February 20, 2026 – FSWM’s Chief Investment Officer, Chris Puplava, examines whether the “running hot” economy thesis remains intact. Citing strong market breadth, surging advance-decline lines, and broad participation across cyclical sectors like energy, materials, industrials, banks, and transports, Puplava argues the bull market is still firmly in place. He also addresses AI’s impact on software, shifting Fed policy dynamics, dollar weakness, and the outlook for gold and interest rates. While acknowledging potential risks—such as rising bond yields or a yen carry trade unwind—Puplava maintains that pullbacks would likely present buying opportunities. Have any feedback, breaking news, or comments about today’s show? Click here to send us a message.

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What Chris Puplava says

The “running hot” economy thesis remains intact based on current market data and technical indicators.

The S&P 500 is showing strong market breadth, with elevated 52-week highs and a surging advance-decline line.

Key cyclical sectors — including industrials, energy, materials, banks, and transports — are outperforming and trading above their 200-day moving averages.

Value stocks continue to outperform growth, with strength also seen in small caps, emerging markets, and other risk-on assets.

Weakness in software due to AI disruption is not materially harming the broader economy.

Potential labor market softening from AI could temper wage inflation, giving the Federal Reserve room to remain dovish.

The U.S. dollar remains below its 200-day moving average, signaling a possible secular regime change.

Gold is strengthening across global currencies, potentially breaking out of sideways consolidation; silver shows early bottoming signs.

The firm remains overweight equities versus bonds, expecting potential pressure on interest rates from stronger growth and increased debt issuance.

Key risks include a yen carry trade unwind or a sharp surge in U.S. bond yields, though neither is currently evident.

Transcript

Cris Sheridan:
Well, today we’re going to discuss whether or not the economy is going to continue running hot, and some of the technical indicators that we use at Financial Sense Wealth Management for assessing the strength of the stock market and much, much more. Joining us on the show today is our Chief Investment Officer, Chris Puplava. So Chris, last month you produced a piece we posted on Financial Sense talking about the outlook for running the economy hot. We’ve already seen that. We have now seen some inflation data come out, along with GDP numbers. What is your assessment of the running-hot economy, and do you think this is going to continue for the remainder of this year?

Chris Puplava:
I do, Cris. You know, one of the things is my background is in science. My degree is actually in biochemistry, which is obviously different than what I’m doing now. But as a scientist, you have a thesis and you run experiments to see if your thesis is validated by the data. That’s what you can do with investing. You can have an outlook, but you always have to test that against what the data is actually doing. And the markets give us daily data. When I look at the data, I still see that the thesis of the economy running hot this year continues to be intact.

For example, recently we looked at the S&P 500 and the number of stocks hitting 52-week highs versus 52-week lows, and we just saw the highest level of new highs in the S&P in well over a year. So to me, the stock market is showing incredible resilience and strength. It’s broadening out. If you look at the advance-decline line for the S&P 500, it’s absolutely surging. So in terms of the market doing what you would expect it to do if the economy is strong, I continue to see that.

Additionally, looking at the credit markets, looking at distressed debt yields versus junk yields, we did have a little bit of a dip earlier this month, but that’s since come back. I’m not seeing any real glaring signs there. And also, if the economy is going to accelerate, what you would expect to see is those industries and sectors most tied to the economy doing well. And that’s exactly what we see.

For example, when you look at the S&P capital goods industry—think Caterpillar, Cummins, or Eaton—the percent of stocks above their 200-day moving average is almost 90%. That’s the highest level we’ve seen in almost two to three years. That sector is looking really good. Its performance has been blistering compared to the S&P 500.

You look at the energy index—95% of its members are above their 200-day moving average. It’s had great relative strength to the S&P. When we look at the materials sector, same story there: 96% of the materials sector stocks are above their long-term moving average, and they’ve beaten the pants off the S&P since the start of the year.

Then when we look at other sectors such as banks, for example, 100% of the banks in the S&P 500 bank index are above their long-term moving average. So you’ve got banks, industrials, energy, materials.

The other thing too is, if the economy is accelerating, with all this activity you’re going to have to ship goods for exports and consumption. When you look at the transportation S&P industry, you’re seeing 92% of its members above their long-term moving average. That index recently hit an all-time high, and it’s beaten the S&P by a sizable margin over the last couple of months.

So when I look at that, Cris, to me I’m seeing no signs at all that this thesis is starting to unravel. Now there is obviously some weakness when it comes to software and concerns that AI is going to replace a lot of those companies. But I don’t see that hurting the broad economy overall. When you look at the cyclical sectors, they’re still doing really well. A lot of these are classified as value versus growth, and value continues to outperform growth.

You’re also seeing this in emerging markets, foreign equities, and small caps. All of these risk-on areas are still outperforming the broad index and look very healthy. So again, as of right now, I don’t see any major warning signs that this thesis is unraveling.

Now there could always be corrections. Obviously, today we have some turmoil with the Supreme Court knocking down Trump’s tariffs. There’s uncertainty about how Trump might try to get around that. But overall, absent normal healthy pullbacks and corrections, I think those would still be buying opportunities because it’s very rare that you ever see the market peak on peak momentum where you’ve got 52-week highs at their highest level in over a year. Usually you see deterioration before a major top. So again, I think any weakness would be a buying opportunity, and I still see the market heading higher in the months ahead.

