The Negatives Are Piling Up as Technical Conditions Deteriorate
Solid fundamentals and valuation will not protect your favorite stocks during this kind of market action. Let's break down what's going on right now.
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The headline on Wednesday is that tariff worries are weighing on the market again. But that isn’t the only problem that investors are grappling with.
There is increased worry that the AI and Data Center themes have been overblown. Goldman Sachs GS is cutting some of its estimates for server sales, and there is worry about the pricing of the CoreWeave IPO. Weakness in data centers has a notable impact on semiconductors.
Another issue is the growing negative sentiment. Barclays cut its S&P 500 estimate to a Wall Street low 5900 from 6600. Goldman Sachs previously cut its S&P target to 6200 from 6500.
Retail investors are worried as well. In a survey by Allianz Life, 51% of the respondents said they believe that "another big market crash is on the horizon."
The biggest problem is that there is still a tremendous amount of uncertainty. No one knows what the impact of tariffs might be, and no one even knows what President Trump is going to do. There are also growing signs of economic slowing, and later this week, we will see the latest reading on inflation.
Many stocks are breaking down, and the charts are very poor. One of the most frustrating things about this market action is that solid fundamentals and valuation will not protect your favorite stocks. In markets like this, everything is sold regardless of individual merit. There is often a tendency to sell the best stocks rather than the worst because it feels too late to sell the worst, and that adds to the problem because there is no leadership.
The best thing that could happen to this market is for Trump to be decisive about tariffs so that investors could try to discount their impact. It may not be good news, but at least there will be some certainty.
The good news is that this action is creating a substantial amount of mispricing. At some point, that is where the best trades will be, but we have to wait for it.
At the time of publication, Rev Shark had no positions in any securities mentioned.
