May 9, 2025 – Can investors outpace volatility in a year of global headlines and shifting trends? David Keller, Chief Investment Strategist at Sierra Alpha Research, joins Jim Puplava on Financial Sense Newshour to analyze current market dynamics. Keller is short-term bullish but medium-term cautious, noting that volatility is likely to remain high in a policy-driven, headline-sensitive environment. He discusses the underperformance of big tech stocks, the emerging strength in commodities like natural gas and copper, and the resurgence of value sectors over growth. Keller also highlights gold and Bitcoin’s recent rallies, driven by inflation and policy support. He emphasizes the importance of mindful investing, diversification, and following market evidence—especially as trends shift amid ongoing economic and political uncertainty.
Website: Market Misbehavior
X profile: David Keller, CMT (@DKellerCMT) / X
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Key points discussed in today’s show:
- Short-term Bullish, Medium-term Cautious: Dave Keller is optimistic about the short-term market trend but remains wary of medium-term risks.
- Market Volatility: High volatility is expected to persist due to ongoing policy changes and headline-driven events.
- Policy-Driven Markets: Political decisions and tariff announcements are driving much of the market’s recent movement.
- 200-Day Moving Average: The S&P 500 staying above the 200-day moving average is crucial for a sustained bullish outlook.
- Sector Rotation: Big tech “Mag 7” stocks are lagging, while value sectors like energy, industrials, and materials are showing renewed strength.
- Commodities: Natural gas and copper have seen positive momentum, while oil remains weak and copper is neutral.
- Gold and Precious Metals: Strong rallies in gold and silver reflect their role as inflation hedges and safe havens.
- Bitcoin and Crypto: Bitcoin’s volatility offers opportunity, but it’s not for the faint of heart; policy support for cryptocurrencies is increasing.
- Diversification and Mindful Investing: Investors should diversify beyond tech and index funds, focusing on value and income opportunities.
- Economic Uncertainty: Mixed economic data and consumer behavior shifts, especially due to tariffs and inflation, remain key risks for 2025.
Transcript
Jim Puplava:
Well, this is certainly turning out to be a momentous week. We just reached a deal with the UK on tariffs, and the Vatican has elected a new Pope, the first American Pope in history. The market seems to be liking that, as all indexes are on the upside. Let’s find out if this continues. Joining me on the program is Dave Keller. He’s president and chief investment strategist at Sierra Alpha Research. Dave, let’s begin with a couple of articles. You sent me a number of charts, but you’re short-term bullish, medium-term bearish. Explain that.
Dave Keller:
It’s great to be back with you, Jim. Thanks, as always, for the invitation. You have to consider the market on multiple time frames. If there’s anything I’ve learned so far as we progress through 2025, it’s that you must separate short-term disruptions from medium-term trends and long-term secular movements. Recognizing those multiple time frames that are always interplaying within day-to-day and week-to-week periods is so valuable. It helps you avoid making long-term decisions based on short-term data. In 2025, after a sell-off from a new all-time high in mid-February to a new swing low in early April, and then retracing a good amount of that sell-off back to around 5,700—where we’re at today—that’s a significant amount of volatility, which I don’t think is going to change. High volatility is going to be the norm. Recognizing short-term movements that turn into medium-term trends is key. For me, the medium-term time frame is about recognizing what we call the cyclical time frame, looking at a period of months as opposed to minutes, and understanding how those have shifted. When I look at the S&P 500 chart and apply my trend models, the short-term model is undeniably strong off the early April low. There’s no denying the strength we’re seeing, even this week, with additional upside follow-through for stocks—not just in big-cap technology, but in other areas as well. The medium-term time frame, however, has a lot to do with where a major average is relative to the 200-day moving average. Despite the rally off the early April lows, the S&P is still below its 200-day moving average. The last time we tested that was in late March, and we had a failure move before the new low. Until the S&P gets above the 200-day moving average, I think many investors, including myself, would consider this, at best, a neutral picture. A move above 5,750, with follow-through above 5,800, would adjust the contours of this market to a much more bullish outlook on that medium term.
