"We're Worried About 2027" - Stocks To Plunge 30%? | Chance Finucane @OxbowAdvisors

Texas Instruments

Across the shows: 1 speaker in other episodes, 1 bullish and 0 bearish calls, past 30 days

• Chance Finucane · Oxbow AdvisorsBullish

  Texas Instruments is less volatile with more consistent earnings than high-flying AI chip names; a small position.

  Oxbow took a small position in Texas Instruments, less than 1% of the portfolio, as an alternative to high-volatility AI names like Nvidia and Micron. Oxbow sees it as less volatile with more consistent earnings. If Oxbow is wrong and AI names fall significantly, the hit to the overall portfolio would be minor.

  “They're less volatile, more consistent earnings, names like Texas Instruments and ASML but they're small positions.”at 7:57

ASML Holding

Across the shows: 1 speaker in other episodes, 1 bullish and 0 bearish calls, past 30 days

• Chance Finucane · Oxbow AdvisorsBullish

  ASML is less volatile with more consistent earnings than high-flying AI chip names; a small position.

  Oxbow took a small position in ASML, less than 1% of the portfolio, as a lower-volatility alternative to high-flying AI chip names like Nvidia and Micron. Oxbow sees ASML as having more consistent earnings. Because the position is small, a significant decline in AI names would be only a minor hit to the overall portfolio.

  “They're less volatile, more consistent earnings, names like Texas Instruments and ASML but they're small positions.”at 7:57

Zoom Communications

Across the shows: 1 speaker in other episodes, 0 bullish and 1 bearish calls, past 30 days

• Chance Finucane · Oxbow AdvisorsBullish

  Zoom is a cheap business whose stock is also lifted by its Anthropic stake, which Oxbow monitors.

  Oxbow bought Zoom when it traded at a cheap valuation and likes it as a business. Its stock has appreciated about as much because it owns a stake in Anthropic. That stake is only a fraction of Zoom's total valuation, but people use Zoom as a public-market proxy for Anthropic, so Oxbow monitors that to avoid getting caught in the hype cycle.

  “And we like Zoom as a business that traded at a cheap valuation when we purchased it a while back, but its stock is actually appreciating as much because they own a stake in Anthropic.”at 8:45

Agnico Eagle Mines

• Chance Finucane · Oxbow AdvisorsBullish

  Agnico Eagle Mines is the highest quality public gold miner; kept as a core holding.

  Oxbow considers Agnico Eagle the highest-quality gold miner available as a public security. Even while trimming volatile silver and silver miner exposure, Oxbow keeps core high-quality names, including Agnico, and some royalty businesses. The recent gold miner rally retraced about half, and Oxbow is watching it closely before adding back exposure.

  “Agnico Eagle Mines is the highest quality gold miner that we think [exists] as a public security.”at 35:13

Energy Select Sector SPDR Fund

• Chance Finucane · Oxbow AdvisorsBullish

  Energy remains Oxbow's favorite sector, though a 2022-style stall after the spike is a risk.

  Chance uses XLE, the energy sector ETF, as a proxy. He says it is up more than 50% year to date, roughly double the next-best sector (tech), and that the move is underappreciated. Energy is still Oxbow's favorite sector. The firm has raised energy to about its maximum weight, nearly 20% of the high-income portfolio. The main driver is the oil spike tied to the Gulf situation, which Chance says is hard to predict. He has trimmed the more volatile parts: uranium, coal and the tanker company Transocean. Most of the core positions are intact. Chance warns that the last oil spike, in 2022, sent energy stocks up more than 60% in that year, then energy went nowhere for three years. He says this is not a prediction, but a slowdown in growth and falling inflation would be a difficult setting for energy. The firm is watching for that over the next six months. If it happens, the firm would pull back toward its core holdings, the pipelines and other high-quality players, and sell more of the periphery. The pipelines make up about half of the energy allocation. They are less volatile, have steadier cash flow through the cycle, and pay good dividends, so the firm does not trade them much.

  “it's up more than 50 year to date which is essentially double the next best sector in the market ... It's still our favorite sector at this time”at 45:16

US stock market outlook

• Chance Finucane · Oxbow Advisors

  Concerned about 2027; a 30%+ stock market drop wouldn't surprise Oxbow, possibly a buying opportunity later.

  Oxbow's directional data only extends through roughly the first eight months of 2027, but it looks concerning. They expect a storm to get through first, with a possible buying opportunity in the back half of 2027, though how long and how deep it runs is hard to say. They would not be surprised by a 30% or greater stock market decline, so they are positioning portfolios so declines are well under half of any market drop. They will trim recent winners in January to be better sized for a difficult first half of 2027.

  “I think we're pretty concerned about 2027... There's a good chance that could provide an opportunity for us, in the back half of next year to get some good buys, but you gotta get through the storm first... I don't think we would be surprised if the stock market went down 30% or more, and we wanna make sure that we are allocated properly heading into that.”at 15:18

• Chance Finucane · Oxbow Advisors

  Record gap between trailing and forward PE signals a significant bear market once the ratio rolls over.

