Speculative Froth Is Not Troubling, Says Schwab's Sonders

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00:00We've been asking the question of people who already own these stocks.

00:04Would you buy more today? Would you add to these stocks today? Do you think investors are?

00:11I think recently, and maybe this is a good news, most of the speculative fervor and a lot of the

00:17buying interest actually had moved away from the mag seven, the big mega cap leadership names and

00:23gone into more esoteric micro cap quantum drones, the meme stocks. And that's where you really saw

00:32the speculative juices. That has rolled over a bit. Goldman's quantum basket is down 25 percent

00:38from the October 15th high. And now only recently, I think you're seeing a shift of attention back into

00:45those mega cap names, maybe as a play on what look to be a series of fairly strong earnings to come.

00:52So I'd be a bit more worried if the aggressive buying had continued to be concentrated in those

00:58leadership names. Liz, you and Kevin Gordon, the team have been doing really excellent work about

01:04what's been performing. And it's a lot of the kind of junky stuff, like unprofitable tech,

01:10quantum computing. I know there was a little bit of the White House influence there. Retail meme stocks.

01:15Is it troubling to you at all that some of these very low quality or speculative or risky type of

01:20equities are doing really well in this environment? Well, it does suggest speculative fraud, troubling

01:26not so much because they don't represent large shares of the cap weighted indexes. So and given

01:32some of the rolling over we're seeing there, even in areas like gold, it suggests you could see some

01:38rotations within those segments of the market by retail traders without it causing trouble for the

01:46overall market. So I think this market continues to be sort of two stories. You've got the market as

01:53measured by cap weighted indexes and you have everything else going on under the surface, not just

01:57within an index like the S&P, but more broadly, even within the S&P. Here's here's something fairly

02:04remarkable that's a test to just how much churn there is under the surface. First of all, yesterday was the

02:09weakest breadth for an up day in history. And that history only goes back to 1990. But in the history

02:15of having that statistics, the weakest breadth just since the April 8th closing low, when the S&P has

02:21obviously been on a tear at the index level, the average member within the S&P has had a 16 percent

02:27drawdown. In the Nasdaq, the average member just since April 8th has had a 35 percent drawdown. So the fuller

02:34story is told under the surface of these indexes in terms of leadership and rotations and where there's sort of

02:42speculative, speculative excess and maybe where there's opportunity.