Episode 303: Nominal Percent

 In this week's episode, David and Ian discuss the the recent rise in the U.S. Dollar and how that is interesting when paired with Emerging Markets and Small Caps outperformance. They also discuss the current range the S&P 500 has been in since May, the failed breakout in long-term interest rates, market breadth, and thinking in terms of percentages rather than nominal dollar values. 

Transcript

David 0:43

welcome back to the Weekly Trend podcast. Today is Friday, June 26th, 2026. S&P 500 currently sitting at 7375. I'm David Zarling. I'm here with Ian McMillan We had a week off, right? We had a week off

Ian McMillan 0:58

I don't think our listeners missed anything. It's where we were two weeks ago

David 1:02

You mean we shouldn't just publish things for the sake of publishing things?

Ian McMillan 1:06

Same spot we were at when we recorded Friday, May 8th

David 1:11

Oh

Ian McMillan 1:12

So may go away?

David 1:16

Ooh, that's, hmm. That's a good point

Ian McMillan 1:19

narrow, it's a pretty narrow...

David 1:21

It's narrow range

Ian McMillan 1:22

Yeah, S is not like we've fallen off a cliff.

David 1:26

That'd be more intriguing if we were down 15%. But valid, valid. We haven't gone anywhere for a month and a half

Ian McMillan 1:35

Some things have, I guess

David 1:37

Yeah I mean US Fed... Yeah, doll- oh yes, let's talk about this, the dollar

Ian McMillan 1:43

Yeah, so is this gonna... Oh man, I love. Okay, so We gotta set the stage, right?

David 1:50

Yep

Ian McMillan 1:50

We have been in weak dollar, good for stocks environment Correct.

David 1:57

Yeah,

Ian McMillan 1:58

Now

David 1:58

that's fair

Ian McMillan 1:59

we've had dollar rip higher. We actually bottomed back in, like, February, and,

David 2:06

been, we've been talking about, we've been talking about DXY 100, 101 for

Ian McMillan 2:11

So long

David 2:12

a long time

Ian McMillan 2:13

as resistance and now it's supporting it.

David 2:16

Yeah

Ian McMillan 2:17

So we're back up into this range, but I mean, okay, like if you had told me the dollar gonna move from 97 to high 101s in five weeks, then tell me that the S&P really wasn't gonna move I mean, that's kind of, that's intriguing to me

David 2:38

No, agreed Agreed. And like, what do you think about this? So like

Ian McMillan 2:43

other strong dollar we have gotten this and, and the markets have panicked. We've gotten like m- you know, 96, I mean, even below this or, you know, October 2024. I don't know, just every time we get like a weird

David 2:59

Well, even think about the strength out of the dollar in '21, '22, which saw a market, the S&P correct into a bear market by some people's terms. I-- we don't really live by this, but sub minus 20%. And here we break an important level. I think your point here is extremely a good one. Like, here we've been below 100, range bound between there and 97 for over a year. We get above there. Are we really seeing that much weakness? I, and then you look at small caps I don't know. Is that a thing? Is this, is, is this, is strong dollar small cap environment? Could be

Ian McMillan 3:42

Could be. I remember 2022, dollar was ripping,

David 3:47

Yep.

Ian McMillan 3:48

and we had that bear market.

David 3:49

Yep

Ian McMillan 3:50

literally, I mean, we bottomed in October 2022 as the Dollar Dixie peaked at like 1, 1.13,

David 3:58

Yep

Ian McMillan 3:59

eyeballing on my chart. So y- I mean, yeah. And then right, so... And then, okay, so to your point, that's the next thing. If you go to all four major indices, what has actually moved higher over the last

David 4:14

Yeah, year to date.

