Lead-Lag Live

Walter Deemer on Small Cap Potential, Historical Market Parallels, and Navigating Speculative Trends

Jan 24, 2025

Walter Deemer, a financial market expert and technical analyst, dives into the dynamics of small-cap stocks versus large caps. He explores the historical parallels with the 1970s and the potential resurgence of small caps. The discussion highlights sector weight differences, speculative behaviors among young traders, and strategies for buying during market dips. Deemer emphasizes the implications of a possible market stagnation and the evolving perceptions of the bond market. Additionally, he analyzes the impact of cryptocurrencies on technical analysis, urging simplicity over complexity in trading.

37:00

Episode guests

Walter Deemer

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Episode notes

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Quick takeaways

The podcast highlights the crucial divergence between small and large-cap stocks, emphasizing that small caps may need to rally for healthier market dynamics.

It discusses the importance of historical market parallels, suggesting current trends might resemble the speculative phases seen in the early 1970s.

Deep dives

Market Behavior and Historical Parallels

Recent market dynamics reveal a significant divergence between large-cap stocks and their smaller counterparts, prompting discussions on the potential repetition of historical patterns from the early 1970s. While large-cap stocks, particularly the MAG-7, continue to perform well, the broader market, especially small caps, appears stagnant. Historically, during speculative phases followed by downturns, similar events transpired, raising concerns that the current market might replicate these past trends. The preservation of small-cap strength is viewed as crucial to breaking this analogy to the 1970s downturn, emphasizing the need for a market shift that favors smaller stocks.

Intro

3min

Navigating Inflation and Market Dynamics

10min

Navigating Market Dynamics

4min

Navigating Market Cycles and Health Considerations

4min

Navigating New Market Dynamics

12min

Navigating Small-Cap Stocks and Historical Market Parallels

3min

Walter Deemer joins us to unravel the fascinating dynamics of small caps versus large caps in today's stock market, sparking the question: Are small caps the unsung heroes poised to lead future market trends? Together, we examine historical market parallels, particularly the early 1970s, and discuss whether we're witnessing a repeat of those cycles or something entirely new. Key insights are shared on sector weight differences and the potential impact of speculative behavior among younger traders, raising the possibility of small caps rallying independently in a healthier market environment.

Listeners will gain a deeper understanding of market trends and investing strategies as we dissect historical behaviors, using McDonald's performance in the 1970s as a case study. We explore the implications of buying during market dips and how the post-quantitative easing era has redefined investor mentality. The conversation also addresses the potential for a "lost decade" of market stagnation and the importance of adapting to changing conditions with a long-term perspective. Insights into the current relevance of the bond market and the unique challenges faced by different generations round out this comprehensive discussion.

With crypto assets lacking traditional fundamentals, we delve into their suitability for technical analysis and compare the current tech dominance to historical patterns like the Nifty 50. Personal trading strategies, including inverse ETFs and shorting, are discussed alongside a pragmatic approach to technical analysis, stressing simplicity and practical wisdom over complexity. We close with an exploration of small-cap stocks' potential risks and rewards, drawing upon historical comparisons and encouraging listeners to stay informed through social media channels. Join us for a rich conversation filled with market insights and trading strategies that promise to enhance your investing acumen.

The content in this program is for informational purposes only. You should not construe any information or other material as investment, financial, tax, or other advice. The views expressed by the participants are solely their own. A participant may have taken or recommended any investment position discussed, but may close such position or alter its recommendation at any time without notice. Nothing contained in this program constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any securities or other financial instruments in any jurisdiction. Please consult your own investment or financial advisor for advice related to all investment decisions.

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