Wednesday's Market Minute: This Is Not A Drill

Within minutes of the opening bell on Tuesday, the hashtag #BuyTheDip started trending on Twitter. The dip in reference was not Gamestop Corp. GME, Dogecoin, or an imploding EV SPAC (that wasn’t until the closing bell). This day-trader call to arms was for the sake of the entire stock market, which dropped quite sharply at the open.

If it wasn’t obvious by now, stocks are a national pastime. With a little help from bull market friends Jay Powell and Cathie Wood, who offered dovish words and bullish Tesla orders, the S&P 500 managed to pull off a rally. The turnaround is without question a victory for bulls who are feeling downright invincible at this point. Chamath, Prince of SPACs, even engaged in a little pseudo-loss-porn for his followers after the close, volunteering the fact he was down $1 billion at one point. Wild stuff, but certainly unsurprising.

SPACs were down an average 7%, Bitcoin got hammered 15%, and clean energy/EV stocks were some of the worst performers in the market. Judging from what he says about what he owns, Palihapitiya may well be the epitome of today’s levered investor. We’re learning this week that Bitcoin and expensive stocks are still very much part of the same theme, and that buying companies based on plans, not sales (see: Workhorse (NASDAQ: WKHS) down 50%), is risky business.

It is quite certainly problematic that more and more of the public stock market feels like a bitcoin proxy, but with dips getting bought like they were yesterday, everyone feels invincible. They’re not. This is not a drill. The weakness showing up in stocks right now is more likely the beginning of trend disruption than it is a one-week time-out. At long last, we are terminally defeating COVID. That means all the major trends of the past year and decade – yes, decade: stimulus, rate-cuts, slow growth – are reversing.

The growth proposition of tech trades is declining from here on out, and stocks highly dependent on quarantine life will peak. Rates aren’t even at 1.5% and they’re already sparking corrections. The past decade was centered on interest-rate cuts, and we may not see one again for a generation. There are plenty of stocks that will love this new regime, but not the ones that can be saved with a hashtag.

Photo by Chris Liverani on Unsplash