Ian McMillan 4:15

It's Russell

David 4:17

Yeah, year to date is the Russell 2000 So is that where, it, you know, it, it, it is evidence towards what are we talking about at the end of the year? Oh, strong dollar, small caps. Oh, it all made sense. Well, not necessarily in the first two quarters, but it might. You know, we're, we're only a couple days away from the fi- you know, completing two quarters. But we might be getting some clarity here where is it strong dollar, strong small caps through the rest of the year? In an environment which would be classic, in an environment where, oh, semiconductors, oh, SpaceX, oh, all these IPOs. Would it be all that surprising if your head was-- your eyes were faced that way and it actually was small caps who led the, for the rest of the year? It's a thesis, but I think you bring up a good point. Above a hundred, small caps have been doing well all year, and here we are

Ian McMillan 5:12

I would also say that emerging markets

David 5:17

Hmm.

Ian McMillan 5:18

Have held up well since... I mean, you've had the dollar move from 95 to 101 in emerging markets. I mean, they sold off like a little bit, but okay, let's look here. Emerging markets are up 16% over the last four months as Dixie's moved higher, and they're staying in line with the S&P are actually kind of... Well, they're actually outperforming the S&P

David 5:46

Yeah, they're outperforming. The alpha there is 14%.

Ian McMillan 5:49

so what, so we have, I'm not gonna say they're red flags, I'm gonna say that they're I mean, things that make me take notice

David 5:59

Yeah. Like, oh, this is important information

Ian McMillan 6:03

How you how does emerging markets outperform with the dollar moving higher?

David 6:10

It almost like, it's almost like that

Ian McMillan 6:12

like, last thrust, this last thrust from the beginning of May pushed us back over 100, and they... I'm not saying they substantially outper- But I mean, they're... I don't know. I just, I think it's very interesting

David 6:27

No, I think that's... Well, it's very interesting from multifaceted approach, but one of the biggest ones is, "Ian, that doesn't match the textbooks, man You're gonna have strong dollar and emerging markets outperform the S&P. I mean, there's, there's 14% alpha in emerging markets versus S&P year to date and trade-weighted dollars exceeding one oh one, one hundred

Ian McMillan 6:52

Which is a very big... I mean, this is... Oh my God. I mean, we talked about this in, like, client letters for years. Same with rates. I mean, dollars usual- I mean, it's in there 80% of monthly letters. And we talk about 100... And sto- I mean, stocks, right? So just in general, stocks are priced in dollars. Stocks are holding up

David 7:16

Yeah, hi

Ian McMillan 7:16

Richie, so you haven't seen that? Maybe it'll affect one thing that's... I mean, Bitcoins. The Bitcoin's still not too hot

David 7:26

Yeah, struggling That's it. Bitcoin's on the struggle bus

Ian McMillan 7:29

Still.

David 7:30

Still.

Ian McMillan 7:31

right

David 7:32

Rates. Well, we, before, before we get to rates, I just wanna highlight you'd be be- had been better off in emerging markets versus Bitcoin going on almost a full year here. But let's go to rates

Ian McMillan 7:47

Believe that. Oh, I believe that, yeah

David 7:49

Uh, 10-year yields still below 4.75, 4.78

Ian McMillan 7:59

Yeah, we kind of got some failed breakouts here.

David 8:01

Yeah

Ian McMillan 8:02

30-year more of a failed breakout, 10-year never really

David 8:06

Oh yeah, the T- the TYX, the 30-year,

Ian McMillan 8:09

UIX is

David 8:10

that's definitely a fail. Looks, appear

Ian McMillan 8:13

ripped Now we're back to where we were in March, so let's not act like we're all getting-- gonna be refinancing soon

David 8:22

But at the same time, you sit there and look at interest rate sensitive areas like home builders,

Ian McMillan 8:28

Yes

David 8:29

have recovered, and even like real estate, which is not a alpha generator per se, but is on an absolute basis participating. Or even like utilities, interest rate sensitive. It is notable that since the, I think it's a good term, false breakout in the 30-year yield, these things have done really well. On, on a absolute basis. I'm not saying on a... I'm not here

Ian McMillan 9:00

own, you wouldn't own real estate?

