The Market's Biggest Warning Signs Right Now with Todd Sohn | The Real Eisman Playbook Ep 66

Summary

Steve Eisman sits down with Strategas chief chartist Todd Sohn for a data-heavy tour of what charts and ETF flows are signaling. Sohn says semiconductors remain the market’s leadership group even after a huge run, while software looks messy and several mega-cap names such as Meta and Microsoft are flashing trend deterioration. Google stands out as relatively stronger, and GE Vernova is framed as a strong trend that is consolidating rather than breaking. The second half turns to ETFs as a structural driver of returns and behavior: Sohn says they now account for a huge share of trading volume, leveraged products have exploded in popularity, and thematic funds often deliver poor risk-adjusted outcomes. Eisman closes by stressing that tech concentration has made index ownership far less diversified than many investors assume, so a reversal could leave few places to hide.

Notes

• Charts are presented as a rapid way to reconstruct what happened across markets and detect when a thesis is wrong or right.
• RSI is framed as a momentum gauge, not a hard rule, for spotting overbought and oversold conditions.
• Semiconductors have surged since March 30 and now represent roughly 18% to 19% of the S&P 500.
• SOXX is described as super overbought and perhaps consolidating after a strong stretch and earnings/IPO catalysts.
• Todd treats semis as the current leadership group, with a sharp reversal likely to pressure index investors.
• Software is described as weak and messy, with prices mean-reverting toward moving averages.
• Todd suggests software is a trade to respect with stops or options, not an obvious conviction buy.
• GE Vernova is portrayed as a strong trend that got overbought and is now consolidating, which Todd views as buyable.
• Meta is viewed as technically weak, with Todd saying it looks more like a short than anything in its current shape.
• A flattening or rolling 200-day moving average is treated as a sign that the trend is changing.
• Microsoft is framed as weaker than Meta and close to retesting earlier-year lows.
• Google/Alphabet had gotten very extended and super overbought, implying a needed pullback before it becomes attractive again.
• ETFs are described as a direct measure of investor behavior because flows, volumes, and launches update daily.
• ETF trading represents about 30% of U.S. exchange volume on an average day.
• In stressed markets, ETF share of volume rises to roughly 40% to 45% as investors adjust exposures.
• Levered ETFs provide roughly 2x to 3x exposure to an underlying asset.
• Leveraged ETF usage is booming, with Todd citing a 2x SpaceX ETF launch as evidence of how far the market has expanded.
• Cumulative mutual fund flows since 1984 are now negative, which Todd calls a striking industry-level statement.
• Steve Eisman notes that actively managed equity funds have seen about negative $5.1 trillion of cumulative outflows.
• Actively managed ETFs are winning assets back because they are cheaper, transparent, and can deliver exposure to almost anything.
• Broad index ownership is becoming less diversified because technology now dominates major benchmarks.
• Owning the S&P 500, Russell 1000 Growth, or thematic funds implies heavy exposure to Nvidia, Microsoft, and Meta.
• Since the March 30 low, Todd says about $27 billion has flowed into tech ETFs while other sectors were roughly negative $4.5 billion combined.
• Factor investing is defined as selecting stocks by characteristics rather than by size.
• Quality ETFs can overlap heavily with the S&P 500 because the index itself has morphed into a quality-like basket.
• The biggest index names have so much free cash flow that they naturally screen as quality.
• Leveraged ETF assets are roughly $200 billion across a few hundred products, and the business can charge around 1% fees.
• Retail adoption of leveraged products accelerated after COVID because they can be used without margin and traded from a phone.
• Daily-reset leverage can amplify volatility because the product must rebalance back to target each day.
• Leveraged single-stock ETFs did not exist until 2022.
• There are now hundreds of leveraged single-stock ETFs, and the market caps of names receiving leverage keep getting smaller.
• Thematic funds blur sector boundaries and encourage crowding into single narratives.
• Thematic ETFs have a rough risk profile, with an average three-year drawdown around 32%.
• About 70% of thematic ETFs have a Sharpe ratio below 1, which Todd uses as evidence of weak risk-adjusted returns.
• Since 1990, only a few sector groups have exceeded 15% of the S&P: tech hardware during the dot-com era, energy in the mid-2000s, and software later on.
• Broader equity ETF flows are lukewarm, while tech remains the extreme part of the flow picture.
• Cyclical-versus-defensive flows are not showing much enthusiasm outside tech.
• A lot of industrial inflow is tied to the power story.
• Private credit headlines are making financials uneasy, which Todd interprets as a contrarian bullish signal.
• Healthcare has been the most frustrating sector over the last three years, with massive outflows.
• Healthcare’s share of the S&P has fallen from 16% to 8%.
• Small-cap ETFs had outflows last year for the first time since 2011, a rare signal for a key asset class.
• Energy saw a sugar-rush of inflows, but Todd says investors are now taking profits as the trade matures.
• Consumer discretionary is distorted by Amazon and Tesla, making equal-weight analysis more useful.
• Consumer staples were about 19% of the S&P in the early 1990s and are now about 4.5%.
• Options-based ETFs compete with Staples by offering S&P exposure, income, or downside buffers.
• REITs are framed as a contrarian diversifier that could work in another tech-bubble-style regime.
• A quality ETF with about $50 billion in assets is said to have near-perfect R-squared to the S&P 500, making it look redundant.
• Money market funds total about $8 trillion, or roughly 25% of the bond aggregate.
• Gold ETFs have seen money come out, which Todd reads as a possible bottoming process.
• Bitcoin is described as rough, with investors moving on from it.
• Bitcoin-related money has moved from DeFi into traditional finance, but Todd says ETF flows are now turning negative.
• Investors should pay attention to what they own because a bull market can hide more exposure than expected.
• Eisman says tech has become almost 40% of the S&P, and adding Google and Amazon pushes the relevant share well over 50%.
• Eisman emphasizes that index investors are no longer diversified because tech dominates market-cap benchmarks.
• Eisman says tech ETF flows are strong while flows into everything else are moribund.
• Google still looks good, but Meta, Oracle, Microsoft, and Amazon look weak to bad, partly because of AI software and capital-intensity concerns.
• The best-performing tech groups are semiconductors and tech equipment.
• GEV is highlighted as a power-related name that has also done very well.
• Eisman ends with a warning that if the current theme reverses, there will be nowhere to hide.