In a recent interview on the David Lin podcast, investment strategist Gareth Soloway observed that the S&P 500 is showing patterns similar to those seen in 2007. He pointed out that the market has experienced drops followed by rebounds, which, in his view, could lead to a new all-time high before a significant downturn. Soloway attributed this potential pattern repetition to consistent investor behavior over time, driven by emotions such as greed and fear.
Soloway also discussed the Federal Reserve’s possible actions, particularly the expected pivot in September. He noted that, historically, markets tend to roll over when the Fed starts cutting rates, suggesting that this might indicate economic trouble. He highlighted that the dollar’s weakening and the decline in 10-year yields are signals of an impending economic slowdown, which might force the Fed to cut rates more aggressively. Soloway expressed concern that the Fed’s dovish stance could be a sign that they are seeing troubling data that has not been fully disclosed to the public.
On Bitcoin, Soloway mentioned that its performance has diverged from traditional tech stocks, with money moving out of high-risk assets like cryptocurrency and into more stable investments. Despite recent declines, Soloway remains cautiously optimistic about Bitcoin, provided it stays within its current parallel channel. He suggested that if the stock market weakens, Bitcoin might attract more investment as a safe haven. However, Soloway warned that if Bitcoin were to break below this channel, it could experience a significant drop. He also pointed out that the current correlation between Bitcoin and smaller-cap stocks, rather than tech giants, might influence its movement.
Regarding gold, Soloway highlighted its strong performance, including recent new highs driven by a weaker dollar and increased buying by central banks. He had previously predicted this rise and continues to view gold as a strong investment. Soloway believes gold could reach around $2660 by early 2025, although he anticipates some short-term pullbacks. He noted that gold’s rise is also influenced by the increasing U.S. debt and the potential for more government spending during a recession, which would further support gold prices.
Soloway explained that his current market strategy involves a focus on the short side despite some buying opportunities during recent market dips. He sees potential in specific sectors like gold and small-cap stocks, especially if interest rates decline. Although Soloway remains bullish on Bitcoin, he advises caution, suggesting that investors should be ready to exit quickly if the market shows signs of breaking down. He also mentioned that he holds a significant position in long-dated puts on the NASDAQ 100, reflecting his bearish outlook on the broader market.
Finally, Soloway emphasized the importance of technical analysis, particularly the Relative Strength Index (RSI), for identifying signs of market weakness. He explained that while RSI levels can indicate overbought conditions, it is the divergences that often signal more significant market movements. Soloway also discussed the limitations of trading based on historical patterns or emotions, stressing the importance of relying on technical indicators to guide investment decisions.
