Money Rehab with Nicole Lapin - Calling the Bear: How Carter Braxton Worth Predicted the Market Drop and What Comes Next

Episode Date: April 8, 2025

Carter Braxton Worth, legendary chart analyst and guest on today’s episode, made headlines when he called the current bear market back in February—weeks before the major sell-off in early March. Nicole and Carter dig into what he was seeing in the charts that signaled the downturn, what the market is saying post-"Liberation Day," and how tariffs could impact key industries. They also break down what it actually means to be in a bear market, why panic isn’t a plan, and which sectors could be your portfolio’s new MVPs. For part two of this conversation, a visual breakdown of Carter’s chart analysis, click here: https://www.youtube.com/channel/UC0KGoa1csmIeAAQIigSwMSw Find Carter's work here: https://www.worthcharting.com/

So, I have written, count them, five books now. But each time I'm in the writing process, I stay at an Airbnb. I love to stay at an Airbnb. When I was actually first launching this show, I was at an Airbnb in Arizona. It was so peaceful. It was stunning. I could be productive and comfortable. The Airbnb was also surrounded by a ton of javelinas. If you know Arizona, you know they're like wild pig creatures, but honestly I love them too. Being away for work, for fun, or both is a perfect opportunity to host your space on Airbnb. And if you think that hosting is overwhelming, I have a solve for you. With Airbnb's co-host network, it's easier than ever before to host. It's also a great way to earn some extra cash, which I know we all love. Now you can hire a quality local co-host to take care of your home

and your guests. They can do everything from creating your listing to managing reservations to messaging guests and even providing on-site support. So if you've got a secondary property or an extended trip coming up and you need a little help hosting while you're away, you can hire eight co-hosts to do the work for you. Find a co-host at airbnb.com slash host. I'm Nicole Lapin, the only financial expert you don't need a dictionary to understand. It's time for some money rehab. My guest today, Carter Braxton-Worth, was quoted in CNBC as saying, It's official, we are in a bear market.

What makes this remarkable isn't what he said, because by now the bear market is obvious. What makes this remarkable is when he said it. He wrote this at the end of February, right after the market hit all-time highs and just weeks before the big market sell-off in the beginning of March that would kick off the bear market we are in right now. Carter is a legend, an absolute legend in chart analysis, which makes him as close to a fortune teller as we can get on Wall Street. So today we dig into what he's seeing in the charts that signaled the sell-off, what the markets are telling us now post-liberation day, and how tariffs

might help or hurt key industries. We also dig into why certain defensive sectors might be your portfolio's new best friend, and how even in rough markets there are smart plays to be made. Carter actually did a really fun show and tell with me over Zoom and he gave me a live analysis of the market with visuals and charts and all the good stuff. It's hard to follow in an audio only episode. So if you want that part of the show and tell and also if you want to learn how to read charts like Carter, I published the clip on YouTube, which you can find in the link in the episode description. But first the big picture with Carter. Carter Braxton Wirth, welcome to Money Rehab. Thank you. Okay, let's talk money and

what's going on in the markets right now. I feel like I need a value. I actually looked in my medicine cabinet and I was like, what kind of relaxing thing do I have here? It is wild sauce. Yes, volatility be one word to characterize it, but also red, right? So we've had a great market for three years. I guess if you think about the last real drawdown was the 2022 bear market, the S&P declined 27%, the NASDAQ 137. And since those lows in the autumn of 2022, for three years, we've been ascending and ascending aggressively to the point where, of 2022, for three years we've been ascending and ascending aggressively to the point where, of course, those who get into valuation, we reached just four or five months ago the highest price of sales ever recorded in the S&P 500 and the Russell 3000.

And now, of course, that excess is being expunged. You actually called the S&P 500 sell-off before it happened in early March. What were you seeing in the markets that made you draw that conclusion? Well, for starters, you're very kind to invoke or recall a good judgment. I have all sorts of bad judgments, things that go terribly wrong. I don't care now. This was a good one. I'm pleased with this particular recent effort.

