Felder's Bearish Warning: Stocks, Bonds, and the Dollar Under Pressure

Jesse Felder: Stocks, Bonds & the U.S. Dollar Are All Breaking (YouTube link)

In the video above, Jesse Felder, a financial analyst, conveys a bearish perspective on various asset classes—stocks, bonds, and the U.S. dollar—highlighting concerns about valuations, economic conditions, and policy changes.

Here’s a concise breakdown of the key points:

• S&P 500 (Stocks):
• Felder is bearish, recommending selling due to high valuations (trading at ~20x forward earnings vs. a historical average of 15x trailing earnings).
• Forward earnings estimates are too optimistic and likely to decline, especially if a recession is underway or imminent.
• Insider selling and excessive retail investor optimism (record flows into leveraged ETFs) signal a potential market top.
• Historical comparisons to the early 2000s tech bubble suggest a possible 50% decline, with the S&P potentially dropping to 4,000 or even 3,000.
• Recent profit warnings from companies like Walmart, DR Horton, and LVMH indicate weakening economic demand.
• Bond Market:
• Felder is negative on bonds, predicting the 10-year Treasury yield could rise to 5–5.5% due to a supply-demand mismatch in Treasuries and persistent inflation.
• A regime change from decades of falling rates to rising inflation and interest rates is underway.
• A potential "bond vigilante" revolt could occur if fiscal deficits worsen or the Fed monetizes debt, especially under political pressure to weaken Fed independence.
• Unlike past cycles, investors like Warren Buffett are avoiding long-term bonds, favoring short-term Treasury bills.
• U.S. Dollar:
• Felder believes the dollar has entered a bear market, potentially lasting years, driven by Trump administration policies favoring a weaker dollar to boost U.S. competitiveness.
• A declining dollar favors real assets (e.g., commodities) over financial assets, similar to the 2002–2011 dollar bear market.
• Current DXY weakness (down 8% in 2025) supports this view.
• Investment Recommendations:
• Real Assets: Felder favors commodities, particularly energy stocks and oil, which he sees as undervalued relative to gold. Energy is the cheapest equity sector with strong insider buying (e.g., Occidental Petroleum, Comstock Resources).
• Oil: Priced for a recession at ~$60/barrel, but likely to rise sharply with fiscal/monetary stimulus and supply constraints (e.g., U.S. shale depletion, global demand from China/India).
• Gold: Bullish long-term (potential to reach $5,000–$10,000/oz), but overvalued short-term at ~$3,300–$3,400 due to recent ETF inflows and high sentiment.
• Investors should focus on protecting wealth rather than chasing returns in this high-risk environment.
• Economic Outlook:
• A recession may already be underway, triggered by a "tariff shock" causing corporate caution (e.g., Amazon and Microsoft halting data center capex).
• Inflation remains a concern (median CPI at 3.5%, above Fed’s 2% target), and tariffs could exacerbate it, creating a stagflationary environment.
• The Fed faces a dilemma: cutting rates risks fueling inflation, while holding firm could deepen a recession. Felder criticizes the Fed’s past dovishness.
• Political pressure on Fed Chair Jay Powell (term ends May 2026) could lead to his replacement, potentially triggering yield curve control or debt monetization, risking a bond market crisis.
• Societal and Market Risks:
• Excessive leverage in ETFs and zero-day options could amplify a market decline, unlike past bear markets.
• Wealth inequality and speculative behavior (e.g., sports betting, meme stocks, NFTs) could fuel political backlash and societal restructuring if markets crash.
• Jonathan’s Commentary:
• Agrees with Felder’s cautious stance on the S&P, citing high valuations, declining earnings, and reduced AI-related capex. Sees a potential drop below 4,800 to 4,000.
• Shares caution on bonds due to debt levels, dollar concerns, and Fed policy constraints.
• Bullish on gold long-term but advises caution after its 25–30% run in 2025. Maintains a ~28% cash position to capitalize on volatility while avoiding duration risk in bonds.
• Slightly less optimistic on oil than Felder, citing potential economic weakness and Trump’s “drill, baby, drill” policy, but acknowledges opportunities in high free cash flow oil companies.
• Key Takeaway:
• Felder warns of a challenging financial environment with overvalued stocks, rising bond yields, a weakening dollar, and recession risks. He advocates for real assets like energy and gold to protect wealth, while cautioning against chasing overbought assets. The discussion highlights systemic risks from leverage, inflation, and policy uncertainty, urging investors to prioritize capital preservation.