The weakness is once again centered in semis and small caps. You can toss away the smalls because who really cares. And then we are left with one: $NVDA. Markets do this all the time: using a nation like China or a stock like $AAPL or in this case $NVDA has lynchpins to the overall health of the economy. If you remember back in 2015 when Trump was discussing tariffs on China, that seemed like the very worst idea in the world, for traders.
And then he did it and nothing happened.
We are now in the era of $NVDA, and this too shall pass. There will be a new era in the future based around the cult of a leader or a concept or a company and markets will jostle between the great many changes that are both real and perceived.
Ultimately, the S&P is +16% for the year and if the year ended now, that would be viewed as a fine year. It isn’t all good and it isn’t all bad, like most things. The market is nuanced and manifests itself across asset classes based on assumptions
Right now we are assuming the semis are cooked. Are they?
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The orange fella is inflationary. As are all. That part you can bank because the regime has changed on the disinflationary side but not on the deficit spending side. There seems to be some unwinding going on and certain stocks have been hosting such an outcome. Take the August melt based on the Yen carry trade and assume those were the weakest most levered hands going. Now we have another tranche going of the same stuff but less urgently. And yet more will come, nobody knows how much.