Everyone’s Bearish… But Are They Wrong? w/ Caleb Franzen

Quick Overview

Caleb Franzen argues that despite recent market pullbacks, the underlying macro environment remains fundamentally bullish, evidenced by continued new all-time highs in small-cap growth stocks (IWO) and high-beta assets relative to low-volatility stocks (SPHB/SPLV), suggesting investors should remain net long and actively deploy capital into discounted risk assets rather than trying to time unpredictable events like political tweets.

Key Points: Small-cap growth stocks (IWO) and High Beta relative to Low Volatility (SPHB/SPLV) are making new all-time highs, signaling strong risk appetite. The relative strength of IWO versus IWN (Small Cap Value) and SPHB/SPLV suggests a macro environment favoring growth and risk-on assets. The ICE BofA US Corporate Index Option-Adjusted Spread (credit spreads) remains low relative to Treasury yields, which historically accompanies bull markets, not bear markets. The divergence between the S&P 500 making higher highs and credit spreads not diverging significantly suggests the market has largely digested the recent volatility, unlike previous downturns. Franzen is actively buying discounted stocks (e.g., semiconductors) that have pulled back 20% because the underlying trend supports continued upward momentum. Investors should focus on technical analysis and asset allocation within the established uptrend rather than trying to predict unpredictable events like political tweets. The current environment demands investors remain net long and take advantage of volatility dips to add risk assets, rather than trying to time market tops.

Context: This is an interview segment between John Gillen of Milk Road Macro and guest Caleb Franzen, a macro analyst, discussing the current state of the equity markets. The discussion centers on analyzing key intermarket relationships and technical charts (like the Nasdaq 100, IWO vs. IWN, and SPHB vs. SPLV) to determine if the recent market weakness is a true reversal or a healthy pullback within a larger bull market structure.