David 9:02

Yeah. You're not gonna ge- you're not gonna generate alpha there. But I think it's notable to say, "Oh, these are participating." You know, this is not, this is not the kid that's pouting in the corner in the classroom. They're actually participating in the class. It's good But they're not the A+ student.

Ian McMillan 9:19

leader.

David 9:20

They're not the leader

Ian McMillan 9:21

They're not like Team Kafka at recess kickball

David 9:24

No. But they're out there playing. They're not out there pouting, but they're out there playing. They're not out there being the alpha, and that's fine. But I think, I think it's notable that those areas, I, I think the... What you've highlighted with rates in conjunction with the dollar is, I think that's what our listeners should be kinda like Paying attention to here, like, oh, dollar's moving above 100 on a trade-weighted basis, but here we have emerging markets doing well, and we've got yield, 30-year yields way out on the spectrum coming in, potential false breakout. That, that's a pretty significant development considering you brought up at the start of this episode, we haven't really gone anywhere since using the S&P 500 since middle of May. There might be some development here

Ian McMillan 10:15

I guess the other theory would be that one of them is lying, and that is gonna be like a failed breakout on the dollar, emerging markets doesn't continue to outperform. Although, I mean, we're fe- we're I don't know. It's kind of far into it for that to be the case. Or, or people are willing to say, "I wanna own emerging markets so bad I don't care about the Forex headwind." May, I mean, that's also a legitimate case

David 10:45

Which that would be risk on

Ian McMillan 10:47

Yeah, that would be, I mean, that's really saying something

David 10:51

It is. And I, you know, I think you and I were talking earlier this week, what, what's interesting at this particular point in time for the market is the uptrend is intact. You have... You don't have financials outperforming, but they're participating. You have some of these areas that we just talked about, real estate, utilities, participating, not outperforming. But what's notable is that the uptrend is intact, broadly speaking. Semiconductors may not have-- It's really hard to say, "Oh, this is where high, high reward to risk exists for semiconductors." So it's a little bit, there's a little bit of fog of unknown right here in this particular spot in the market where you don't get to say, "Oh, yeah, clear leader, this is what's happening." But yeah, you don't get to say the uptr- the uptrend is over Is that a fair, is that a fair way to say it? Like, it's not like the, the prior leadership out of semiconductors and space and quantum and all those things are super clear

Ian McMillan 12:02

I mean, all that is still Hanging in there

David 12:06

Correct And, you know, we've heard about negative breadth. What do you think about participation and breadth of this market?

Ian McMillan 12:14

thought I s- and then I thought I saw Dietrich said NYSE Advanced Decline made it to new highs

David 12:24

You were right there You look at the show notes

Ian McMillan 12:27

And yeah, you looking at the workbooks? Pretty solid. Pretty solid from Industrials. Now, you know, now Industrials is a spot where It's tough on a relative basis. I don't know what they're doing today. But yeah, I mean Caterpillar's ripping. we stressing over the market if Caterpillar is all time

David 12:51

Right.

Ian McMillan 12:52

high?

David 12:53

Yeah, I think that's completely a valid point I mean, there's a lot of things that can

Ian McMillan 12:58

What do you think about

David 12:58

work like...

Ian McMillan 12:59

breadth is okay?

David 13:00

I do. I mean, we have most percent back in Xs

Ian McMillan 13:04

Yeah. Boy, can bullish percent consolidate

David 13:08

Sure

Ian McMillan 13:09

And then does that lead like, is there a history of it leading to,

David 13:13

Yeah, I don't have a research report on that, but it might be worthwhile. But I mean, if, okay, year to date Russell 2000 is the best index here today Second best is Nasdaq 100. You have the NYSE advanced decline line, new highs

