Meb Faber: The U.S. Market Can’t Keep Winning (The Chart That Shows It)
Speakers
Summary
- The date is January 29, 2026; the US market (S&P 500) is trading at a CAPE ratio of ~40-44x, signaling extreme overvaluation relative to history.
- Commodities are in a massive breakout: Gold, Silver, and Copper are hitting all-time highs, with Silver breaking $120.
- There is a historic divergence between US Market Cap Weighted indices (expensive) and Equal Weight or International indices (cheap).
- Trend following and Managed Futures strategies are capturing "right tail" upside in commodities while US equities look fragile.
Trade Ideas
Meb confirms Gold, Silver, and Copper are hitting all-time highs (Silver broke $120). He notes that trend followers are "chock full" of these assets and that "normal" investors have zero exposure (under-owned). This is a classic Trend Following setup. The assets are breaking out to new highs, institutional ownership is low, and the "fear of missing out" (FOMO) phase hasn't fully hit the retail public yet. The breakout signals a continuation of the trend. Long Precious Metals and Industrial Metals via liquid ETFs. A sharp reversal in inflation expectations or a liquidity crunch causing a sell-everything moment.
Meb Faber
Co-founder and Chief Investment Officer at Cambria Investment Management
Meb notes that the S&P 500 is trading at a CAPE ratio of 40+, while the spread between Market Cap Weight and Equal Weight is extreme (7th percentile on a 5-year basis). He explicitly advocates for "ABMCW" (Anything But Market Cap Weight). When the largest stocks (Mega Caps) become historically expensive, the index becomes top-heavy. Equal Weight indices (RSP) rebalance away from overvalued giants into the average stock, offering a valuation safety net and mean-reversion potential. Long Equal Weight S&P 500 to capture US exposure without the valuation risk of the "Mag 7" successors. Momentum in Mega Caps continues irrationally (the "melt-up" scenario).
Meb Faber
Co-founder and Chief Investment Officer at Cambria Investment Management
Meb highlights that while the US is at ~40x PE, the rest of the world is in the "teens" or "single digits" (specifically mentioning Brazil). He notes "European banks outperforming Mag 7" and a rotation into value. Valuation spreads this wide historically lead to a rotation. Investors seeking yield and reasonable entry points will flow from the expensive US market to cheap International Value and Emerging Markets. Long International Value (EFV) and specific cheap EM countries like Brazil (EWZ). A global recession drags down all equities regardless of valuation; US dollar strength.
Meb Faber
Co-founder and Chief Investment Officer at Cambria Investment Management
Meb states that Trend Following (Managed Futures) solves portfolio problems by capturing "right tail" events (like the massive move in commodities) while chopping off the "left tail" (drawdowns in stocks). He mentions these strategies are up double digits year-to-date (Jan 2026). In a world where stocks are expensive and commodities are volatile/trending, traditional 60/40 portfolios fail. Managed Futures automatically adapt to go long commodities and short bonds/stocks if trends dictate, acting as a necessary diversifier. Long Managed Futures strategies to hedge against US equity valuation compression. Whipsaw markets (trendless volatility) where the strategy bleeds slowly.
Meb Faber
Co-founder and Chief Investment Officer at Cambria Investment Management
Meb compares the current US market dominance (23% of global GDP but a massive chunk of market cap) to the Japanese bubble of the late 1980s. He cites the CAPE ratio of 44 as a "potential turning point." At 44x CAPE, future returns are mathematically destined to be low or negative. The risk/reward for holding passive, market-cap-weighted US indices is historically poor compared to every other asset class mentioned. Avoid or reduce exposure to Market Cap Weighted US Indices. "Animal spirits" push valuations even higher (e.g., CAPE 50) before the crash.
Up Next
This Meb Faber Show video, published February 03, 2026, features Meb Faber discussing GLD, SLV, CPER, RSP, VXUS, EFV, EWZ, DBMF, KMLM, SPY, QQQ. 5 trade ideas extracted by AI with direction and confidence scoring.
Speakers: Meb Faber · Tickers: GLD, SLV, CPER, RSP, VXUS, EFV, EWZ, DBMF, KMLM, SPY, QQQ