Vincent Deluard says more than 70% of U.S. stocks trade below their 200-day moving average while the S&P 500 just hit a record. He warns this divergence resolves either when the bottom catches up or the top catches down, and after a 17-year bull he is turning bearish.
Deluard tracks income through real-time tax collections rather than GDP, which he calls fuzzy. Personal income tax growth jumped from 4-5% before COVID to 6-8%, suggesting faster nominal income and possibly understated inflation; it has since slowed to about 5%.
Deluard cites a JPMorgan study showing withdrawals from investment accounts across the income spectrum and Vanguard data on emergency 401(k) withdrawals. He compares today's low savings rate and equity extraction to 2006-07, arguing consumption is being propped up by asset gains rather than real wage growth.
Deluard argues the policy response, not the initial shock, determines inflation. COVID was deflationary in China but about 10% inflationary in the U.S. after checks and supply disruptions. In an inflationary era, he expects whatever shock comes next to be met with inflationary policy.
Deluard says WTI is misleading because nobody consumes it directly. Add Asian refined-product premiums, roughly $20 of refining margin, and another $20 for transport and insurance, and the effective global oil price is $150-$200. Energy stocks were up about 45% this year even with WTI apparently contained.
Deluard sees agriculture as the most concentrated inflation risk. Diesel and fertilizer are critical inputs, fertilizer supplies are stuck in the Middle East, and El Niño threatens Latin American and Asian crops. France has become a grain importer, and Russia-Ukraine grain remains stuck, making food-price shocks more likely.
Deluard says average stock correlation with the S&P 500 has fallen to about 5%, with a third of U.S. stocks at negative beta. If correlation normalized to 50-60%, he estimates the VIX would be near 40 rather than normal. That makes the calm index volatility look artificial and vulnerable to a correction.
Deluard says Europe is where Japan was in 2011-12, but uglier. Aging populations, rising social spending, and failed productivity hopes leave a weaker euro as the only escape. Unlike Japan, Europe must coordinate 17 countries, fight inflation, and face a U.S. focused on trade deficits, so the process becomes a sequence of crises.
Deluard lists the ingredients of a sovereign debt crisis: high debt, a large primary deficit, foreign financing, no printable currency, weak growth, unpopular politicians, and no ability to raise taxes or cut spending. France hits every marker, he says, with a particularly bad gap between interest costs and nominal growth.
Deluard says Japan is exiting its debt crisis. Tax collections have grown about 7% annually for a decade, so even with rates near 4%, nominal growth exceeds interest costs. He likes the yen as a defensive hedge because money is returning to Japan and the currency historically rises when stocks are weak.
Deluard notes South Korea and Taiwan run current-account surpluses around 25% of GDP, with Samsung making roughly $1 billion a day. That flood of money will leak into consumption, investment, military spending, and bonuses, pressuring local rates and currencies. He suggests long won versus euro and receiving Korean rates versus paying European rates.
Deluard says U.K. defined-benefit pensions cut domestic stocks from 50% of assets 20 years ago to about 5% now. Foreigners also left after Brexit, leaving MSCI UK at roughly 2% of global market cap, below its GDP share. He sees the U.K. ahead of Europe in working through its political debt crisis.
Deluard sees real yields around 3.5% while inflation break-evens barely move despite energy and food pressures. He suspects the market is pricing the risk that official inflation will be systematically understated. That interpretation supports gold and Bitcoin, because the problem is not simply rising real yields but manipulated inflation measures.
Deluard calls 5.2% yields normal with inflation, real growth, and AI capex, arguing the prior decade of QE and negative term premiums gave investors the wrong baseline. He is turning more positive on bonds mainly because he is bearish stocks, and belly-of-the-curve coupons offer a buffer if yields rise further.