Ian McMillan 13:31

S&P advanced decline line looks like it's a new highs

David 13:34

New highs. Bullish percent in Xs and not like to these extreme lever- levels. We're talking about like in the You have a put-call ratio in a lot of different metrics near one, which is way higher than I was expecting. And what I mean by that is the amount of hedging potentially going on right now is pretty impressive, and I'll always go back And I actually don't know who I first learned this from, and so if there's any way that that person is listening to me and like, "Dave, I'm the one who told you that," please speak up. You don't get nervous When they're shorting, continually shorting the market. You get nervous when they stop shorting the market, and they've continued to short this market. I mean, the fact that we have put-put call ratios across the board near one does not reek of throwing up the shorts, throwing up their hands. It's more same old, same old what we've seen over the past 12 months, which is over-hedging. And this is all happening, to your point, with a trade-weighted dollar above 101. You do sit there and wonder, okay, is it possible that the last six months... 'Cause we're coming up on six months for this halfway point. Are we gonna continue to see this move forward for the rest of the year, and how aggressive is it? Cause people are try- are still super skeptical of this market I don't know. Do you, do you have a sense in your, you know, in the, in your analysis and what you look at? Is it

Ian McMillan 15:09

just got like the longer we go on without I don't, I don't know. I don't know what people want. I definitely think that there's s- I think skepticism It's just probably frustration Um Right? 'Cause we just got another V bottom

David 15:30

Oh, like frustration of being, like, not overly exposed

Ian McMillan 15:33

Exact-- Yes. Yes Of like, how can this keep going? Why can this keep going? SpaceX at 2 trillion, this is so dumb. And like, I'm not saying $2 trillion IPOs are not dumb. I'm not saying they are. I mean, I don't know. I don't just- it kind of is what it is. gonna... There will be an IPO before I die that's probably like $20 trillion. I assume so. Definitely before my kids die

David 16:03

Yeah

Ian McMillan 16:04

Right, and 'cause it's so du- like, it's just always gonna be, and it always just feels. The first time there was ever a billion-dollar IPO, I bet people It's the same thing. I bet there was tons of newspaper articles about, oh my gosh, a billion dollars for an entire company, and how absurd that sounded.

David 16:23

Yeah

Ian McMillan 16:23

don't know. We'll see. I don't know. They're saying SpaceX is gonna buy T-Mobile now. So

David 16:28

That's a thing?

Ian McMillan 16:29

there's a rumor. Well, they've already been making a lot of acquisitions. Bill Ackman, he said it horribly and got flamed online, but part of SpaceX's value, like, is its value Like they can just go buy whatever they wanna create almost. They're gonna be given the ca- they, they were, they were just given the cash to do that. Whether you agree, I mean, the market, capital markets just gave them money to go built

David 17:01

Right

Ian McMillan 17:02

You and I couldn't do that

David 17:04

So the first billion-dollar IPO in US history appears to be Conrail in 1987

Ian McMillan 17:12

1987, the year I was born. So in my lifetime, we've gone from one billion to $2 trillion IPOs. I'm just... Okay, like, let's... It's just numbers, people.

David 17:23

Yes, it is.

Ian McMillan 17:24

It's just numbers like this, and it will contin- At one point, there was probably a $10 million IPO, and people

David 17:32

10 trillion? 10 trillion

Ian McMillan 17:34

And, and yeah. Well, 10, 10 million. At some point, do you think someone's IPO'd their company at a value of $10 million? Like

David 17:42

Oh, you mean back, back in history? Yeah.

Ian McMillan 17:44

back when,

David 17:45

Yeah, yeah, yeah. Yep

Ian McMillan 17:47

And they're like- When we talk about inflation

David 17:50

Yeah. Well, and okay, and this goes back to like are you living the nominal life or the percent- or the percentage life?

Ian McMillan 17:58

Exactly. That's a whole nother second level of thinking that many people never get to

David 18:04

And the best way I c- I know how to explain that is, and we experience this and educate our clients all the time about this, there's a point where your retirement account beta fluctuation of that account exceeds what you earned on an annual basis, on a nominal basis, on a dollar basis. And so you freak out, right? "Oh, my account's moving $120,000." Like, what?