The principle that informed that decision basically in January, December, January, was that the breadth was deteriorating. Now, people say, well, there's always an issue with breadth, which is a way of measuring market health. And so we have had for a long time great marquee names, household names, Apple and Microsoft and Google, and they've even named them a group, Magnificent 7, right, have led so much of the equity market and people and perhaps rightly so. Well, it doesn't matter that others are lagging and not keeping up as long as these champions are carrying the team, all is well. But usually when you have divergence between the performance of an aggregate, an

index, dominated by a few big outperformers, versus the constituents diverging and not performing, it invariably ends with weakness in the index. And what was happening in December, really started in October, is that individual stocks started to put in their peaks. So right now we know that the selloff in the S&P, it starts at the index level on the 19th of February, only six weeks into it. But for instance, the semiconductors peaked in July. Microsoft peaked in August.

I mean, individual securities were starting to roll and stall and starting to basically turn over and head lower way before the index. And so, for instance, right now, the index itself is only down, what, 12 percent? If you were to look at the Russell 3000, it's important to talk about that because that represents 98 percent of the investable capital in the United States. The S&P 500, obviously not as broad and big. And if you look at that index, the Russell 3000, the entire shooting match, it peaked on the 19th of February

is down 15, 12, 15% or thereabouts, but the median performance of all constituents is down 38. Meaning we're well into a bear market, it's been going on for months, and the individual stock or player on the team has been in real trouble. Only now is it coming out at the index level. So if I could put that great analysis into other words, basically you are seeing the big components of the index.

So if I bought VOO or SPY, which tracks the S&P 500, that was not turning around as quickly as the big companies within the index. So Nvidia, you mentioned Microsoft, hit their peaks and then they kind of reverted back earlier than the overall index did. And so that showed you that the index was next. It would be like watching a sickness, looking at 100 people in a room. And one person, you just don't think anything's wrong. And now everyone's sick. But it turned out, if you look back,

well, that guy was sick three weeks ago. She was sick six weeks ago. Meaning, it doesn't come out at the aggregate level. All of a sudden, it starts slowly. It's under the surface. Individual securities start to underperform, start to roll over, start to stall, start to decline, even as the index goes higher. The principle is this.

Let me just say it this way. The parts compose the whole. The whole looked OK to the maybe casual observer. We're making new highs in January, but the parts were rolling over. So the individual companies or the big companies are leading indicators to the overall index, what's going to happen there. And the bigger the companies, the more of a reaction that it will have eventually. It seems like those are the earthquakes and then there's the aftershocks of the overall index. Maybe I'm mixing my metaphors here. But I mean, look, there's so much money and so few names,

the top 10 names. But if you went back to the night, about 50, 60 years, if you looked at the weighting of the top 10 stocks, and people say, oh, it's so much money and so few to have, but it's always high end top weighted. So if you go back to the last 50 years, the top 10 stocks on average, 20 plus percent weight, meaning life sorts out winners and losers. It's just the way it is. A small hardware store gets acquired by a bigger hardware store. A better software operator takes over another.

We're always going towards bigger things, concentration. That's the way it is. And so the top 10 stocks, whether it was IBM in its heyday or GE or Cisco in 07, top 10 stocks always about 20% weight. But what started to happen this go round in the past 18 months is they were 30 and 33%. So much so that now that they're selling off, that's where the market is finally succumbing.

So you predicted that this was going to happen months ago, but now it's almost like an insult to injury reaction with Liberation Day. We're talking on Liberation Day. What are you seeing in the charts right now? Because the market was declining, we were having really bad days, and now this is just like, you know, kick them while it's down. Yeah. I mean, over time, and everybody knows this markets go up, there are more Oreo co-consumed 10 years from now than now, more Gillette razors, more people, there's prosperity, there's growth, and that's figuring out who you are in the market. But if you are a trader, and

you spend time trying to zig and zag, trying to study sequences, the current sell-off at the index level is highly unlikely to stop here. Okay. So can we talk through which of the industries you think are going to be helped or hurt by tariffs? You mentioned consumer products like, you know, razors and Oreo cookies. Exactly. And that's a classic playbook.

