Sven Henrich: "Stocks Are In Uncharted Territory"

There's "zero history whatsoever" of current stock valuation levels sustaining

When Sven Henrich of NorthmanTrader.com was last on this program in November, he gave the advice "remain bullish, but be careful"

Since then the S&P has continue to rise. So his guidance proved out.

Here at the start of 2025, what does his Technical Analysis tell us to expect next?

And did the shock to investors delivered by China's surprise release of the DeepSeek A.I. model change his outlook at all?

Sven shares his latest outlook along with the warning that his data sets show "zero history whatsoever" of current stock valuation levels sustaining.

So get ready for a volatile year.

To see his charts explaining why, click here or on the video below:

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Adam’s Notes: Sven Henrich (recorded 1.30.25)

EXECUTIVE SUMMARY:

• Sven highlights a growing disconnect between financial markets and economic fundamentals. Despite Germany experiencing two years of negative GDP growth and reducing its 2025 forecast to 0.1%, the German DAX has hit new all-time highs. Similarly, the FTSE in the UK continues to rise despite stagnation. This underscores the dominance of liquidity over economic fundamentals in market behavior.

• Sven identifies three key factors fueling market liquidity:

  • Firstly, massive U.S. deficit spending of $2 trillion in 2024, with no signs of slowing.

  • Secondly, Corporate buybacks expected to reach $1 trillion in 2025, according to Goldman Sachs and

  • Thirdly, Reverse Repo Facility depletion, which provided $2.3 trillion in liquidity since 2022 but is now nearly exhausted, posing a risk to markets if not replaced.

• Market valuations have reached historically extreme levels, with S&P 500 GAAP price-to-earnings (P/E) ratios exceeding 30, a level only previously seen during the dot-com bubble. Additionally, household equity exposure is at record highs, and short interest is at record lows, indicating extreme investor confidence. Sven warns that a 10-20% correction would not even return valuations to normal historical ranges.

• Given extreme valuations and the likelihood of heightened volatility, Sven emphasizes that