.

[00:01:04]Okay, let's just kind of start with the basics. This is a chart of the S&P 500 represented by SPY spy exchange traded fund.

[00:01:17]When you look from the bottom of about October of 2022 to present, I drew a black arrow to show the trajectory of the market, the S&P 500. Now, you can see there were I I see three noticeable dips, but those are just corrections. They're dips.

[00:01:41]They're not a down market. Um and and it just and here we are at the very upper right and it just keeps on going. So, there are people who are sitting on the sidelines waiting to get in the market.

[00:01:57]When should I get in? When should I get in? If it goes down there, it it it it concerns them that this is displaying risk. If it's up, same thing. It's like, okay, it has a chance of going down. So, whatever happens, people are thinking, you know, when do I get in back in the market and that so that's why I want to cover this.

[00:02:22]the price earnings ratio called a PE ratio uh is to on the S&P 500 is today about 28 to1. That's a fairly healthy pretty high valuation. It is easy to grab on to a notion that it's overvalued and it's going to come down. Therefore, I'm going to sit back and wait for that.

[00:02:47]A and I won't say that's wrong because it's entirely possible that's correct.

[00:02:52]Um I'm going to show you look at this from a a flow of what's called a flow of funds analysis and I'm going to start with South Korea. Now South Korea is a proxy put it up here. South Korea is a proxy for Asia. So we could include China, Japan, Taiwan, Indonesia, you know, countries like that. And we could say um Asia in general, developed Asia. And we could say, okay, I South Korea is is a good representation.

[00:03:33]I use South Korea because it is a um it's a smoother chart. And so this is the chart of EWI which is the same our the same for us as SPY. Um it's an eyesshares ETF and you can see this over the past four years.

[00:03:56]I it's a weekly chart so a move in here is equivalent of one week. I came down went sideways and then went back up.

[00:04:08]That's what it looked like for four years.

[00:04:12]So, to really look at this, we've got the S&P 500 here, the the South Korea market here. Now, what I'm going to do is I'm going to put those together and analyze those from what's called relative strength. Which one is stronger? Because when you look at each one of them at different times, they both go up. But let's look at them. if we compare them on a relative strength basis. So to do this, I'm going to I'm going to show you two views. One is the S&P 500 numerator, South Korea denominator, and then I'm going to switch them. Same thing, same data. It's just one is showing from a growth perspective and one is not. But when we when we put S&P 500 on top numerator EWI South Korea on the bottom denominator this is what happens. So we see when those are blended on a comparative basis from 2020 late 2021 to present it goes way pretty far up did really well and this would mean the S&P 500 outperformed South Korea up until about January of 2025 and you see that at the top of the black arrow.

[00:05:32]Then the S&P 500 did not collapse. I already showed you that. But relative to the South Korean index, it dropped a lot. Said another way, the South Korean stock market accelerated beyond the S&P 500 significantly.

[00:05:58]But on a comparative basis, look at the S&P 500.

[00:06:04]What caused that? I'll get into that later. Now, I want to flip it around and show you the other side of it. So, if we look at turn that exact same data, just change the numerator and denominator.

[00:06:16]Now, we make South Korea the numerator, S&P 500 denominator. So, if it goes up, it is favoring the S&P 500.

[00:06:26]Excuse me. South Korea. So look here. South Korea is out of favor.

[00:06:33]Out of favor. Out of favor. Comes down to the end of 24 and then it takes off compared to the S&P 500 and which did just fine. Wow. That's outperformance.

[00:06:50]So, and you're wondering why are you covering this, Ben? I I'll show you.

[00:06:57]I asked the question why.

[00:07:00]What is going on here? Reuters says this and it's two sentences. uh investors are rotating out of expensive US stocks into cheaper Asian markets, especially when US policy uh uh uncertainty, trade tensions, and a softer dollar make Asia look better on a riskreward basis.

[00:07:33]I got this article and I'll give you a couple of sentences from it. I so what what does all this mean from the US China economic and security review commi commission said they said this this is not usually a oneway permanent migration of money. Capital tends to move in cycles. the flow can reverse if US growth reacelerates or Asian earnings disappoint.

[00:08:11]So in other words when when you look at this from a couple of perspectives the international market billions and billions maybe even trillions of dollars at times are moving from here to there changing places. So what happened here is that the large amounts of money, I don't know the amount, but large amounts of money moved out of the US into Asian markets. And I just read you the reason why.

