The NASDAQ 100 had its worst day since 2022 wiping out over $1 trillion in value according to Bloomberg. This marquee index is on pace for the worst quarter since early 2022.
The S & P 500 has closed below its 200-day moving average for the first time since November 2023. Its fall from its high in just nine sessions is the swiftest decline of this magnitude since February 2020 according to Bloomberg.
The markets are on edge, partially the result that the President had warned that the economy may feel a “little disturbance” from the pending trade wars. The Administration has also refused to rule out the possibility of a recession.
Considerable attention has been focused on the Atlanta Fed GDPNow model that is suggesting the economy is contracting around a 2% rate. However, little attention has been given to the New York’s Fed Model called the “Nowcast” which suggests 1Q growth around 3%.
Two weeks ago, few had heard about the Atlanta model and even fewer about the NY model.
Perhaps the only certainty is that uncertainty is rising. In the absence of any conviction, prices normally take the path of least resistance and that is down.
Perhaps one of the greatest differences of today is the massive concentration of monies in a few stocks and one sector. Bloomberg writes that over 40% of the S & P 500 is comprised of just 10 companies and one sector. It is unprecedented.
Momentum and concentration are great in an “up market.” However, it is also very debilitating in a down market.
Bloomberg writes the PE ratio is less than one point shy of being at the fourth highest value for the PE in the past 125 years. Moreover, the dividend yield is less than one third of its historical average.
However, as indicated above, the market has never been this concentrated in a few companies and one sector. A strong argument can be made the remaining 490 S & P 500 companies comprising about 60% of the benchmark’s capitalization offers value.
A question that only history can answer is whether the selloff will continue and impact the “rest of the market.” To date, “the rest of the market” is outperforming the overly concentrated indices.
What will happen today? Will the JOLTs Jobs data impact trading?
Last night the foreign markets were mixed. London was down 0.14%, Paris up 0.16% and Frankfurt up 0.31%. China was up 0.41%, Japan down 0.64% and Hang Seng down 0.01%.
Futures are marginally higher. The 10-year is off 3/32 to yield 4.23%.
