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Major Index Performance (as of Thursday’s Close):
• S&P 500: Up 0.6%
• Dow Jones Industrial Average: Up 1.15%
• Nasdaq Composite: Flat
• Gold: Up 1.39%
Nasdaq Struggles While Broader Market Stabilizes
On track for its fifth consecutive weekly loss, the tech heavy Nasdaq 100 continues to face pressure. In fact, the current losing streak marks the longest since May 2022. Ongoing weakness and disappointing forecasts across most sectors have weighed heavily on what many argue is an overvalued index. Forecasts from FedEx, Nike, Micron Technology, and Lennar all fell short of expectations, further exacerbating the sell-off.
After last week’s decline, the S&P 500 was down more than 10% from its highs. Keep in mind, this is not unusual. These kinds of corrections happen every two to three years, so this is not cause for alarm, at least not yet. Buying the dip is a popular strategy but it’s effectiveness may be in question. Although many investors still view tech giants as high-quality companies, it remains to be seen if their valuations fully reflect economic risks and the uncertain payoff of AI-related investments.
Key Economic Data This Week:
• Retail Sales (MoM): +0.2% (vs. +0.6% est.)
• Housing Starts: 1.501M (vs. 1.385M est.)
• Import Price Index: (MoM): +0.4% (vs. 0.0% est.)
• Initial Jobless Claims: 223K (vs. 224K est.)
• Existing Home Sales: 4.26M (vs. 3.95M est.)
Volatility Remains Elevated Amid Mixed Signals
Retail investors poured over $12 billion into U.S. equities last week, according to JPMorgan data. Historically, heavy inflows from individual investors have preceded periods of market weakness. Adding to this phenomenon, they are often the last to reduce exposure when things are worsening.
Meanwhile, Bank of America’s Michael Hartnett pointed to “monster” inflows into global equity markets, despite rising trade tensions. He noted that optimism among investors remains surprisingly high, even as risks of a broader trade war loom. Markets in Germany and China, key exporters to the U.S., have rallied post-election, which may indicate scepticism of new tariffs significantly damaging global growth.
What is Our Position?
We remain cautious in our outlook. A weakening technical picture, lower corporate earnings guidance, and reduced forward expectations support our defensive stance. We continue to favor dividend-paying value stocks, fixed income, and precious metals. Sector rotation is showing resilience in areas like consumer staples and healthcare, while growth-oriented sectors continue to lag.
Why Active Management Matters:
Market conditions continue to shift as economic indicators show signs of slower growth. Headlines and emotions often cause knee-jerk reactions, thereby exacerbating the vicissitudes across major indexes.
You might be wondering how to best navigate these conditions. Passive investors tend to ride out market fluctuations, compared to actively managed portfolios that have the flexibility to assess risks, adjust positioning, and potentially capitalize on changing conditions. Rather than reacting, a strategic and disciplined approach allows for proactive decision-making.
When it comes to navigating uncertainty in the context of investing, it requires more than just waiting for the market to recover, it’s about focusing on risk management, adaptability, and long-term strategy, all of which are key features of OmniStar’s actively managed strategies.
Have a great weekend,
Your Portfolio Management Team