Ian McMillan 18:32

I never freak up when it goes up 120

David 18:34

No, no, no. It's what it goes down. But as a percentage, you're fine, and that's throughout the history of the world

Ian McMillan 18:42

It is. It takes a lot to get used to that

David 18:45

Yeah. A- a- and throughout the history of the world though, it's, you gotta live the percentage life. And, and that's, that's-

Ian McMillan 18:53

big numbers are, they, they suck the first few times it happens.

David 18:58

Yeah

Ian McMillan 18:59

It sucks. I like,

David 19:02

I'm not here-- Yeah, I agree. I'm not here sitting here saying it's, it, it doesn't feel like that. I'm here to remind you that

Ian McMillan 19:09

nest egg and watched it go down 10% You

David 19:13

nothing, but it might be the nominal amount that might be the dollar

Ian McMillan 19:16

yeah, yeah, that's what I meant. Like, if you've got, let's say you You know, 70, 80 grand a year, saved up, and you got a million-dollar nest egg when you retire. People under 40 are gonna laugh at me. That, hey, the way it used to be. Right, you lose 100 grand in a year when you used to bring in before taxes 70 or after taxes 50, 55?

David 19:47

Up

Ian McMillan 19:48

Yeah, I mean, it's, it can definitely be a gut punch. And eventually you get used to it

David 19:54

Yeah, you have to think in percentage terms. If you are thinking in dollar terms, you are not thinking in the way that...

Ian McMillan 20:02

it'll only get worse,

David 20:03

Right.

Ian McMillan 20:04

the accounts are rallying

David 20:05

Yes And that's, again, that's inflation. Like, you- inflation doesn't think in dollar terms

Ian McMillan 20:12

Yeah, if there is still the same amount of US dollars floating around today that there was 40 years ago, and we wanted to have a conversation about different size IPO values, okay, we could have that. But that's not the case. We don't have the same amount of money in the system I don't know, what is, what's 2 trillion in 1987 dollars?

David 20:32

2 trillion and 87. So what are we sitting? We're sitting 26. We're sitting 30 years in.

Ian McMillan 20:38

Nine zeros?

David 20:39

Yeah, that sounds right I mean, I feel like, I mean And this is why as well, like when you think about governmental systems, why are we using what we're using for certain retirement calculations? Very frustrating But 2 trillion is just indicative of why we are involved in markets. Again, we are not involved in markets because they're fun, entertaining, even though you have apps like, I'll just call them out, Robinhood putting gambling on their app. Crazy. Being involved in markets is not the same as gambling

Ian McMillan 21:19

you doing like the prediction stuff?

David 21:22

Yes We're involved in markets that protect our purchasing power. Inflation is real. It always will be real. There's no avoiding it. IPOs are an example of that

Ian McMillan 21:34

So it's the equivalent of a $674 million IPO

David 21:40

Yeah, think about that

Ian McMillan 21:41

So all right, let's go look at like, I don't know, what's worth 670 million? I guess that's like your large mega cap-ish I don't know. What did Palantir tr- what does Palantir's IPO valuation, I don't know

David 21:56

So you're saying that

Ian McMillan 21:58

Palantir is

David 21:59

You're saying, what were, what were the numbers? That a couple trillion dollar IPO today is equivalent to- A couple

Ian McMillan 22:10

million

David 22:11

In '87

Ian McMillan 22:12

In '87

David 22:14

Everything is relative

Ian McMillan 22:15

Which was probably a lot back then. I

David 22:17

No, it i- it, it was a lot back then. But it, okay, this goes back to the human nature of Let's, let's talk baseball contracts Every time there's a new record...

Ian McMillan 22:30

Pretty,

David 22:30

What's that?

