It is hard to have a polite debate via text. Everyone reads your words in their head with their own tone and interpret intention differently. Let me be clear that none of this is directed at anyone with malice of intent, rudeness, or hatred. This is intended to help, to educate, to inform. Please take it as such.
**"Knowing yourself is the beginning of all wisdom." - Aristotle**
TL/DR: The vast majority of the people on Reddit and involved with investing subreddits are well intentioned. They are here to learn, share, and hopefully grow as investors. But they are also a mix of ignorant (the true definition meaning uninformed) about much of the market, lack experience, and are hyper focused on their specific section of the market and headlines, and they allow that to inform their opinion about the market overall and let that impact their psychological well being...which impacts their investing decisions.
Be honest with yourself. If I just described you. If you have only been investing in the bull market since Covid. If you aren't old enough to have had significant money in the markets during the 2000 crash (meaning most of you under the age of...say... 30). If you can't legitimately say that you understand markets, risk assessment, and macroeconomic forces impacting the markets... please read.
**Why This Market is Very Healthy and MOST LIKELY NOT in a Bubble:**
Just a sampling of SP500 companies and their performance over the past month:
Lam Research: -34%
Intel: -34%
Applied Materials: -33.35%
Micron: -28.5%
Tesla: -25.36%
Caterpillar: -22.21%
Oracle: -19% (-28% on the quarter)
IBM: -18%
AMD: -16%
GE Vernova: -15.5%
Same companies distance from ATH:
Lam Research: -40%
Intel: -39%
Applied Materials: -37%
Micron: -34.6%
Tesla: -38.37%
Caterpillar: -25%
Oracle: -65.36%
IBM: -31.73%
AMD: -22.5%
GE Vernova: -21.7%
And the same patterns repeat across some pretty much all of the biggest name in the index related to (directly or indirectly) to the AI trade and recent run-up.
Just a sampling of SP500 names that have begun making new ATH or made significant moves over the past \~month:
Apple: +20.5%
RTX Corp (Defense): +17.4%
Exxon: +15.17%
Thermo Fisher: +14%
CVX: +13.8%
Mastercard: +5.35%
Total SP500 constituents (including the ones with multiple tickers as yes they do get included to make is SP503 in reality... Alphabet, Fox, and News Corp all have dual tickers. We could exclude them and the math would be almost exactly the same.) that are up vs down past month:
UP: 324 (64.4%)
Down:179 (35.6%)
SPY Distance from ATH: 2.6%
SPY Performance on the Year (YTD): 8.6%
Russell 2000 (IWM) Distance from ATH: 3.3%
Russell 2000 (IWM) Performance on the Year (YTD): 18.9%
Yes this list of tickers with double-digit up moves is much smaller than list with double digit down moves. But that is exactly the point.
The RATIO of stocks with up moves vs the past month is double the stocks with moves down. Even the ones significantly off their all-time highs. And the down stocks are generally the LARGEST constituents on a percentage basis to the weighting of the SP500
When MOST people talk about a "bubble", they are talking about an event that will burst and cause the broader market to pull back. But that is not necessarily true. And it is not true here.
What we are seeing is a broadening out of market performers. This is a rotation. This is profit taking. This is the market doing exactly what it is supposed to be doing: deciding who are the winners and losers, both in short run and long run.
The fact that the giant AI trades are coming back down to earth.... with none of the macro-economic market fundamentals having changed at all... and in fact for MOST of the AI names their individual fundamentals haven't really changed at all... means what we are seeing is NOT irrational exuberance.
It is profit taking mixed with a healthy dose of skepticism.
Does this mean the market CAN'T or WON'T turn down through the end of the year? No. Does this mean there will be ZERO macro-economic shocks that causes a broader correction? No. Does this mean the specific AI names will not pull back even further? No.
But all of this fear mongering, doom and gloom, and blind acceptance that this is a bubble and everything will come crashing down is not supported by the market action, the fundamentals, or the sentiment in the market.
Take a step back, take a breath, and do yourself a favor: Assume for a moment that perhaps you are being over confident in your knowledge and skills... recognize that the talking heads on CNBC and the rest of the "big money" in the game have their own agendas and reasons for saying what they do. And enjoy the ride and the learning.
\*Stepping off of soap box hoping everyone takes some small tidbit away from this....while accepting some of you will undoubtedly find nothing but fault in my message\*
Have a great day.