There was an expression, soap and cereal is the most defensive thing, soap and cereal. And what that means is if you look at companies like Nabisco that sell crackers or Colgate Pomona, we have 170, 200-year-old companies in this country that literally sell soap, domestic household things, and food products. Now, those are the most defensive things at all.

People consider health care defensive. Like P&G or J&J. Exactly, Colgate or Clorox, or a General Mills cereal, or that sort of thing. Health care is relatively new. We don't have health care companies that are old like that. 150 years ago, health care was, okay, bite on this stick because we're about to saw your leg off.

We don't have anything else to offer you. Point being, they're not defensive pharmaceuticals the way soap and cereal is defensive, classic staples. And you'll see that now in this current drawdown, what is going down not as much? Soap and cereal. That's consumer staples, utilities, very defensive names. And all institutional managers know this. And if you cannot hold cash, if you're concerned and you're selling some Apple or selling some Google or selling some Meta or selling some Tesla, by mandate, you're not allowed to hold the cash. They have cash managers, different product, different things.

So that money must go back by the close or the next day by the close. And so you see rotation. It's always a part of markets and institutional money will rotate to defensive things because on a beta-adjusted basis, even if everything goes down, those stocks go down less, and you're seeing it in the market now. Here's a thing from March 30 saying, look, it's official, we're in a bear market. Just to talk about the statistics, the weak form of analysis in terms of charting and tenets is to look at an index. That's like if you went to the doctor, I went, and I walked in, the guy from nine feet away said, oh, you look okay. I do. I look okay, right? But you don't know about my blood pressure, whether I have diabetes or gout or cholesterol.

You cannot study a patient by doing that. You have to get in the chair, get in the gown, and then they take your blood pressure and they poke and prod. That's what this is. The weak form is saying, oh, the index is down only 910. That's nothing. Underneath the surface, it's been massive deterioration and there's more to come. If you're concerned about this downside, what does that mean for you guys? Are you shorting the market? Oh, yeah. Well, clients have been short. So I have two types of institutional clients, and those are pension plans. Those are long only mutual complexes. Those are hedge funds. Those are family offices, endowments, and at that line. Now how big a drawdown? Why not 20% that's garden variety normal. Some people think it's gonna be 50. I can't speak to that

I think that's unknown, but I am very confident in saying that the current sell-off is Highly likely to stop here unlikely right not likely to can just be over. So where does it? Where does it go? Oh at least 20%. Thank you, Carter. Can we play a quick game of bullish or bearish rapid fire? Bullish or bearish on Tesla? Tesla's just lost 50% of its value. Tesla has made no progress in four years.

I'm a seller. Okay. S&P 500. Bearish, lower. About to 48, 50 or thereabouts. Gold. Gold. It had a huge surge in 2019 and 20. Gold was sideways for four years and gold had a similar surge.

That which was hated and ridiculed and scorn is now loved. It's on the cover of the Wall Street Journal. We're backing away from it. We're gonna let someone else trade that here. We think it's crowded and at risk. How about meta? I think that a general statement that is worthwhile, I think, is that there's nothing to be lost by postponing all new buying. If someone's that cost average down every month

and plays golf instead, do it every month, but you have to know who you are in the market. Nvidia. Nvidia. Now, for instance, look at the insurance stocks. Look how good Chubb is. Look how good AIG is. They're very defensive. Look at Berkshire Hathaway. There's a reason for this. Right? They're the only thing. Even with all the insurance craziness and fires and disasters. So a place to hide. There's a good ETF if you wanted to. It's KIE, and that picks up AIG and progressive and Chubb and Hall State and AIG and progressive and job and all state

and so forth and so on. How about Apple getting beat down with the tariffs? Apple I'd nibble. How about Nike? Nike? That's unhappy. That's unhappy. And sometimes this happens.

Great franchises, Nike, Disney. It's tempting always to think it's cheap. So Nike is the same price it was in 2015. It's down 2025. So adjusted for inflation, Nike's lost about 40% of its value. That's a disaster. I wouldn't step in and buy that. Why? Just because it's down? There's no thesis. Just one of the oldest rules in the book, hard to do. I'm constantly holding my own finger off the buy button. Don't buy stocks in downtrends. Just don't do it. But what about buy lows sell high?

