The Fully Invested Bear

This might just be my favorite interview of the year. I will humbly admit to learning more about technical analysis from my recent conversation with Jeff deGraaf than I had in the previous two years. And I shouldn’t be surprised—my friend Jared Dillian calls Jeff “the best technical analyst in the world.”

They worked together on Wall Street, and Jeff went on to found Renaissance Macro Research, where he’s the chairman and head of technical research. Institutional Investor has named him the #1 technical analyst for over a decade, and he’s a member of their Research Hall of Fame.

Beyond the Charts

Many investors fall into one of two camps: fundamentals-driven investors who think charts are tea leaves, or technicians who think fundamentals are noise.

Jeff started in the former camp. But his mentor at Merrill Lynch kept getting calls right by watching charts. And Jeff grew frustrated by the disconnect between what was “supposed” to happen and what would actually happen in the markets.

So, he pioneered a third path.

Now he treats charts as a starting point—not the whole process. He still cares about valuations and fundamentals. But he no longer works in vain, telling the market what it ought to do.

“I’ve just had a lot more success listening to the market,” he told me.

The Market Cycle Clock

One of Jeff’s most valuable tools is what he calls the market cycle clock. It plots inflation on the vertical axis and growth on the horizontal axis, creating nine zones that predict different market environments.

Turns out, inflation matters more to S&P 500 returns than GDP growth does. In fact, Jeff’s data shows that weaker growth often correlates with better stock returns—because the market responds more to policy expectations than to economic data. Weak growth signals that policymakers will step in. Strong growth signals they’ll take away the punch bowl.

We’ve all seen great economic news hit the tape only to watch the market sell off. Jeff’s framework explains why. The market isn’t acting irrationally—it’s pricing in what comes next.

Right now, according to Jeff’s model, we’re in a zone of slow growth with inflation still elevated. Historically, that produces annualized S&P 500 returns of around 6.5%. Not terrible, but not spectacular either. It’s a choppy, fickle market without much breadth—exactly what we're experiencing.

From here, the historical tendency is for inflation to continue falling. And the zone below this one—where we may be headed—is quite bullish for stocks.

What This Means for 2026

Jeff pointed out a trap that catches investors of all experience levels: they underestimate how high the bar is to be bearish. Bears always sounds smarter, but bullishness should be your default.

Nevertheless, Jeff calls himself a “fully invested bear.”

He’s always watching for risk, but he knows the probabilities. The S&P 500 finishes positive roughly 62% of the time. And if you had odds weighted 62% in your favor, you’d play as often as possible.

Jeff sees a market in decent shape heading into next year. December seasonality tends to be positive. The equal-weight S&P 500 is showing strength, suggesting a broadening beyond mega-cap names.

He does expect a reality check on AI at some point, which could eventually create better buying opportunities. Healthcare, in particular, looks attractive—cheap on a revenue-to-market-cap basis and starting to break out. “That’s the kind of thinking we like to hear,” Jeff said, “because you tend to have at the beginning of long advances [of] what we call the incredulous advance. Nobody believes it.”

Watch my interview with Jeff deGraaf by clicking the image above.

You’ll also hear:

• What to do when you’re in a bubble

• Jeff’s contrarian take on tariffs

• Why semiconductors look like they did in 2000

• Why the two-year Treasury yield tells you more than the Fed funds rate

• The difference between momentum markets and trend markets—and why it matters for you

I encourage you to watch my full interview with Jeff deGraaf by clicking here. His framework for thinking about markets is both rigorous and practical—and well worth your time.

A transcript of our interview is available here.

Learn more about Jeff deGraaf and Renaissance Macro Research here—and check out their podcast, Off-Script here.

Until next time, thanks for reading.

Ed D’Agostino

Partner & COO