Jim Puplava:
So, you would want to see a breakthrough above 5,800?
Dave Keller:
Yes, because that would complete a rotation back above the 200-day moving average. Many investors are still waiting for the next shoe to drop, expecting the next headline to cause the S&P to retest the April lows. If we get above 5,800, you have to abandon that mindset and recognize and embrace the strength we’ve seen in risk assets off the April lows. You follow the evidence, and if the evidence shows enough buyers coming in to propel us above that long-term barometer, you have to follow that trend higher.
Jim Puplava:
I can’t think of a year in the markets, Dave, where the political has so dominated. Everything we saw happen in the market was driven by policy—not a credit event, a bad unemployment number, or the economy. It was all policy. When you have policy-driven events, and I think we’re going to continue to see those this year, it makes for a more volatile and choppy market.
Dave Keller:
I don’t see volatility going down. I see many potential future paths for stocks, but I don’t see a path that involves lower volatility. That’s just the nature of a headline-driven society and market. Right now, you have an administration that is aggressively and vocally changing ideas, throwing new ones out there, and seeing what sticks. I don’t see that behavior changing anytime soon. The problem is that markets tend to like certainty and dislike uncertainty. They prefer being able to value a company’s ability to grow earnings quarters down the road and don’t like when that’s difficult to do. From the Fed meeting this week, it wasn’t a big moment in terms of interest rate policy, but it was more about expectations for future rate cuts. I don’t know what you heard, Jim, but I heard, “We’ll wait and see.” It was a sit-on-our-hands, let’s-see-how-this-plays-out approach. Even the Fed is waiting to gather more evidence. We’re increasingly focused on the latest headline, which generally means a more volatile market, with plenty of upside opportunity and downside swings within whatever longer-term trend plays out.
Jim Puplava:
Speaking of long-term trends, one thing we’re seeing is a gradual shift into the commodity space. Let’s talk about oil, which hasn’t done well this year, but natural gas and copper.
Dave Keller:
Within the energy space, people often think of it simplistically—I’m probably guilty of this more than anyone—as Exxon, Chevron, or ConocoPhillips, the big integrated companies. If that’s how you view the energy sector, you’re betting on crude oil prices. Of all the charts I’d show you in 2025, crude oil is probably one of the least impressive in the short term. It’s bounced off its April lows to around $65 a barrel, a far cry from where we were at the beginning of the year, around $80 a barrel. Crude oil prices have remained relatively muted. However, within the energy sector, areas like infrastructure plays, pipelines, and natural gas companies have done quite well. The XLE has had underwhelming performance in 2025, but there are opportunities, probably not in the big integrated companies, but in other areas of the energy sector. The reality is that big technology trends, from AI to everything else, require a lot of energy, and traditional fuels and other energy sector components make those possible. Natural gas plays are much more attractive, and we’re certainly seeing strength there.
Jim Puplava:
We’ve done very well with natural gas pipelines this year.
Dave Keller:
Yes.
Jim Puplava:
What about copper?
Dave Keller:
Copper is usually a basic material, an industrial material. It has a lot to do with ongoing conversations with the U.S., and its price has traditionally been a good indicator of economic growth and demand for natural resources or basic materials to build cities and connect them. From a technical perspective, copper prices have been neutral. While areas of the commodity space like gold and silver—precious metals—are doing quite well, and commodities like crude oil are struggling, copper has been in the middle. It had a strong first quarter but cratered in early April as the initial tariff announcements downgraded its value almost overnight. Now it’s sitting mid-range. From a technical perspective, it’s more neutral. A breakout in copper is likely part of a broader shift from the tariff tantrum and uncertainty of initial announcements to deals being made. We saw a deal with the United Kingdom announced earlier today, with a lack of specific detail but an encouraging initial step. More announcements like that, particularly with China, would provide clarity on valuing companies and economic growth based on the potential impact of tariffs. That would help copper prices. For now, it’s more neutral than anything.
