The Index Is at a High, Most Stocks Are Already in a Bear Market: Notes on Vincent Deluard

Contents

1. The host asked “we’re still in a bull, right,” and he turned the question around
2. The cracks showed up first on his own street
3. He doesn’t look at GDP, he watches what the tax office collects
4. Consumption is holding up, so where is the money coming from
5. Why the VIX is so quiet
6. The camera turns to Europe: France hits every marker
7. Money is flooding into East Asia, and the sea wall was built for three metres
8. Your account is still up, so how do you know whether you’re in that third
9. The news says oil isn’t high and inflation came down, so which number do I trust
10. Reference material
11. One Thing to Take With You

See one leaf fall and you know the year is late; look at the ice in the jar and you know the cold has come over the world.

—— 《淮南子・說山訓》（Huainanzi, “Shuoshan,” Western Han; translation mine）

On The Meb Faber Show #655, released 23 October 2026, StoneX global macro strategist Vincent Deluard said he is turning bearish on US stocks, and his reasons were structural. With the index at an all-time high, he counted more than 70% of US stocks trading below their 200-day moving average, while the average correlation of a single stock to the index had fallen to roughly 5% against a normal 50–60%. Re-running the volatility math with correlation back at normal levels, he put the VIX near 40 instead of where it sits. He flagged two things himself: the episode was recorded in the first week of October, and a technical divergence like this can resolve in either direction — the bottom catching up to the top counts as a resolution too.

The host asked “we’re still in a bull, right,” and he turned the question around

Meb Faber opened it lightly: US stocks at all-time highs, up over 10% on the year, nobody has a care in the world, we’re still in a bull market, right? Deluard’s answer was that a majority of US stocks would disagree.

Then he said something I found honest. After a seventeen-year bull market in which every dip was a buy, making this call is dangerous. He had been bullish on equities and on nominal growth since COVID, so the switch made him uncomfortable too. His phrase for the present was “getting long in the tooth,” and he pictured the Treasury Secretary waking up every morning asking how to make sure S&P and Nasdaq futures open green — a job he thinks is getting harder.

The cracks showed up first on his own street

What brings the episode alive is the Bay Area section.

He lives in Oakland. Look at the housing market there, he said, and you see two worlds: a crazy bull market above the ten-million-dollar price range, and at the same time prices down a fair amount where he lives. He drew a careful line around who he meant — not the people building frontier models, but the people working at Salesforce- and Adobe-like companies, whose home prices have come down and whose stock option packages have shrunk.

I stopped there. That group — maxing out the 401k, college educated, working in tech and services, owning a home — has been the hidden strength of US consumption for years. Deluard says they are starting to struggle, and his evidence isn’t a feeling: a fresh JPMorgan study shows withdrawals from investment accounts rising across the entire income spectrum, and Vanguard’s measure of emergency 401k withdrawals climbs every year. The famous K shape, he said, is now bifurcating again inside the top half of the K.

He doesn’t look at GDP, he watches what the tax office collects

The best line in the episode sits here. Deluard says he doesn’t know what GDP is — “is GDP growing right now because we’re talking? Did GDP increase when Netflix raised its pricing? Was that inflation or productivity?” In the fifties, when the economy made steel bars and cars, you could count the things. Now he thinks the concept leaves you more confused than before, and he puts PMI and sentiment surveys in the same bucket.

What he believes in is income, and the best way to track income is tax collections, which the US publishes close to real time. That gave him a puzzle. Before COVID, personal income tax collections grew around 4–5% a year. After COVID it was 6%, 7%, even 8% earlier this year. Where do those extra two or three points come from? He offered four hypotheses — understated inflation, a deficit near 6% of GDP run at full employment, a tech capex cycle worth close to 3% of GDP (an investment boom he thinks is bigger than the canals and the railways), and productivity — and his own answer is that it’s a mix of all four.

Then the change this year: collections started at eight or nine percent growth and are now closer to five. His gut number for where inflation actually sits is also 5%. Put those together and most people are making no progress in real terms. The official data shows it as well — the oil shock has been absorbed by wages, and real wage gains have been negative for four months.