  Oxbow watches the gap between the Shiller trailing price-to-earnings ratio, based on ten years of earnings, and the forward P/E. That gap is very wide after ten years of uninterrupted growth, and the forward P/E has come down. Going back decades, when this period of uninterrupted gains ends and the ratio rolls over, a significant bear market has followed. The reverse is also true: when the two ratios converge at a low level, as in the early 2000s and 2009, it has been a great buying opportunity. Oxbow says the market is very far from that point.

  “when you've had this period of uninterrupted great stock market, it tends to proceed as soon as that ratio rolls over. It's a pretty significant bear market that's ahead.”at 19:41

• Chance Finucane · Oxbow Advisors

  US stocks may enter a long range-bound market where only active allocation earns returns.

  Chance argues that the market has had a very long bull run, with a secular bull market since 2009. He says that is not the whole story: there have been ten to sixteen year stretches with no new record high, such as 2000 to 2013 and the late 1960s to 1982. An index investor who just holds through those periods goes nowhere. Chance thinks the market might start another range-bound period like that. If it does, the only way to earn a return is to actively adjust positioning among stocks, precious metals and bonds. He also points to extreme valuations after the strong run, and argues that clients should ask how much stock they really need. Adam Taggart agrees and says the active approach may suit the coming market better than a passive one.

  “we might start a new range bound market like that and the only way to generate a return is going to be actively adjusting”at 44:16

US Treasuries & yields

• Chance Finucane · Oxbow Advisors

  Since 2020 a new era of rising yields; Oxbow buys 2–3 year Treasuries and avoids going further out.

  Oxbow sees yields as on a path higher over time since 2020, though they will be volatile and can drop over twelve-month stretches. When maturing Treasuries free up proceeds, they have been buying two- and three-year Treasuries, especially as yields neared 5%, which Oxbow calls the best level in quite some time. They have not gone further out than three years because of their view that yields will rise on average.

  “I think that goes back to our view that since 2020, we're now in a new era where yields are going to be rising. They'll be volatile.”at 13:19

• Chance Finucane · Oxbow Advisors

  Short-term Treasuries yielding 4-5% are a strong base with next to no downside.

  Chance says that Oxbow keeps its focus on the short end, roughly two to three years or less. At those maturities investors lock in about 4% to 5% annual returns with little downside risk. He contrasts this with the decade when short-term Treasury yields were zero for years. He says the yield lets investors earn a solid return while they wait for better opportunities. Parking money there also cuts the risk of a major drawdown. Chance argues that drawdowns are when investors make their worst emotional decisions. The firm adds other opportunities on top of this base where the downside looks low. Chance also ties this to clients who have sold a business or inherited wealth, arguing that short Treasuries let them avoid investing it all at once.

  “That's a great base rate to have ... it's definitely a real leg up that you can know that you can be making 4% for free pretty easily with next to no downside risk”at 52:55

Gold & precious metals

• Chance Finucane · Oxbow Advisors

  Long-term precious metals conviction intact; trimming volatile silver and miner exposure short term.

  Gold rose from about $4,000 to $4,700 and gold miners rose about 50% in roughly six weeks, but the move has since fizzled into a lower high. Gold has fallen back to about $4,100 and miners have retraced about half the rally. Oxbow cut precious metals from about 15% of the high-income portfolio in January to 6-7%, added back to about 12% in July after a pullback, and recently sold silver and a silver miner. Oxbow keeps its long-term conviction but manages short-term choppiness by trimming volatile positions and keeping core high-quality holdings like gold bullion.

  “our conviction, we still have the same conviction long term, but we need to manage the risks short term.”at 34:45

• Chance Finucane · Oxbow Advisors

  Gold between $3,800 and $4,200 looks like a good price; Oxbow holds a precious metals core.

  Oxbow has a constructive view on precious metals, which Adam Taggart describes as a ten-year bullish outlook. Chance says the firm treats roughly half of the precious metals sleeve as a core, high-quality holding that it keeps at target weights. The other half is traded actively: they lighten up when prices get ahead of themselves and add on valuation dips. Chance says the firm thinks the current gold range of about $3,800 to $4,200 is a good price. He also stresses that they must plan for a break below those levels. He cites the 2011 to 2016 decline in gold, silver and miners as a reason a holder could capitulate, so the firm weighs that downside scenario against its bullish view.

  “And we think that this is a good price here where the gold price is somewhere between 3,800 and 4,200”at 39:37

AI bubble & tech valuations

• Chance Finucane · Oxbow Advisors

  AI beneficiary stocks are priced too high; tech downside around 30%, so Oxbow avoids adding or holding them.

  About 30 AI-beneficiary stocks make up roughly half of the S&P 500's market cap and move opposite to the other half. Oxbow thinks the prices investors must pay for AI beneficiaries are too high relative to the downside. They see roughly 30% downside for tech stocks, which is too much to meaningfully add or hold. Investors remain very bullish and are rotating from AI into non-AI stocks, which Oxbow reads as a sign that exuberance is somewhat too high.

