Transcription
Hey everyone, and thanks for jumping back into the equity verse. Today, we're going to talk about what I think is a coming correction in the stock market.
If you guys like the content, make sure you subscribe to the channel, give the video a thumbs up, and check out Into the Cryptoverse Premium at intothecryptoverse.com. Link is in the description below. You can also check out my website at benjamancow.com as well.
Now, honestly, I don't like making a lot of videos like this in the stock market. And I'll tell you why. With stocks, it generally makes sense to be a bull, right? Because most of the time, stocks are in a bull market. And my strategy with stocks for like the last seven years or so, uh, since 2019, has just been to buy low expense ratio index funds. Now, I do have some individual stocks that I occasionally cover. Uh, but for the most part, like a majority of my portfolio that is in stocks, a majority of it is just in low expense ratio index funds. Nothing flashy, just something that you can put some money in every month, and then over time, it tends to grow. Okay.
Now, I think, and I don't say this lightly, like I really don't say this lightly, I think the stock market is approaching a sizable drop. And I, and I don't just mean like 5%. I, I would say, you know, at least 10 to 20% drop coming up relatively soon.
Now, there, you know, there's a lot of different ways to think about it, but the primary reason why I think we're going to see a correction by stocks is because, and I've talked about this for a while, when you have a correction in metals, like we just had a 40% drop by metals. In the short term, there's usually no rotation in the risk assets, right? Like a lot of people think that, oh, we just need silver to calm down, and then when it calms down, money will then flow into other asset classes. That's not usually true after parabolic rallies.
If you look at the valuation of the S&P 500 against gold, one of the things you'll notice is that the level that it's just broken down from is the same level that it broke down from in 1973 and in 2008. Now, in 2008, it kind of like whipsawed around here for a little bit, right? And it, it started in March. It went back up and came back down and then went back up. Now, if you overlay the S&P 500 onto this chart, let's take a look at what happened as it whipsawed. So, when it first had that low right here, the stock market had a little bit of a bounce, but you can see it was, it was a, it was a lower high, and then ultimately the S&P 500 came crashing down. If you go back to 1973, you can see the S&P 500 broke down against gold. It was just after the S&P 500 had topped, and then the S&P 500 had a fairly large drop. So obviously, a correction could always turn into more than a 10 to 20% drop, but it seems like there is a high probability we will have a sizable drop in the stock market in the not-so-distant future.
Stocks are also sometimes on four-year cycles. I know people are mostly familiar with it as it relates to Bitcoin, but the stock market, Bitcoin does not have a monopoly on the four-year cycle. I, I hate to break it to you, but it just doesn't. In fact, if you look at the stock market in the like in the 60s and 70s and even 50s, you can see there was a low here in like 1958. The next one was 1962, '66, 1970, 1974, 1978, 1982. Every four years, like clockwork, you had lows in the stock market. So even last year, or sorry, last four-year cycle, the stock market had a low in October, coincidentally, that's when I think Bitcoin is going to bottom, potentially October of 2026. So when I look at this chart, I have to think like, okay, well, what if the stock market puts in a low in October of 2026? Well, if it does, that means the correction's got to start sometime.
Now, it could start later in the year, like there is a chance that it doesn't start until say, like March or something. Uh, if you go look at 2018, you'll see that the stock market had a fairly large drop the very end of January going into the very beginning of February. And it was about a 12% drop. 12% drop. But then it had another rally, right? And and and it had another rally into September. And then it had another drop, a 20% drop going into the year. So, the reason why I don't want to get too deterministic about saying it's more than a 10% drop right now is because like I recognize that you could have a scenario where it drops and then gets another rally back up and then drops again. The main point is that the low occurred in the midterm year, right? You have 2018, you have 2022, you will likely have another major low in 2026. The only difficult thing is predicting when does it actually occur.
If you look at the year-to-date ROI of the stock market and you average out all prior midterm years and you look at 2026, you can see that the low is often late Q3, early Q4 for the low. Sometimes you can have a spike, right? You can have a spike in March, but the low tends to be late Q3, early Q4. What I'm looking for right now, what I'm looking for is about a 10% drop. So, that would get the S&P back down to call it 6,000 to 6,200. I could see it being like a 10 to 15% drop. Um, May 15th is getting pretty deep though, but I, I, I would say a little over 10%. Seems about right. And if you notice, a lot of years, the S&P does have 10% drops, right? Even in 2023, had a 10% drop. In uh, 2024, had a 10% drop. 2025, it had a 20% drop. So, I think a 10% drop could make a lot of sense.
I also would argue that it seems like the S&P 500 has been stalling out up here, and I think you're going to start to see some sellers. One of the reasons too is because crypto, I think, leads in a lot of ways. Like when you get these sell-offs, and Bitcoin has been dropping a lot over the weekend, and I think that's going to kind of propagate into the stock market, potentially as early as the first week of of February. So I want you to think about this idea. I'm not married to it, but I do think it's reasonable to suggest that, hey, like, we could be getting a 10% drop by stock soon.
If you look at the S&P 500 divided by the money supply, you'll also notice, uh, back in 1998, and we've talked about this a lot before, but back in 1998, uh, we had the same, I mean, it's almost a perfect match. It's kind of crazy when you think about it, how how well this lines up, like from the, um, from the low in '96. And if you just overlay, um, the S&P 500 here, I mean, even the 20% drop we had last year lines up. So, if this plays out, you know, you're, you're, you were potentially kind of like right here, and then that would, that corresponded to that drop, right? Eventually went higher and then you got the larger drop later on, but I think it's a 10% drop seems likely. It seems very, very likely. And especially with with the stock market breaking down against gold, with silver getting a correction, with crypto crashing over the weekend, I think it might be about time. And I don't say that lightly because I really do just buy low expense ratio index funds and try to figure out everything else. I'm not out here trying to time every single top and bottom with stocks because it's impossible.
I do think if the stock market drops, say 10%, it could lead to especially some short-term buying opportunities, right? A 10% drop would would get you back down to, uh, some of these levels down here. And and some of the individual stocks are already starting to show a lot of weakness. If you look at like Netflix, you know, it's been dropping pretty pretty consistently, and it just dropped all the way down here. You look at Microsoft, it's been dropping pretty consistently, right? Like it's been dropping. Um, Apple also been dropping. It just seems like, seems like some of the heavier weight things are are starting to show a little bit of weakness recently. Meta, Meta was, but then it, it actually had a little bit of a bounce recently. Um, so who knows exactly with that one, but I do think that there's a good chance, there's a good chance we'll see a 10% drop in the stock market relatively soon because the stock market's breaking down against gold. It is, uh, we're seeing a sell-off in crypto, and also we just saw silver have a 40% drop. Usually when that happens, you don't get a rotation. You get a sell-off by risk assets.
Those are my views. If you guys like the content, make sure you subscribe to the channel, give the video a thumbs up, and you can also check out my website at benjamancow.com. Thank you guys for tuning in. Subscribe, and I'll see you next time. Bye.