Consumption is holding up, so where is the money coming from

This is where he joins the two threads. If real incomes aren’t growing, why does consumption look fine? Because the stock market has been going up and people have been pulling money out of investment accounts and 401ks.

It reminds him of 2006 and 2007: oil above a hundred and touching one-fifty one day, yields rising, consumption held up by homeowners harvesting equity from their houses, the savings rate very low and at times negative. Today the savings rate is at generational lows. His verdict: “the sole justification for the bull market is the bull market itself. It’s a very circular argument.”

Why the VIX is so quiet

This was the part I cared about most.

Volatility measures variance, and a portfolio’s variance has two components: the average of the individual variances, plus the sum of the correlation matrix. The second part normally dominates. Since the summer, Deluard says, that correlation matrix has basically gone to zero: about a third of US stocks trade at negative beta, and the average single-stock correlation to the index is around 5%. He calls it unprecedented.

He listed candidate causes — pair trades at hedge funds, the AI trade, earnings so good that people trade earnings instead of macro — and then said the cause doesn’t matter. What matters is that it has kept the VIX down. So he recalculated where the VIX would be with correlation back at a normal 50–60%: around 40.

He cross-checks against MOVE, the bond market’s volatility measure. Usually the two track each other closely, because stocks are discounted by a discount rate and a volatile discount rate moves stocks. Right now MOVE is at an all-time high while the VIX looks normal. His guess is that it resolves from both ends: bond volatility eases after this crisis passes, equity volatility comes up. And stocks have a hard time rallying with the VIX above 20.

The camera turns to Europe: France hits every marker

Deluard is French, and he gives his own country no mercy.

His thesis is that Europe today is where Japan was in 2011–2012, only uglier. Japan’s demography puts it ten to fifteen years ahead of everyone else, and it tried everything in order — fiscal didn’t work, monetary didn’t work, hoping for productivity didn’t work — until the only remaining route to growth was debasing the currency enough that exports and tourism picked up, which is how you escape a trap where the cost of debt exceeds the growth rate. The yen went from an 80 handle after the earthquake to 165 when he visited Japan this summer: the third largest economy halving its currency, achieved in relative peace and stability, with the banks doing well. On his reading, the Japanese experiment succeeded.

Europe wants to copy that homework under reversed conditions. Japan needed the Ministry of Finance, the Bank of Japan and a handful of big corporates — people from the same three schools — to nod. Europe needs seventeen countries on board, and every decision transfers money between them: cutting rates helps the indebted, weakening the euro helps the exporters. It has to be done in an inflationary world, facing a US president who sees trade as zero sum. As for the productivity reports, he has watched them for a quarter century, from the Lisbon strategy in 2000 to the Draghi report in 2025, and compares them to a rain dance around a fire.

Then he read out the checklist for a sovereign debt crisis: a high-debt sovereign, a big primary deficit, financed by foreigners, in a currency it cannot print, an economy that doesn’t grow, unpopular politicians who can neither raise taxes nor cut spending. “Perfect hit for France.” He added that what matters is r minus g — the cost of debt against the growth rate — and France’s gap is the most negative, while Japan’s is positive, which is why he thinks Japan has no debt crisis.

Money is flooding into East Asia, and the sea wall was built for three metres

Europe’s terms of trade shock is negative: pay more for energy, get less for industrial exports, support a growing population that doesn’t work. East Asia is the mirror image. His number is a current account surplus of 25% of GDP in South Korea and Taiwan, forecast to persist out to 2030. He mentioned reading that Samsung makes a billion dollars a day, more than Nvidia.

Then the best metaphor in the episode. People will say the central bank will sterilise and the government will manage it. Those tools work at small scale, he said, and it’s like the tsunami in Japan: the dikes were built for three metres and fifteen metres arrived. Run a quarter of GDP in surplus year after year and some of it leaks — into consumption, public investment, defence budgets — and that becomes pressure on rates and on the currency. He noted the Korean won up 15% against the euro over the past month.

The same logic explains his crypto ownership chart. The highest shares are South Korea around 20%, the US around 15%, Taiwan third. Koreans like to gamble, he said, and they have watched their banking sector go to zero several times in a lifetime, with a central bank persistently suppressing the value of their currency — so a preference for crypto makes sense.

