Welcome to MktContext. We cut through noise with thoughtful macroeconomic commentary and tactical market research. Written weekly for wealth managers and active investors to navigate today’s stock markets.
Current market timer: Bearish
In last week’s letter, titled “AI Bubble Bursting,” we identified a topping pattern in the S&P 500 and Nasdaq. This week, the indexes fell sharply, along with AI favorites like semiconductors and data center stocks.
We are witnessing a dramatic reversal as crowded tech positions are sold and the market braces for recession. The Nasdaq is down 8% from the peak. Semiconductors are down 27%.
But while tech giants struggle, the weakness has not spread to the rest of the market. Energy, Utilities, Consumer Staples, Consumer Discretionary, Healthcare, Financials, and Real Estate are all rebounding. The crosscurrents have never been stronger.
This week’s selloff was triggered by concerns over Meta’s capital spending, which turned free cash flow negative. Next week’s Amazon, Google, and Microsoft earnings could bring more bad news.
Is the selloff over? Or is there more to come? We discuss in today’s letter…
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