Hi everyone,
For today’s episode of Talking Markets I’m thrilled to welcome back our favorite cloud bear,
, for what was a characteristically fascinating conversation.Paulo sees potential market “fireworks” in August, perhaps followed by a positive Q4 before things get “sloppy” in 2026. We got into a ton in this catch-up, including:
"Echo Boom" and Speculative Behavior: Paulo describes the current market as exhibiting behavior similar to the “echo boom” seen in 2000. He notes the “speculative element is fully back,” with “max stupid” behavior (tons of examples in this epic X thread).
Broadening Top Market Pattern: Paulo sees the market forming a “broadening top,” characterized by new highs, new lows, higher highs, and expanding lows. This pattern is a “sign of a phase transition in the market that is in the process of changing direction,” likely leading to volatility that will “chop everybody to death.”
FO
MOU: Cash levels among fund managers are “back below 4%,” indicating widespread market participation driven by “FOMO - but not even fear of missing out. More fear of underperforming.”Seasonal Weakness: Paulo thinks we might get market fireworks soon, specifically in the “late summer window of August, September.” He suggests this period could generate a “5 to 10% market correction.”
Fourth Quarter Rebound: Paulo’s "base case is that we recover, possibly go on to expand a new top, one last hurrah for 3 to 6 months” after the August/September correction, as “fourth quarters tend to be very positive, in a year one”of a presidential term.
AI-Induced White-Collar Recession: He’s concerned a “significant wave of job cuts, within 3 to 5 years” due to AI implementation, particularly affecting white collar entry level positions. He thinks “the older than 55-60 and the younger than 30” age groups as being in a “particular vulnerability window for AI implementation.”
Trump and the Fed: Paulo is “98 Delta” confident that Trump is “laying the groundwork to fire Jerome Powell.” He expects Powell to “not go quietly” and for the situation to “end up in the courts.”
White Metals (Silver, Platinum, Palladium): Paulo sees an opportunity in “white metals,” and says that while they’ve already gone up, platinum and palladium are still off all time highs by a lot.
Hong Kong Equities: Paulo likes Hong Kong as a “proxy” to Chinese equities, noting that “Hong Kong was a better performer... the Hang Seng did better last year than the S&P did.”
Brazil: He has been “very bullish on Brazil for past kind of nine months or so,” but current political dynamics (Lula's rising popularity potentially short-circuiting market improvements) add some grey areas. He would “revisit it in another month or two if we can get a little more correction in here.”
Enjoy,
Maggie
Important Disclaimer: It is crucial to remember that this article is for informational purposes only and should not be considered investment advice. Consult with a qualified financial advisor to assess your risk tolerance, investment goals, and overall financial plan.
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