Cris Sheridan:
You mentioned the damage that we’ve seen in the software space because of the rollout of agentic AI. That was something we discussed this week on FS Insider with Xavier Stonehouse regarding what we’re seeing with developments that are moving very, very fast—with OpenAI, with Claude Cowork, and just in general the increasing autonomy of a lot of these large language models being able to multitask and do all sorts of different things. It’s quite amazing.

But I could be wrong on this. It would seem to me that a lot of these software companies could very easily incorporate agentic AI into their own business models. Yes, they may end up firing or laying off some of their workforce, as we’ve already seen with the big tech companies. But that’s honestly going to make them more productive and more valuable in the end if they can make that transition.

Chris Puplava:
I would agree. I think a lot of companies are going to see rising profit margins. And for the broad market, if we do have some weakness in the labor market—where we will likely see some jobs displaced by this—then we’ll probably see wage inflation tempered. That is a huge component of overall inflation levels.

So if inflation can stay tempered and you see some softening in employment, that gives some credence or support for the Fed to remain dovish in terms of cutting interest rates because job growth is stalling and inflation is not heating up, as well as continuing to expand its balance sheet.

That’s going to be important. If Trump isn’t able to get around the Supreme Court’s knockdown of his tariffs, then what we’re going to see is a budget deficit blowout because of the loss in tariff revenue, which means more debt issuance. That’s part of why we’re seeing interest rates spike and the dollar weaken today.

It’ll be very important for the Fed to continue expanding its balance sheet if we’re going to have a greater supply of debt issued by the U.S. Treasury.

In terms of the dollar and the implications of this, today you’re seeing gold back comfortably above 5,000—around 5,070 or so. When I look at gold versus foreign currencies, it is up against every single world currency. The same holds true over the last month, three months, and six-month period.

This could be the catalyst to end gold’s sideways consolidation. Gold is starting to strengthen here. Same thing with silver—there’s potential that silver is trying to put in a bottom. I’m not as confident on silver as I am on gold, but it does look encouraging.

The dollar continues to remain below its 200-day moving average. One of the things you and I have talked about repeatedly over the last several months is the potential for a secular change in the dollar. As of right now, I’m not seeing any sign that the breakdown in the dollar is a false move. The longer the dollar stays below the 200-day moving average, the more it solidifies that we have a regime change underway and the dollar is likely heading lower.

Cris Sheridan:
As you mentioned, in 2025 we were seeing a parabolic increase in prices for both gold and silver. You were looking at that from a cautious standpoint. You had previously been quite bullish on metals but were recommending perhaps lowering exposure given the parabolic move and rotating into other parts of the commodity space.

Energy was one area in particular you discussed in 2025 that looked particularly attractive, as well as the materials sector. What have we seen happen since then?

Chris Puplava:
Well, the energy sector continues to head higher, obviously getting a bit of a lift from concerns about a possible U.S. strike on Iran. It is a little overheated, so I wouldn’t be surprised to see the energy sector pull back a bit. But overall, I think the breakout we’ve seen in energy is solid. Absent any near-term consolidation, I think energy is going higher.

Energy more or less peaked in ’22, went sideways for three to four years, and then had a major breakout. I still think energy is going to be one of the top-performing sectors of the year, and we’re already seeing that—it’s up almost 23% year to date.

On the fixed-income side, part of what we’re doing is focusing our bond exposure based on our views. When you look at our asset allocation of stocks versus bonds, we’re overweight stocks because we think interest rates could be pressured higher with the amount of debt issuance and a stronger economy.

Even within corporate bonds, we’re focused on the sectors we like, such as energy and materials. We’re also getting creative by looking at convertibles. One position we bought for clients was a convertible energy stock that, if it doesn’t work out and the stock doesn’t do much, will behave like a bond. But if the stock does well, the convertible will perform more like the stock. That’s done really well for us too.

So far, our thesis has remained intact, and that’s showing up in performance. We’re really happy with how the year is going so far.

Cris Sheridan:
So Chris, in sum, when you look at the technical outlook for the stock market—advance-decline lines and many of the other indicators you follow—you still believe the bull market is in place for the U.S. stock market. That aligns with the idea that the Trump administration is going to continue running things hot with the U.S. economy. That favors industrials, materials, and cyclical parts of the market, which is where we are positioned.

And particularly as it relates to the U.S. dollar, if we continue to see the dollar in this bearish trend as it has been, that continues to favor these areas as well. So that’s going to be a key area of focus. Does that summarize how we’re positioned and our outlook, or is there anything you’d like to add?

Chris Puplava:
No, that’s a good summary of where we’re at. We continue to look at the market to see if our thesis is validated. I would say the biggest concerns I have are possibly a major breakout in the yen that could lead to an unwind of the yen carry trade, or a substantial rise in U.S. bond yields.

Everything you want to see is gradual. The market has a hard time with shocks, but as long as things are gradual, the market can absorb that. So those are the big things to worry about—a yen carry trade unwind or a huge surge in bond yields. But as of right now, I don’t see that. I still think the bulls have the upper hand at this point.

Cris Sheridan:
Chris, if any of our listeners would like to contact you about our money management services and see how they can participate in what we’re doing here at Financial Sense Wealth Management—whether it’s corporate bonds or the specific sectors we have exposure to—what would be the best way for them to contact you?

Chris Puplava:
They can reach me at 888-486-3939, or they can shoot me an email at chris[dot]puplava[at]financialsense[dot]com.

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