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A new round of recession fears rattled markets Monday, sending the Dow Jones Industrial Average down more than 1000 points and eroding Wall Street consensus that U.S. stocks would be among this year’s biggest winners.
Many investors had anticipated that American exceptionalism—the perceived advantages the U.S. has over other countries, such as its economic strength and technological innovations—would help drive another year of robust stock gains.
But worries about a trade war, signs of flagging growth and splinters in the artificial-intelligence trade have taken some of the shine off that optimism. President Trump over the weekend refused to rule out a recession this year, setting off a fresh wave of declines in U.S. stocks. The S&P 500 fell 3%, while tech-heavy Nasdaq Composite lost more than 4.5%. Bank stocks slid, along with shares of smaller companies perceived to be sensitive to the economy. Bonds rallied.
The S&P 500 fell 3.1% last week, wiping out its postelection gains and pushing it into the red for 2025, a rare stint of underperformance versus many global peers. The Nasdaq Composite entered correction territory, a drop of 10% or more from its recent high.
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"Wouldn’t it be great if there were some way to quantify exuberance? At market extremes there can be. Speaking in 2002, Sun Microsystems CEO Scott McNealy was brutally honest about how dumb it was for investors to buy his company’s stock at the peak:
Two years ago we were selling at 10 times revenues when we were at $64. At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now, having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those basic assumptions are? You don't need any transparency. You don't need any footnotes. What were you thinking?
And Sun was cheap compared with Cisco Systems, which fetched as much as 38 times sales and briefly became the world’s most valuable company. There have been many comparisons with Nvidia, which recently won and lost that crown. The AI chipmaker fetched as much as 56 times sales last year. In January it lost more market value in one day than Cisco was worth at its peak.
McNealy’s take is forehead-slappingly obvious in hindsight, but don’t buy or sell stocks on that measure alone. Outside of semiconductors, a sector inflated by Nvidia, one of the highest sales multiples back in January could be found in out-of-favor biotechnology companies. Many have little to no revenue but lots of promise.
At the other end of the spectrum are food retailers, which typically trade around one-third times sales. As much as people complain about grocery prices, supermarkets earn paltry profit margins.
A company that’s very profitable like Nvidia can still look reasonable on a price-to-earnings multiple. “Look” is the key word since it’s been in business for decades and its operating margin has quadrupled recently—a hard thing to sustain, as Cisco and Sun both learned.
Even simpler numbers might have given us pause. Two months ago Nvidia was worth as much as the entire German and French stock markets combined and twice as much as all U.S. energy stocks.
What were we thinking?"
https://www.msn.com/en-us/money/top-stocks/the-mounting-case-against-u-s-stocks/ar-AA1ADpKO
Nasdaq Comp, R2000 and DJ Transports were already below 200-dMA.
Only DJIA remains at 200-dMA - it may follow others this week.
% stocks above 50-dMA remain negative (comparing with Friday).
$NYA50R, NYSE %Above 50-dMA 34.91% (negative)
$SPXA50R, SP500 %Above 50-dMA 43.20% (negative)
https://thelogic.co/news/canada-us-trade-war-eggs-fentanyl/
just providing a cleaner link. Easy for me to do on my computer (not so easy on my phone.)
Elon Musk retiring from government service to tend to his sinking car company and exploding rockets?
I wasn't aware eggs became this expensive since I usually have cereal for breakfast.
I was so stunned by the price that I forgot Crash is in Hawaii!
What I can offer as a best case is no Tariffs on Mexico and Canada to the extent they impose Tariffs on China, which can happen but the timing likely is after the 19th. No benefit to let the pressure off on FOMC. China's official economic report on Monday was that their inflation reading was negative. So, they have a capacity to absorb some of the Tariffs.
The other possibility is (and one can only hope) a reduction of rioters' mentality at the leadership level - not sure that is palatable enough for many. But to expect them to change their overall approach will require old MAGA to start to abandon them. You can put your own probabilities of that happening. Leaders are a reflection of the people from whom they draw their power.
The love lost towards non-North American traditional allies is unlikely to reverse and those allies have already accepted that. So, I expect Tariffs on non-North American allies to come in April.
No discernable impact on credit so far - further encouragement for the administration to stay the course.
I am guessing stock market is likely to be at a better level on April 2nd than on March 18 (start of FOMC meeting).
https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm
Tomorrow is JOLTS
Wednesday is CPI
Thursday is PPI
and Friday is U Mich.
Bizarrely, I watch economic news and calendar way less since this administration took office.
I hope (and request) the bond fund traders in the forum post when they sell their bond funds. As far as I can tell, they are still enjoying their bond funds.
@balubalu. Not a bond trader. But own a few bond funds. No chance I’ll be selling them any time soon:
VNLA, WEA, BWG
@BaluBalu, interesting comments. Time will tell. I've said enough about Trump to hold me for a while.
In other news, if the next inflation report is headed in the wrong direction things could start to get interesting.
Stay tuned.
The 1 month performance of Consumer Cyclicals - 13.56% is the only sector worse off than Tech -12%. Communication svcs are down -9.76%.
Consumer Defensive and Real Estate are both essentially flat, Utilities and Energy down less than -3%.
Tech led this bull market, and tech is taking a hit. The rest of the market is muted, for now.
I haven’t looked at ccor recently. But the VIX apparently has romped ahead in recent days. That + the flight into quality bonds has probably helped it.
The 10 years treasury fell 10 bps.
https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value_month=202503
Future market for tomorrow is down again.
https://finviz.com/futures.ashx
To show the difference holding some good quality bonds makes … Today TCAF (equity only) lost twice as much (-2.21%) as its sibling PRWCX (-1.11%) which holds some bonds.
If you examine the bond portion of PRWCX, Giroux divides the bank loans and high yield (higher risk), corporate (medium risk) and treasury (lower risk). Also he maintains a high single digit % in cash. Today, it did well compared to that of Vanguard Balanced Index fund, VBALX.
The cat is out of the bag.
Peter Navarro is on TV right now. He said "Tariffs equal to Tax cuts." If any one was waiting for it to be spelled out, now they have it.
What did Navarro have to say? I'm not finding anything in print yet.
I like yesterday's price action in the market better than today's, even though my portfolio lost a lot less today. My worst performer today is MRFOX -1.67%, while holding 26% in cash. MOAT returned -1.9% but it is 100% invested. CGBL did better than I expected at -0.26%