Jim Puplava:
One thing I’m looking at, Dave, is from a thematic point of view. We’ve got AI and cloud data centers that consume a lot of energy. We’re trying to electrify our economy with EVs, which means more charging stations. We’re building windmills and solar—all of that takes energy, as we discussed, and that energy requires copper. Fundamentally, they’re not making new copper discoveries or seeing big new mines, and the same applies to oil. I can’t help but think that, longer term, prices will head higher with all this demand. But I want to change topics and go back to technology. Let’s talk about the Mag 7 stocks. I’m looking at their charts, and the only one that seems to have done really well is Microsoft, with blowout earnings, though they’re not quite back to where they were. Meta is still down, Nvidia hasn’t approached its highs, Tesla is the same, and so are Google and Apple. What’s your take on the Mag 7?
Dave Keller:
This is the problem with major benchmarks in 2025, Jim. That handful of stocks you mentioned has a huge weight in our benchmarks. In the S&P 500 and Nasdaq, a bunch of utility companies, industrials, materials, and energy stocks doing incredibly well don’t move the needle nearly as much as one big move in Alphabet, Meta, or Apple. Arguably, the weakness in stocks like Alphabet is holding the benchmarks back. When you think about how markets have evolved in 2025, tariff-related announcements have affected how we’re valuing these companies. For companies like Apple, there are big question marks about the long-term impact of tariffs and how they may need to adjust their business models, production, and material sourcing to navigate this new tariff landscape. At the end of the day, these big conglomerate technology and communication stocks’ oversized impact has been brought into question. The risk in stocks like Alphabet is tied to search. I don’t know about your behavior, but I probably use Google half as much as I used to. Other times, I’m using AI engines like Perplexity or ChatGPT because, depending on the question, those tools get me to an answer more quickly and efficiently. From a technical perspective, besides Microsoft, which gapped higher on earnings and has continued to drift higher, most of these stocks have more to prove. Most of the stocks you mentioned are still below their 200-day moving average. If they start to get above that, you’ll see optimism. Netflix, which you didn’t mention, has a better chart than any of those you listed. Following the strength is as important as ever.
Jim Puplava:
It’s amazing to see how much technology is changing the way we live. We were commenting with friends the other day—anywhere you go, Dave, at a restaurant, people are on their phones. At a baseball game, they’ve got their phones out. We have phones, iPads, and even the movie industry has changed. We used to go to theaters, but now you watch Netflix or Amazon Prime, streaming shows instead of just a two-hour movie. Everything is changing, for sure.
Dave Keller:
The question is which companies, technologies, and bets reflect where things are headed. If any companies can navigate this, it’s these large conglomerates with almost endless cash to throw at systemic problems. For now, I’m sticking with where we’re seeing the best relative strength in that basket. Microsoft gapping higher and following through post-earnings is one of the most encouraging things I’ve seen from the Mag 7 recently.
Jim Puplava:
One thing that strikes me is that when I got into this business, 50% of the S&P was made up of energy, industrial, and material stocks. Fast forward to the 2000s, and we almost ended up back in that position when oil hit $150 a barrel and gold went from $250 to almost $2,000. Today, energy is a small fraction of the S&P index, along with materials and industrials. I can’t help but believe, Dave, that we’re going to swing in the opposite direction.
Dave Keller:
At Fidelity, we did deep analysis on sector weightings, and you’re exactly right. In 1980, energy was the biggest S&P sector. In 1960, materials was the biggest, with steel companies and the like. Now, materials are a rounding error in the S&P 500. We’ve come through a period where technology, communications, and big internet-based consumer names dominate the benchmarks, our thinking, and much of our behavior. You could argue that, based on valuations, certain areas of the market, including big technology, are still quite overpriced. Other areas, however, are much more reasonably priced. You’re starting to see a resurgence in parts of the industrial sector. Value over growth is a theme many of us haven’t seen in a long time, but a bull market driven more by value than growth is a very real scenario. For me, it’s important to keep an eye on the charts because they’ll reflect when investors start making that bet. We may be seeing some of that in 2025.
