The Quality Stocks Index Is A Screaming Buy… For The Long Haul

The gap between high-flying tech stocks – soaring far beyond their earnings growth – and companies delivering slow, but steady growth, has reached an extreme last seen in 1999:

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Quality stocks are underperforming the overall market at levels seen in the late 1990s. (Source: Jeff Weniger via X)

The S&P 500 Quality Index ranks companies not by market cap or a compelling AI story, but rather by fundamentals. Earnings, profit margins, and financial leverage. Reasonable debt.

You know, the kind of stuff that makes your eyes glaze over. And the type of companies we like to hold for the long haul in our model portfolio.

Today’s underperformance in quality stocks is another sign that we’re in a cycle where tech earnings are driven by a story, not by fundamentals – classic signs of a bubble.

While most data points we’ve reviewed indicate the bubble is still in its early stages, the Quality Stocks Index at this extreme is a sign of a late-stage bubble.

Today’s Quality Index gives you another reason to take some profits off the table now, as we’ve prescribed in thePlunge Protection Plan.

~ Addison

P.S. We’ve invited New Yorker, Andrew Zatlin, to join this week on Grey Swan Live! for obvious reasons: we want to get a boots-on-the-ground look at what incited young voters to elect Zohran Mamdani, a democratic socialist, to office in the world capital of finance. It’s an entertaining subject, at the very least.

With customary aplomb, we expect Zat to regale us with his thoughts on Mamdani, the purported exodus of finance bros to Florida and Texas and what the Federal government shutdown revealed about unemployment and the real economy behind the AI capex spending bubble. More to come…

If you have requests for new guests you’d like to see join us for Grey Swan Live!, or have any questions for our guests, send them here.

The gap between high-flying tech stocks – soaring far beyond their earnings growth – and companies delivering slow, but steady growth, has reached an extreme last seen in 1999:

Turn Your Images On

Quality stocks are underperforming the overall market at levels seen in the late 1990s. (Source: Jeff Weniger via X)

The S&P 500 Quality Index ranks companies not by market cap or a compelling AI story, but rather by fundamentals. Earnings, profit margins, and financial leverage. Reasonable debt.

You know, the kind of stuff that makes your eyes glaze over. And the type of companies we like to hold for the long haul in our model portfolio.

Today’s underperformance in quality stocks is another sign that we’re in a cycle where tech earnings are driven by a story, not by fundamentals – classic signs of a bubble.

While most data points we’ve reviewed indicate the bubble is still in its early stages, the Quality Stocks Index at this extreme is a sign of a late-stage bubble.

Today’s Quality Index gives you another reason to take some profits off the table now, as we’ve prescribed in thePlunge Protection Plan.

~ Addison

If you have requests for new guests you’d like to see join us for Grey Swan Live!, or have any questions for our guests, send them here.

The stock market “rebalancing” is a polite way to put it. Energy and health care are getting a healthy boost. But tech hardware and software makers are still getting dressed down and have been asked to report to the principal’s office.

The great rotation underway has triggered a series of “Hindenburg Omens.” Five have occurred in recent weeks.

The S&P 500 has traded in a 3.7% range over the past two months — less than half the 20-year median of 8.6%. One of the tightest ranges in modern history.

In trader parlance, the indexes are “flat,” a setup that often materializes before a sell-off at the top after a multi-year bull market.

Goldman Sachs told its own traders to be aware that institutional trading activity resembles a VIX reading near 35. Rather than a reading of 20, where the VIX has been trading over that same 2-month period.

The U.S. software ETF, IGV, tested its April 2025 lows last week and trades roughly 35% below its peak. The “SaaS-pocalypse” in software companies reflects the fear of Citrini’s 2028 scenario happening in real time. That divergence now exceeds the spread seen at the peak of the Great Financial Crisis.

Under the surface, the “great rotation” we wrote about last week is threatening to widen.

Despite its overly-educated 40-million-plus population, on a GDP per capita basis Canada is null. Collectively, the Great White North would rank as America’s second-lowest state, coming in above Mississippi, but below Alabama.

SpaceX is the most valuable private startup in history — and if its success continues, it might become the most valuable public company in history.

After all, as Musk famously said in 2023, “I have never lost money for those who invest in me and I am not starting now.”

For investors, SpaceX has been a wild, joyful ride — and now the journey continues!