Ian McMillan 22:31

that's pretty pertinent. It's pretty pertinent given things going on

David 22:33

I know, I know. I agree. I've- we're probably getting a lockout. All those things aside, you look at contracts of baseball players over time, when has there ever been a year where a new contract is signed and, and, and some, I'm gonna say it, some old man goes, That's ridiculous. That's the biggest contract we've ever..." Yes, it always will be

Ian McMillan 22:59

It always will be

David 23:01

It always will be. Like why do we fight?

Ian McMillan 23:03

laugh, are gonna laugh that Patrick Mahomes was only making 50 million a year at some

David 23:08

I, I'm actually laughing at that right now. Like, that's ridiculous So, and we see this across sports, it's the same thing across markets, and it's actually the reason why you're involved with markets, 'cause you can't stuff cash in your mattress. That's not how it works There might be a time for that. I'm not saying you don't have risk management. I'm just saying the reason why you're involved in markets and the reason why we see the pro sports contracts that we see is, is inflation's all around us. It's, it's a normal part of economics. And you can like it

Ian McMillan 23:36

like, everything costs more

David 23:39

Yeah And it's also the same environment that provides economic ladders to people who wanna progress. Like, I don't... You can hate on it all you want

Ian McMillan 23:49

be- we're gonna buy like four Tauruses for 120 grand one day, just so people are aware

David 23:57

For Taurus

Ian McMillan 23:58

Do they still make those?

David 24:00

I have no idea, actually

Ian McMillan 24:02

Well, whatever the equivalent at the time of a Ford Taurus is. They will be

David 24:07

A Ford Taurus wagon With, with climate control Can you imagine, like, what our grandkids will say? Like, "What do you mean climate control? Like, you didn't have climate control?" No, I rolled my, do- down my window. That's what I did

Ian McMillan 24:23

I hope we're done with that

David 24:25

Yeah.

Ian McMillan 24:26

I

David 24:26

Crazy

Ian McMillan 24:28

grandchildren never hear about climate control

David 24:30

Ugh Crazy

Ian McMillan 24:32

we've gotten

David 24:33

We're all over the place

Ian McMillan 24:35

really on a big detour here

David 24:38

We have, and we need to get you out of here, so I better highlight the support of this podcast, which is the Adaptive Select ETF listed on the New York Stock Exchange under ticker ADPV, which helps investors access two of the most prevalent factors in markets, momentum and relative strength. Using proprietary identification methods, the Adaptive Select ETF attempts to own the strongest 25 large cap stocks when the market is in an uptrend. And since not all market environments are the same, Adaptive Select seeks to prevent extended declines by moving to short-term Treasury bills and cash during long-term market downtrends. Investors can find out more, including how to invest in ADPV, by visiting adpvETF.com or calling 1-833-880-5200. Investing involves risk, including possible loss of principal. ADPV is distributed by Quasar Distributors LLC. Ian, did you have anything else to add for our listeners? Cause I feel like I might have interrupted you there

Ian McMillan 25:32

No, no, no, you didn't. Yeah, definitely one of those wait and see. I think I about it earlier in the week. I mean, I blow... Let's call it 7260 and 7620. I don't know. Probably better off. I'm just gonna try my hardest to be twiddling my thumbs until we get out of this little range.

David 25:53

Yep.

Ian McMillan 25:53

game plan.

David 25:55

Allow the market

Ian McMillan 25:56

best suited to twiddle my thumbs

David 25:59

Mm-hmm. Hey, sometimes the best moves you make are the ones you don't

Ian McMillan 26:04

Yeah, and it's like I mean, what is this? A it's a 5% range

David 26:10

Normal considering the aggressive move we had from the, quote-unquote, Iran, Iran lows. Not too bad. Not too shabby Anything else you wanna highlight before I get you outta here? We ask our listeners to give us a high ranking on their platform of choice. Anything else?

Ian McMillan 26:26

I don't. Have a great weekend everyone