Jim Puplava:
It’s amazing because, during disinflationary periods like the last decade, growth stocks do well. The financial system looks at future cash flows and discounts them at lower interest rates. In an inflationary period with higher interest rates, value and hard assets outshine.
Dave Keller:
Yes, very much so. You’re seeing that with gold rallying to the point it has, and silver and precious metals as well. A classic investing mistake is thinking whatever worked in the last cycle will continue to work. We may be going into uncharted territory where value has traditionally underperformed. If you look at previous playbooks during periods of chronic inflation, which all signs point to as the most likely outcome, value sectors are usually in a better position. I agree.
Jim Puplava:
People forget that when the S&P has gone up in the last couple of years, it’s been driven by the Mag 7 stocks—a handful of stocks, maybe 10 or 20, out of an index with 500 stocks. If you look at the other 480 stocks, many offer great dividend yields, low P/E multiples, and great value. We focus on the market’s P/E ratio, but a lot of that is driven by the Mag 7.
Dave Keller:
The weightings exaggerate this more than many investors realize. I haven’t done this analysis recently, but I wouldn’t be surprised if the top 10 to 20 S&P 500 names are about the same weight as the bottom 400 to 450 names. That shows the gap in influence between multitrillion-dollar market cap companies and smaller members of the S&P. The lower end is where you’re likely to find more opportunities, with value sectors represented, healthier dividend components, balanced growth opportunities, and more reasonable valuations. The bull market in 2024 was driven by big tech, so many investors are probably still overweight in those names, which made early 2025 a painful experience. Stocks like Nvidia and Palantir are great when they’re working, but when your portfolio is dominated by them, you feel all the pain and more on the way down. It’s an argument for diversification, particularly into areas of the market many were underweight in during 2024 and now need to reconsider in 2025.
Jim Puplava:
As money went into S&P index funds, most people don’t realize that about 30 to 35 cents of every dollar goes into these Mag 7 stocks. Conversely, when money comes out of the S&P, as it did with this downturn, these stocks suffer more. The best example I can think of, Dave, is that people forget what happened in 2022 when many of these Mag 7 stocks were down 40, 50, or 60%.
Dave Keller:
What I was taught is that the heroes in a bull market often become the villains in the next bear market. You’ve seen that. It’s tempting to chase performance in the later innings of a bull market—seventh, eighth, or ninth inning—with what has worked well. The problem is, at the beginning of the next drawdown or corrective period, those lead on the way down. In 2025, we’ve seen other areas of the market do much better than technology and communications, starting to outperform. When thinking about opportunities looking forward, it’s areas outside the Magnificent Seven that present a decent balance of appropriate valuations, good growth prospects, and an income component to help weather periods of instability, which I don’t see changing anytime soon.
Jim Puplava:
Let’s talk about my favorite Pepto-Bismol investment, which is Bitcoin.
Dave Keller:
That’s a fantastic intro, Jim. Cryptocurrencies, and Bitcoin in particular, have essentially been a leveraged equity bet in 2025. If you look at a Bitcoin ETF like IBIT, the iShares ETF, or GBTC, the Grayscale version, they outperformed the S&P and Nasdaq into the February peak. From February to April, they underperformed dramatically. Since the April market low, Bitcoin has outperformed the S&P and Nasdaq on the way up. This is not an asset class for people with a low tolerance for volatility—you need the Pepto ready. However, Bitcoin is appreciating, and from a technical perspective, breaking out above $90,000 to $92,000, a congestion area, was a bullish breakout. This week, Bitcoin pushed above $100,000 for the first time since its previous all-time high. We have an administration that’s made it clear they want Bitcoin and other cryptocurrencies to thrive, so I anticipate policy decisions and announcements to support that. They’ve made it clear they have a financial stake in cryptos doing well. The table is set for cryptocurrencies to continue improving. The long-term story is strong. When thinking of cryptos, focus on well-known coins with practical applications—Bitcoin as a potential store of value and means of exchange, or Ethereum with the Ethereum network’s practical implications. For every one of those, there are hundreds of small altcoins that don’t deserve your attention—they’re pure speculation. Finding cryptocurrencies with actual utility is a good way for traditional investors to get exposure. With ETFs being fairly liquid and growing in assets, that’s a low-risk, low-cost way to access these markets.