He also dropped a number I didn’t expect: the average UK defined benefit pension held 50% in domestic stocks twenty years ago, and 5% today. The way they did it was to keep international equities and take the balance out of domestic ones. Foreigners sold first after Brexit, then came this institutional seller who never stopped, and the UK is now about 2% of global market cap — below its share of global GDP.

Your account is still up, so how do you know whether you’re in that third

My first reaction was to open my account and check. The useful takeaway here for an ordinary investor is that the index’s return can decouple from the state of most of what you own — when seven names carry an index, “up 10% this year” is a statement about those seven names.

So I turned it into a check I can actually run: instead of looking only at the portfolio’s total return, lay the holdings out one by one and count how many are above their own 200-day moving average. That ratio often tells a different story than the total. Deluard’s other observation works as self-diagnosis too: if your holdings have barely moved together these past few months, your portfolio’s measured volatility looks lower than the risk it carries, because what’s suppressing it is correlation — and correlation is the kind of thing that returns to 70% overnight on a bad day.

Let me be straight about a limit: I don’t know when it returns to 70%, and Deluard gave no timing either. What he gave was “if correlation normalises, the VIX belongs near 40.” That distinction matters. The first is a forecast; the second converts today’s price into a stated assumption. The second is the one you can act on.

The news says oil isn’t high and inflation came down, so which number do I trust

His shadow oil section takes exactly this apart. WTI doesn’t look high, but nobody consumes WTI — we consume diesel, gasoline and jet fuel. The price that matters for the global economy is what Asia pays for refined products: add roughly $20 a barrel of refining margin, then another $20 of transportation and insurance, and his conclusion is that “we are living in a 150 to 200 dollar oil world.”

On inflation he points to Chinese producer prices. Most of what we buy is made in China, so falling Chinese factory prices are a deflationary shock exported to us through Amazon and Walmart, and that, he argues, is the main reason inflation fell after 2022. Chinese PPI is now running at 5–6%, and the PBOC has been letting the yuan appreciate about 0.5% a month — prices and the currency rising together, two shocks for importers.

What I took from these two sections is a way to read a price: ask whether you, or your supplier, actually pay it. A futures quote, an official index and your realised cost are three different lines; they sit on top of each other in calm periods and separate under pressure. His biggest worry runs along the same wiring — expensive diesel passes into agriculture, fertiliser is still stuck in the Middle East and can’t be spread, and wheat, corn, rice and soybeans are all up 25–30% this year. Food prices, he said, destabilise policy in a way other prices don’t, especially for countries that import both grain and oil without easy access to dollars.

Reference material

• The Meb Faber Show #655, 23 October 2026, with Vincent Deluard, global macro strategist at StoneX; recorded in the first week of October
• Vincent Deluard’s X account and StoneX’s research service — the two channels he mentioned himself at the end of the episode
• Public data you can check yourself: US Treasury daily tax receipts, Vanguard’s 401k emergency withdrawal statistics, JPMorgan’s study on investment account withdrawals, CBOE’s VIX and ICE’s MOVE index, China’s NBS producer price index, MSCI country weights

One Thing to Take With You

An aggregate can keep rising while its components deteriorate, because the aggregate is weighted and you are not.

The whole episode circles one idea. Index, GDP, WTI, VIX, CPI — each is a weighted or averaged total, and totals hide dispersion. Deluard’s method, stripped down, is to take them apart: into stocks above or below the 200-day line, into a correlation matrix, into the actual price of the barrel you pay for.

Here’s something I’ve tried, and I’d suggest it to you — it has nothing to do with investing. Pick something you’ve recently summarised as “pretty good”: your health, a relationship with someone, a project in progress. Break it into three to five components and score each one as better or worse than last quarter. You’ll often find the total looks fine because one component is unusually strong and covering two that are sliding. Those two are where next month’s time should go. When I do this, the thing being covered up is almost always something I already knew and hadn’t wanted to admit.

Raw Markdown

This article is an educational discussion of investment method. It is not advice to buy or sell any individual security, offers no target prices, and does not analyze any current holding. Investing carries risk; make your own decisions or consult a qualified professional.