Yeah, those are idioms and adages that they say they're melodious. They sound good in the air, but they're not really real. Stay away from this. I wouldn't buy this. Don't buy stocks in downtrends. It's a pretty good rule. I struggle with myself. I'm always tempted.

This is so cheap. I got to buy it. Don't do it. So what do you do instead? Is there something that you are bullish on that I didn't mention? I just showed you one of the great IE market insurance socks are fantastic even with all of the the craziness in the world and All of the natural disasters. Yeah. Well, there's some are life health insurance. They're not a flack doesn't care about disasters You're trying to property casualty. That's a different kind of thing. But MetLife, Chubb, Chubb is ensuring

antique clocks and that kind of thing. Case by case, they're not all great. But again, this is a very fine area of the market to be in right now if one has to be long. We under episode, as you know, Carter, with a tip that listeners can take straight to the bank. It could be anything that we talked about today around technical fundamental analysis, whether to buy, how to react to the news, anything. The thing that I would say if you really don't change your stripes, and that is the single most important thing. So someone told me once there's only three kinds of hands in the market. There's weak weak, there's weak strong, and there's strong hands. You can be two of the three, but you can't be one of the three.

So let's talk about it. Weak, weak is this. Ready? So weak, weak is this. We buy a stock at 10, it's 11. Feeling good. It's back to 10. It's 12.

It's 11. It's 10. It's 950. It's 9. I don't want it. Walk away. Meaning you're willing to acknowledge error, move quickly. Bought it at 10, it was 11, we didn't get it. Now it's 950, it's 9, I don't want it, walk away. Meaning you're willing to acknowledge error, move quickly, bought it at 10, it was 11, we didn't get it, now it's 950, walk away. Weak, weak, just hot potato, that's fine. And then there's strong hands, we buy it at 10, goes to 11, feeling good, we think it's

worth 30, then it goes to 12, but it's back to 9 now, back to 8, we buy some more. It's down to 7, fine, we're confident, we think it's eight, we buy some more. It's down to seven, fine, we're confident. We think it's worth 30, buy some more. It goes to five, it's cut in half, we bought it at 10, it's five, we're buying more. And ultimately we're vindicated, the thing that you're talking about, and it comes out and turns and it goes to 30.

That's strong hands. You took it, but the third thing you cannot be is weak, strong. You think you're strong, but you're not. So you buy a 10, and then it's 11, then it's 10, then it's 11, then it's nine. And the other guy walks away. Week, week, she walks away.

Get rid of it, don't want it. The weak, strongest, I can handle nine, then it's an eight, I don't know, I don't know. Then it's a seven, I think I'll buy some more. Okay, I should do it, I know I should do it. Buy some more at seven. Then it's six, oh, this is bad. That's five, all right, I gotta get out.

And selling it all, that's a disaster. That's not knowing who you are in the market. It's okay to buy it and be wrong, buy it at 10, sell it at 9. That's a disaster. That's not knowing who you are in the market. It's okay to buy it and be wrong. Buy it at 10, sell it at 9.50. We're wrong. Weak, weak. Just don't care.

Or strong. We're buying at 10. We think it's worth 30. It goes to seven, we'll buy more. It goes to five, we'll buy more. We're confident. We did the work. The team is smart.

We know what we're doing. And it merges like a phoenix. It goes to 25, you make money. But weak, strong. I think I'm strong. But you're really weak. And this is a mental thing. You buy a 10 and eight, and then you're like,

and then you walk away at five. It's a disaster. It can't be weak, strong. Weak, weak or strong? Weak, strong, no good. Money Rehab is a production of Money News Network. I'm your host, Nicole Lapin. Money Rehab's executive producer is Morgan Lavoie. Our researcher is Emily Holmes. Do you need some Money Rehab? And let's be honest, we all do. So email us your money questions, moneyrehab at moneynewsnetwork.com to potentially have your questions answered on the show or even

have a one-on-one intervention with me and follow us on Instagram at Money News and TikTok at Money News Network for exclusive video content. And lastly, thank you. No, seriously, thank you. Thank you for listening and for investing in yourself, which is the most important investment you can make.