[00:08:44]Because they said this goes in cycles.

[00:08:46]It does. What will happen? I believe at one point that money that's in the Asian markets will come back into the US. Is that going to happen this year? We don't know that. May, may not.

[00:09:02]But when it does, you've got huge amounts of money. I'm just going to call it a trillion or a few trillion. It's it's a large amount of money. When that money comes back into the market, the US market, leaves the Asian markets, what is going to happen to the S&P 500 and what's going to happen to South Korea and other Asian markets? So, you know, stocks go up because money comes in, people buy, and they buy more than they sell, and vice versa. So, when that money comes in, it is going to push stocks up. That's just the way it works. Just like when it leaves, it pushes stocks down. Supply and demand. So, the question is, we don't know when. We don't know what's going to cause the flow of money to reverse and come back into the US. Now, what we have going on, we have geopolitical events.

[00:10:09]Uh we have what a year ago we were talking about tariffs, administration talking about tariffs. Now we've got a war going on with Iran. Maybe it's short-lived. We don't know.

[00:10:22]And when when that gets resolved or it looks like it's going to get resolved, equity markets for in the US will go back up probably and uh just like they came down when that risk entered the market. So uh you can believe whatever you want to believe. So, I'm just saying if you believe that that things are going to be resolved geopolitically and that money is going to come back into the US, what you're really betting on is the fact that uh that is going to force equities up. If you don't think that's going to happen or even if you think those are not related, okay, that won't happen. Um, I'm just giving you a point of view that says with a 28-1 PE ratio in the S&P 500 that that may not signal a high. It I I'm not saying it's low. I'm just saying it could keep on going. And what it would take to keep on going is money come in coming into the US. And there is an imbalance right now. Money is outside the US. And if it comes in, you can see how far out of balance it is, then I I can make I can make the case to myself, stocks are going to move up. Uh, and they may move up significantly. What's happening right now in the US, even though most of the money is overseas, what's happening right now in the US is that um the um stocks are are at an all-time high and they keep making new all-time highs.

[00:12:03]They keep going up. Now, I looked at the futures for today is Monday. Actually, we're recording this on Monday. I looked at the futures for tomorrow, which is the first day of the week, Tuesday, because Monday is a holiday. So, the first trading day is tomorrow. Futures are way up. I'll show you a picture. and uh meaning that uh there is still optimism in the market that things are going to be resolved and maybe money is going to come back into the US.

[00:12:37]So what we do with our approach is that we're flexible.

[00:12:44]In a way I don't care if the markets go up or they go down. In a way I don't care. We make money when they go up.

[00:12:55]But conversely, when they go down, we get out of the market. So, I'm not interested in taking risk. I have no interest in taking risk in the market.

[00:13:03]And so, that's the way I do it. I just get out of the market. We go into money market. We've done it this year in the about the last three weeks of March when the U Iran war was kind of peaking out.

[00:13:16]Last year, same thing happened with tariffs when tariff uncertainty just was kind of at its height. latter part of March also last year uh we got out of the market and so whenever risk for whatever reason happens that's our signal well we do it mathematically but we get a signal that says get out and we get out that produces the idea of getting in the market and in the right index or the right sector when the market is going up produces very favorable returns when the market is going down we get out of both when sector and on indexes we just get out and uh the combination of those two has produced very good returns. So I just pulled up I looked at it says on our website I just pulled up our numbers for the last 12 months. Now I can go back further or I could make a shorter period but I just did 12 months. So our sector rotation where we change sectors uh daily sometimes daily uh is up 27.3% for the last 12 months. Our moderate momentum which uses indexes like the Dow and NASDAQ uh and and again a little bit of a rotation here as well is up 33.7% and our high performance is up 69.5%.

[00:14:37]So my point is what I'm talking about, what I'm advocating for is the flow of money that's positive and negative. We take advantage of that to to invest money and to not invest money meaning get out of the market. We do both and um the result the combination of that has produced favorable rates of return. So these are our numbers and their net of fees.

[00:15:06]The this is on our website so we publish it. So if you go to the uh website repondinvestments.com look under the performance tab uh you will see these numbers. We also give a lot more detail on the metrics behind these numbers and u because I like to disclose everything and every month we update that based on whatever the numbers are. Okay, thank you for watching. If you have questions or comments, leave them in the comments section below. And if you want to talk with me, uh my number is uh following this uh video. Feel free to give me a call. Thank you very much.