The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Familiar risks
Headlines lacked bombshell stories but premarket futures traded down about 30 points. January PPI data printed a little hot but it didn’t move the markets much, which was surprising. The S&P opened down about 50 points and wandered around in the down 30 to down 70 range. Private credit concerns are resurfacing and financials suffered today. Financials were the worst performing sector. Energy and healthcare performed best. There was a bit of risk-off behavior across markets today. Bonds rallied and yields across the treasury curve fell again. Despite the drop in the stock market, capital flow was 108%, not too elevated.
The lingering risks we’ve discussed before are stepping into the spotlight. The concern about the private credit and equity market lacked a zinger of a news story today but markets are getting nervous in anticipation of one. Credit spreads are widening and investors are selling financial stocks. Additionally, the AI-scare joined the bearish party. Block Inc. (ticker XYZ) is a fintech company that announced a 4,000-employee layoff, out of 10,000 total employees. They cited gains from AI as the reason. The stock rallied 17% today.
Talk about an AI-scare story that hits home. Large layoffs resulting from AI has been widely expected for a while. Investors and commentators foresaw this likelihood, but didn’t know *when* it would begin and didn’t know *how big* it could/would be. This small company is the first notable example. It is causing a lot of extrapolating and a lot of worrying.
February is in the books as a win for the bears. The S&P is up about 50 bips for the year now. We naturally look ahead to March and wonder whether the risks that are on the rise will continue to grow. Or is this another example of fears inflating fears?
The dip-buyers are licking their chops. I don’t know whether they’ll get their usual bounce this time however. The lingering risks that weigh on the market right now don’t seem likely to evaporate in a week. They may recede to the back of investors’ minds but not actually go away. There’s more meat on the bones to these fears than some of the past ones.
See you Monday, have a great weekend.
-Mike
Visdom Market Commentary
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