Should You Be Worried About The Market Drawdown?
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To investors,
Yesterday was a rough one in financial markets. Tech stocks, bitcoin, and many other investment assets were caught in a sea of red. It seemed like nothing could hide from the pain. Bloomberg’s Eric Balchunas showed that everything was down, including short term Treasuries.
This sell-off led people to ask the question “is this bull market over?”
The answer is more complicated than you may think.
Take stocks as one example. Carson Group’s Ryan Detrick has done a good job highlighting the intra-week performance of different trading days.
As you can see from the chart, Monday, Tuesday and Wednesday have positive performance and Thursday and Friday turn negative. So yesterday’s negative performance is inline with how the market has been trading all year.
Nothing to worry about there. In fact, Balchunas explains S&P trading volume was potentially a positive sign in the grand scheme of things.
“If there’s a silver lining it’s $SPY volume was somewhat subdued, you can see it’s elevated but not even Top 20 day of year. Usually that indicates short-lived selloff vs higher volume which indicates deeper freakout but who know.”
Is the bull market in stocks over? Probably not, but never say never. This would have been one of the shortest bull markets in history. That doesn’t mean it couldn’t have happened though.
Wedbush’s Dan Ives remains firmly bullish. In regards to the sell-off, Dan says “we view this as short lived mini panic moment for tech stocks as we believe tech stocks will have a major rally into the rest of the year as investors look to play the AI Revolution and the 2nd/3rd/4th derivatives now playing out across consumer/enterprise names.”
Bitcoin was also down yesterday. The asset is known for its asymmetry, but investors have been relatively disappointed with its performance year-to-date. Joe Consorti writes “Bitcoin is now up only 4.2% YTD, compared to the S&P 500 and the Nasdaq, which are up 14.5% and 18.9% respectively.”
That is not why many investors are buying the asset. They want explosive returns, not sideways action that is outperformed by major equity indexes. On the flip side, the digital currency is only up 6% over the last year, yet it is up 500% in the last 5 years.
Investing is hard. Certain assets perform well at different times. Add in the uncertainty of monetary policy, geopolitics, and capital flows. The complex economic machine can be hard to predict.
But here is the thing that gives me peace of mind during drawdowns like we are living through. The best companies will continue to perform over the long run. Bitcoin will thrive over years. Anyone worried about certain price action increases their odds of making bad decisions. Those who can buy great assets and hold them for a long time will do well. That timeless investing principle is timeless for a reason.
Hope everyone has a great end to their week. Stay calm and realize green days will return. Talk to you on Monday.
- Anthony Pompliano
Founder & CEO, Professional Capital Management
Is $100k Bitcoin The New Normal?
Jeff Park is the Partner and Chief Investment Officer at ProCap BTC. In this conversation, we break down why bitcoin has been moving sideways and whether investors should actually be concerned.
Jeff walks through major forces shaping the market — from 50-year mortgages and government backstops to the surge in AI data-center demand. We also touch on Square’s bitcoin payments rollout, the state of stablecoins, and where sentiment goes next.
Enjoy!
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