In today’s briefing:
- How to Trade the AI Panic
- US Market: WALK TO THE EXIT NOW BEFORE EVERYONE STARTS RUNNING!
- Is It All Over For U.S. Growth Stocks?
How to Trade the AI Panic
- The recent market pullback may have been attributable to a combination of breadth deterioration and a highly bifurcated market.
- In the short term, technical price action and sentiment have become stretched to the downside that a bounce is more or less inevitable.
- We continue to believe stock prices will rally into year-end, but we are watching for signs of a bullish follow-through after the reflex rally for confirmation.
US Market: WALK TO THE EXIT NOW BEFORE EVERYONE STARTS RUNNING!
- The US market is weakening again as an interday reversal after Nvidia results foreshadows continued selling in the AI theme. Market breadth is weakening and stocks at 52-week lows surging.
- Volatility has reached levels last seen during the tariff tantrum in April. Insider sales of Nvidia have surged since June. Private credit and private equity markets are showing stress.
- US consumption has narrowed and is highly dependent on stock market gains. Household debt levels are at new highs, and consumer sentiment is lower than during the GFC in 2008/09.
Is It All Over For U.S. Growth Stocks?
- A market leadership review shows a gradual rotation from growth to value leadership, and from high-octane momentum names to fundamentally driven investment factors such as quality and dividend growth.
- However, macro factors such as the possibility of Fed easing and short-term technical rotation patterns raise the odds of a growth rebound.
- We reiterate our view that long-term equity investors should diversify by adopting a barbell allocation to U.S. growth and non-U.S. developed market value stocks.
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