Jim Puplava:
Let’s circle back to gold for a minute. Over the last couple of years, normally when you see a strong dollar or rising interest rates, it’s been negative for gold, but that hasn’t happened recently. I think the main factor is the BRIC countries moving to gold settlement and massive central bank buying.
Dave Keller:
The trend in gold and other precious metals has been quite strong, with gold outperforming silver consistently over the last 12 months. Gold prices have reached impressive new all-time highs, pushing above $3,000 for the first time in March and now above $3,300 as we speak today. There’s no doubt that gold, traditionally a decent inflation hedge and store of value, is following through on that claim over the last six to 12 months. If inflation remains a key factor, which I think it does, gold is a decent place to be. The concern from a technical perspective is the strength and magnitude of the run so far. Gold’s performance in 2025 is up significantly from year-end, while the S&P and Nasdaq are essentially flat year-to-date. There’s been a move to gold as a safe haven. If the dollar dramatically improves or risk assets start to improve, that could take some wind out of gold’s sails, which has had a very good run. From a diversification perspective, I still think it’s a decent place to be. Don’t think of gold as a substitute for an equity allocation, but more as part of the fixed-income allocation. In a 60/40 portfolio, taking some of the fixed-income portion and putting it into gold may be a decent way to diversify and navigate this period.
Jim Puplava:
Final question, if I may. You said short-term bullish, medium-term bearish. What would need to happen for you to change from medium-term bearish to medium-term bullish?
Dave Keller:
The challenge with equities right now is that we’re all trying to draw long-term conclusions from very volatile short-term news flow. Every day brings a different bullish or bearish headline. We’ve seen that with economic data, which has been mixed. Some indicators suggest things are fine, with okay jobs growth, while we’ve had our first negative quarter of GDP. The prospect of a recession is very real. Economic data always has a built-in lag, so the stock market, one of the best leading indicators of the economy, will reflect optimism before it shows up in economic data. Things to look for include economic data or company announcements that help understand the state of the consumer. The biggest risk in 2025 is that consumer behavior changes due to tariffs or things becoming less accessible or more expensive, which could impact equities. From a technical perspective, getting above and staying above the 200-day moving average for the S&P 500 is key. As longtime letter writer Paul Montgomery famously said, “The most bullish thing the market can do is go up.” Investors who have been reasonably and understandably negative due to the deterioration in March and April need to recognize the market’s strength. The S&P getting above 5,750 to 5,800 converts many bears into a more bullish frame of mind, providing the next leg higher for stocks.
Jim Puplava:
All right, Dave, as we close, tell our listeners about Sierra Alpha Research.
Dave Keller:
It’s a pleasure, Jim, and I appreciate, as always, the great conversation and thoughtful questions. You kindly came on my podcast, The Market Misbehavior Podcast, where we try to highlight knowledgeable investors and share their insights. Sierra Alpha Research is designed to empower individual investors, self-directed investors, and financial advisors with the tools they need to move from mindless investing to mindful investing. Mindless investors get caught off guard, lacking situational awareness and not appreciating emerging trends or inflection points. We help people become mindful investors, appreciating the market’s context, focusing on what’s working and what’s not, and using technical analysis tools to improve decision-making through consistent processes. Visit marketmisbehavior.com to see some of my work, and I encourage people to check it out.
Jim Puplava:
All right, Dave, as always, a pleasure speaking with you. Have a great weekend, and come back again.
Dave Keller:
You as well, Jim. Thanks, as always.
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