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My heart goes out to my leveraged and high-beta brothers and sisters. Thoughts and prayers
Financial Highlights
Market Volatility Continues; Tech Weakens and Uncertainty Grows
Markets stumbled this week, with the S&P 500 briefly erasing its year-to-date gains before rebounding slightly on Friday to end the week with +1.4% YTD gain. The index is up 15% from a year ago. Tech stocks, particularly the "Magnificent Seven," led the decline, with NVIDIA tumbling over 8% despite beating earnings expectations. The NASDAQ posted its worst weekly drop since September, reflecting investor concerns that the AI-driven rally is losing momentum and the growth narrative might be at risk. The Dow managed to rise nearly 1%, as investors rotated into more defensive sectors like consumer non-durables and health-tech.
This week marked a firm shift toward a risk-off posture. Treasury yields dropped as weak economic data fueled speculation about potential rate cuts, while Bitcoin and gold followed equities lower before bouncing back late in the week.
Economic indicators are flashing mixed signals. GDP growth held steady at 2.3% and corporate profits were strong in Q4 2024, but the GDPNow report from the Atlanta Fed raised concerns of a possible contraction brewing in Q1. Consumer sentiment is flagging, with the Conference Board's Confidence Index dropping to its lowest level since mid-2024. January's retail sales decline and rising jobless claims added to worries about a potential slowdown. Inflation remained sticky, with core PCE rising 2.6% year-over-year. It remains cooler than December but still persistently above the Fed’s 2% target.
Trade tensions didn’t do the markets any favors, with policy risk compounding the weakening economic reports. President Trump reaffirmed plans for tariffs on Canada, Mexico, and China, with additional levies on the EU set for April. Investors fear that trade disruptions could weigh on corporate profits and consumer spending, adding another layer of uncertainty to an already choppy market.
What This Means for Investors
With volatility running higher and economic signals mixed, diversification remains key. If investors haven't already, they may benefit from rebalancing portfolios, looking beyond tech, and considering defensive sectors and international opportunities. While pullbacks are unnerving, this one is not particularly unusual by historical standards. Market history suggests that pullbacks and consolidations can create long-term buying opportunities for patient operators.
Market Activity
Although stocks rose on Friday, it was a rough week overall with the NASDAQ crossing into negative territory for the year. Anyone who jumped on the Bitcoin bandwagon in the last few months needs a hug. The Dow now leads all major U.S. indices after a 1% rise week over week. Treasuries yields are dropping as the market starts to digest recent economic data. The 2-year fell below 4% for the first time since October and the 10-year inverted against the 3-month.
Stocks
Fixed Income
Economic Reports
GDP and PCE came in on target, but rising jobless claims, falling consumer confidence, and falling home sales were cause for concern. Next week is chock full of relevant economic reports, capped by a Powell speech.
This Week
Next Week
Earnings Releases
Despite lofty expectations and the pressure of supporting the entire global financial system, NVIDIA resoundingly beat on EPS, Revenue, and Blackwell sales [Report]. Unfortunately, during the after-hours session, the stock didn’t budge, and Thursday saw it fall heavily like the rest of the market. Market savior no more.
This Week
Next Week
Recommendations
Market Turmoil
- Inflation is no longer the scariest risk | Neil Dutta, uniquely bullish throughout 2023 and 2024, is cautious. Weakness is nipping at our heels, but all is not lost.
- More proof that US stocks are suffering from a momentum unwind, not a growth scare | The credit market is telling a different story than the stock market.
- Give it a minute | When the buzzing in your head gets loud, just breathe. It's usually better to do less than do more. Josh Brown offers some sage advice about our current environment(s).
New Int’l Monetary System, Who Dis?
- What a 'Mar-a-Lago Accord' Could Mean for the Economy | Joe & Tracy speak with Jim Bianco on Tuesday’s episode of Odd Lots. The so-called “Mar-a-Lago Accord” has become a curiosity on Wall St., with some analysts considering its merits more seriously and publishing notes about the rumored plan.
A Little Pick Me Up
- Giving a Sh!t is a Superpower! | Kobe and NHL players stand out for a reason.
- Berkshire Hathaway Annual Letter | Buffet is always worth reading, and this one demonstrates many examples of why he still stands out as a one of one investor. Buffet clearly envisions the end of the road and talks openly about Greg Abel taking the reins of BH. There aren’t many of these written by the man himself left. I can’t think of a job I’d want less than stepping into Warren Buffet’s seat.
Chart(s) of the Week
Here is a heavy dose of perspective. This is one of the highest bearish sentiment reactions amid a paltry drop in stock prices. We’re all so soft now 😭.
Source: Ritholtz Wealth Management; YCharts Data
The Citi Economic Surprise Index hard (actual, measurable) and soft (surveys, sentiment) data is diverging. Sentiment is far worse than the actual data (neither readings are on par with the worst of 2024 and look how that turned out). Don’t let emotion take the wheel just yet.
Source: Dan Greenhaus (@DanGreenhaus)
For the optimists in the crowd: We might have some good entry points in the future. But we also might have more pain on the way. Each of the marks below was preceded by larger corrections than we’re currently experiencing.
Source: SentimenTrader via Daily Chartbook
Thanks for reading
Related: Why Great Financial Stories Win Clients and Build Wealth