  “For us, we just think the prices that you have to pay for the AI beneficiaries is too high, the downside is too steep. You can make a case that tech stocks, the downside is 30%”at 3:42

AI chips & semiconductors

• Chance Finucane · Oxbow Advisors

  Semiconductor stocks face about 50% downside; memory chips peaked in June and are already down about 40%.

  Memory semiconductor names and the Korean stock index, which is mostly two memory names, all peaked in June. A September rally in AI names made a lower high, and they have fallen again. Memory semiconductors and the Korean index are down about 40% from highs, and semiconductors fell 16% in eight trading sessions. Semiconductors are cyclical, and cyclical tech tends to struggle when growth and inflation slow, which Oxbow sees as the backdrop for at least half of 2027. Its downside for semiconductor stocks is about 50%, so Oxbow isn't adding to or holding those sectors.

  “the downside for semiconductor stocks specifically is more like 50. That's just too much downside for us to meaningfully add or hold positions in those sectors.”at 3:53

Market sentiment, positioning & volatility

• Chance Finucane · Oxbow Advisors

  Investors remain very bullish, rotating from AI into other stocks; this exuberance seems too high.

  Investors are still very bullish on stocks in general, and it continued through October. When AI stocks pull back, the whole index does not fall because money rotates into non-AI stocks. That shows investors still want full stock exposure, which makes Oxbow a little wary that exuberance is too high. Oxbow is comfortable with its equity exposure only as long as it pays reasonable prices for what it owns.

  “investors are still very bullish on stocks in general... when you have these pullbacks in the AI stocks, you're not seeing the whole index go down because all they're doing is rotating into the non AI stocks.”at 4:10

US growth & recession risk

• Chance Finucane · Oxbow Advisors

  Growth and inflation both slowing in first half 2027 would be the worst backdrop for stocks, especially cyclicals.

  Historical data shows the worst environment for stocks is when economic growth and inflation both slow. In the first half of 2026 growth accelerated because it was cycling the 2025 tariff announcement, and inflation spiked as oil jumped with the war. In 2027 those year-over-year comparisons flip, producing steep base effects in both growth and inflation. Going back through decades, a significant slowdown in nominal GDP growth has made it hard for stocks, especially cyclicals and tech, to perform. The market may already be pricing this in about three months ahead, versus the usual one month.

  “there's good data that just suggests that the worst environment for stocks is when you have a period where you have both economic growth slowing and the inflation rate is slowing. And a lot of that has to do with comparisons versus what happened in the previous year.”at 17:01

US rates & the Fed

• Chance Finucane · Oxbow Advisors

  New Fed chair may wait longer, but the Fed would likely still step in during a deep market crash.

  Given the Fed's history, Oxbow thinks it would likely still step in during a truly bad market even under new leadership, though it might wait longer. A 50% decline would hit consumer spending through the wealth effect, since so much household savings sit in the S&P 500. A research service Oxbow uses estimates the stock-driven wealth effect has had triple its long-term average impact on consumer spending this year, which shows how much people rely on it.

  “He might wait longer. I think we would think just knowing all the Fed's history, even if there's a new person at the top, they probably still are going to step in.”at 21:50

US consumer

• Chance Finucane · Oxbow Advisors

  Stock-driven wealth effect is unusually large for spending; a market reversal would hit consumer activity hard.

  A research service estimates the positive wealth effect from rising stock portfolios has had triple its long-term average impact on consumer spending this year. This shows how much households rely on stock gains to keep up their lifestyles. A significant reversal would hit economic activity and consumer spending, and a 50% market decline would be the extreme case.

  “I actually just saw a report from a research service we use that estimates that the wealth effect or the positive wealth effect from stocks going up in everyone's retirement portfolios and whatnot has had triple the impact on consumer spending this year than ... the long term average”at 22:16

AI infrastructure & data centers

• Chance Finucane · Oxbow Advisors

  Data center construction is the only growing construction segment, making the economy dependent on it.

  Latest construction spending data shows data centers growing more than 70% annually and power, tied to data centers, growing about 10%. Every other sector, including residential and manufacturing, is negative year over year. The economy is therefore bifurcated, and any slowdown in data center or power construction, whether from financing constraints or big players pulling back, could alone drive an economic slowdown.

  “The only growth in construction spending [is] more than 70% annual growth in data centers. ... Every other sector of the economy, whether it's residential, manufacturing, all the way down, negative year over year.”at 23:00

Credit markets

• Chance Finucane · Oxbow Advisors

  Muni-Treasury spread blew out, then should compress; Oxbow buys shorter munis meanwhile.

  Adam asks whether municipal bonds look more attractive now that yields are higher. Chance says Ted Oxbow has long focused on tax-adjusted yield. Munis are more attractive than before, but investors must watch the spread between munis and Treasuries of the same maturity. That spread got abnormally wide at some point recently. For clients who needed more munis, Oxbow filled those positions with shorter-term munis, and it is keeping the focus short-term, the same as with Treasuries. Chance expects the spread to compress, which would mean munis look less attractive relative to Treasuries. He says there will be opportunities to add at good relative yields every year.

  “there was some point relatively recently where that spread got abnormally wide ... But then that spread between munis and treasuries will compress”at 1:04:54