The Fear Is Palpable, But Our Longs Continue To Revolutionize The World
Bryce here. I originally named this article "Where'd The Mojo Go?," but in reality the mojo for stocks – and AI stocks in particular – vanished over two months ago (we have DeepSeek to thank for that, see our recent article "It's All About Tech? Alway's Has Been" for more analysis on that).
Fear is back, and today we finally saw some signs of panic. The Mag 7 index is now in bear market territory, having pulled back around 22% from its highs set around January 22nd (again, corresponding with the release of DeepSeek).
Even Treasury Secretary Bessent (a former hedge fund manager) made the comment that the selloff of late has more to do with tech than geopolitics (are you reading Trading With Cody, Scott?). That said, I think his comment was a little too curt given that tech makes up the vast majority of American stock portfolios and he should be at least slightly concerned about the effect this bear market will have on Americans' perceived wealth. Contrary to his statement, the stock market crash is a MAGA problem (at least for the near term).
In any case, today's selloff was the worst we've seen since COVID, and you could tangibly feel the fear in the markets today. The Nasdaq closed down nearly 6% and many large cap tech stocks were down 8-12% or more. A good handful of non-tech bellwethers like UPS and Nike (NKE) closed at multiyear lows as those companies have direct exposure to tariffs and growing restrictions on global trade.
And let's just say that we are feeling worried as well. Trump's radical tariff plans could reshape the entire global supply chain if implemented and would be very inflationary as well (i.e very bad for the economy). Moreover, if you zoom out and look at 5-year charts for the big tech stocks, they are up 176% over that time and there is clearly still a lot of room to the downside if things truly crash.
But despite the fear, we think there is near uniformity of consensus around a possible recession at this point. The markets are starting to price in a declining US economy, and to be clear if the US actually does go into a deep recession, there is more room to fall.
