Episode summary
Quality in the Streets, Momentum in the Sheets | TCAF 217
Ask The Compound
· · Hosts: Josh Brown, Michael Batnick · Guests: Joe Terranova
Summary
The conversation centers on a market rotation away from the biggest AI and momentum winners and toward quality, healthcare, energy, financials, and other lower-profile parts of the market. Joe Terranova argues that the recent weakness in names like Palantir and Oracle is a sign of delevering and sentiment change, not necessarily the end of the bull market. He says the market’s structure has changed so much that corrections are now faster and more violent, but so are snapbacks, and he expects that dynamic to continue.
A major theme is that capex-heavy AI leaders have been rewarded because their spending has been paired with strong earnings growth, but the market is also becoming more sensitive to debt-fueled spending and to whether huge OpenAI-related commitments will actually be monetized. Joe Terranova says the recent pullback is also consistent with a broader shift in factor leadership, where quality, equal weight, and growth can matter more than a narrow mega-cap trade.
The back half of the episode focuses on rules-based investing and Joe Terranova’s JOT ETF. He argues that rules help investors do what discretion often cannot: sell and re-buy strong names when the model requires it, rebalance into strength, and avoid being trapped by emotion. He also makes a bullish case for 2026 and beyond, citing easing central banks, strong earnings, calmer rates, and a historically favorable midterm-election setup.
Key takeaways
- Joe Terranova says momentum has rolled over from dollar, crypto, metals, and rare earths into equities, with healthcare and energy starting to outperform.
- He argues the market is not necessarily topping, but delevering, and expects corrections and snapbacks to get faster under today’s market structure.
- Joe Terranova says capex leaders like Oracle and Palantir are getting more skepticism because investors are now more sensitive to debt and to whether OpenAI’s spending commitments are real.
- He says his rules-based JOT strategy is designed to act as a core holding and a shock absorber by rebalancing into factors like quality, momentum, and equal weight.
- Joe Terranova cites 21-for-21 midterm-election-year gains from the election date through June 30 as one reason he remains constructive on 2026.
- He argues long-term earnings growth, not multiple expansion alone, has driven the market’s gains and still supports the bull case.
Notable quotes
“Momentum has literally been the dominant factor in the marketplace since the Federal Reserve began the first rate cut in September of 2024”
“I don't think it's a long punitive period. If you think about what happened in 2022, okay, that was a nine and a half month process, but the Federal Reserve was raising rates at a historic pace”
“I think it's actually today below the level that it was at”
“I think benchmarks have been obliterated. I think what's more important is that you capture the personality of the market”
How the episode opens
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Good. All right, ladies and gentlemen, welcome to a live recording of the compound and friends. It's so nice to be here.
What is this place exactly? Is anyone Nobody actually knows, right? They shot severance in here.
It Okay. Okay. It's a Masonic lodge, I'm told.
Yes. Okay. All right, guys.
We are uh super excited to be here and uh we're going to we're going to have an awesome episode of the show. I want to just let everybody know. Um everything that goes on in this room is going to make it on the air into the actual recording.
I don't want anyone to be shy. I want to hear loud cheering when Joe says something that's cheery or loud laughing when Michael says something hilarious like what he just attempted but better. And uh you guys will be uh part of part of the show that we do.
Sound good? Yes.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- market pullback
- ai capex
- historical market trends
- rules based investing
- election impact on markets
Watch the episode
Watch “Quality in the Streets, Momentum in the Sheets | TCAF 217” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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