Carter Braxton Worth
speaker
43 appearances
1 recordings
1 series
first heard Apr 2025
last heard Apr 2025
Carter Braxton Worth’s voice in public audio — every appearance, attributed to the second.
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Appearances
Yes, volatility be one word to characterize it, but also red, right? So we've had a great market for three years. I guess if you think about the last real drawdown was the 2022 bear market, the S&P declined 27%, the NASDAQ 137. And since those lows in the autumn of 2022,
For three years, we've been ascending and ascending aggressively to the point where, of course, those who get into valuation, we reached just four or five months ago, the highest price to sales ever recorded in the S&P 500 and the Russell 3000. And now, of course, that excess is being expunged.
Well, for starters, you're very kind to invoke or recall a good judgment. I have all sorts of bad judgments, things that go terribly wrong, but I'm pleased with this particular recent effort. The principle that informed that decision basically is... in January, December, January, was that the breadth was deteriorating.
Now people say, well, there's always an issue with breadth, which is a way of measuring market health. And so we have had for a long time, great marquee names, right? Household names, Apple and Microsoft and Google, and they've even named them a group, Magnificent Seven, right? Have led so much of the equity market and people and, and, Perhaps rightly so.
Well, it doesn't matter that others are lagging and not keeping up as long as these champions are carrying the team, all is well. But usually when you have divergence between the performance of an aggregate, an index dominated by a few big outperformers versus the constituents diverging and not performing, it invariably ends with weakness in the index.
And what was happening in December, really started in October, is that individual stocks started to put in their peaks. So right now we know that the sell-off in the S&P, it starts at the index level on the 19th of February, only six weeks into it. But for instance, the semiconductors peaked in July.
microsoft peaked in august i mean individual securities were starting to roll and stall and starting to basically turn over and head lower way before the index and so for instance right now the index itself is only down what 12 if you were to look at the russell 3000 it's important to talk about that because that represents 98 of the investable capital united states
The S&P 500, obviously not as broad and big. And if you look at that index, the Russell 3000, the entire shooting match, it peaked on the 19th of February as down 15, 12, 15% or thereabouts. But the median performance of all constituents is down 38, meaning we're well into a bear market. It's been going on for months. And the individual stock or player on the team has been in real trouble.
Only now is it coming out at the index level.
It would be like watching a sickness, looking at 100 people in a room. And one person, you just don't think anything's wrong. And now everyone's sick. But it turned out, if you look back, wow, that guy was sick three weeks ago. She was sick six weeks ago. Meaning it doesn't come out at the aggregate level. All of a sudden, it starts slowly. It's under the surface.
Individual securities start to underperform, start to roll over, start to stall, start to decline, even as the index goes higher. The principle is this. Let me just say it this way. The parts compose the whole. The whole looked okay to the maybe casual observer. We're making new highs in January, but the parts were rolling over.
And people say, oh, it's so much money and so few to have, but it's always high end top weighted. So if you go back the last 50 years, the top 10 stocks on average, 20 plus percent weight, meaning life sorts out winners and losers. It's just the way it is. A small hardware store gets acquired by a bigger hardware store. a bigger, a better software operator takes over another.
We're always going towards bigger things, concentration. That's the way it is. And so the top 10 stocks, whether it was IBM in its heyday or GE or Cisco in 07, top 10 stock, always about 20% weight. But what started to happen this go round in the past 18 months is they were 30 and 33%. So much so that now that they're selling off, that's why the market is finally succumbing.
Yeah, I mean, over time, and everybody knows this, markets go up. There are more Oreo cookies consumed 10 years from now than now, more Gillette razors, more people. There's prosperity, there's growth, and that's figuring out who you are in the market.
But if you are a trader and you spend time trying to zig and zag, trying to study sequences, the current sell-off at the index level is highly unlikely to stop here.
And that's a classic playbook. There was an expression, soap and cereal is the most offensive thing. Soap and cereal. And what that means is if you look at companies like Nabisco that sell crackers or Colgate-Pomona, we have 170, 200-year-old companies in this country that literally sell soap. domestic household things, and food products. Now, those are the most defensive things at all.
People consider healthcare- Like P&G or J&J. Exactly, Colgate or Clorox or a General Mills cereal or that sort of thing. Healthcare is relatively new. We don't have healthcare companies that are old like that. 150 years ago, healthcare was, okay, bite on this stick because we're about to saw your leg off. We don't have anything else to offer you.
Point being, they're not defensive pharmaceuticals the way soap and cereal is defensive. Classic staples. And you'll see that now in this current drawdown. What is going down not as much? Soap and cereal. That's consumer staples, utilities, very defensive names. And all institutional managers know this. And if you cannot hold cash...
If you're concerned and you're selling some Apple or selling some Google or selling some Meta or selling some Tesla, by mandate, you're not allowed to hold the cash. They have cash managers, different product, different things. So that money must go back by the close or the next day by the close. And so you see rotation.
It's always a part of markets and institutional money will rotate to defensive things because on a beta adjusted basis, even if everything goes down, those stocks go down less and you're seeing it in the market now. Here's a thing from March 30 saying, look, it's official. We're in a bear market. Just to talk about the statistics.
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