Key insights
- The author anticipates a potential 10-15% market correction driven by overvalued AI, data center, and energy stocks, coupled with global economic uncertainties. They initiated a small SPY position and plan to increase it on further dips. However, they acknowledge that large-cap SaaS stocks could provide a floor, limiting the downside. The overall outlook leans bearish in the short term.
I've been holding the last two paychecks as cash in my self-directed brokerage (Empower) waiting for a dip. Added some SPY around 649 near close today, will add heavy if drops to the ~630 area, roughly a 9% pullback from the 697 high based on history last 3 digs
There is more down side dropping 10-15% from the high:
AI, data center, and energy stocks have run up 3–10x across big and small caps, that's a lot of air to give back. My thesis on these is 6-8months before it starts dropping slowly just the same HOOD and other ran up SaaS in 2024...HOOD jumped to 100 then 150 now ~70.
Add in the current global environment and possible recession risk, job creation or stagnation and a 10–15% drop from highs isn't out of the question.
The counterargument 9% from high is as good as it can get:
Large cap SaaS stocks have already been beaten down on AI fears and could rebound (I have nflx, orcle, adbe msft, rddt, rblx), which might put a floor under the broader market around that 9% level. Because a lot of these stocks are rotational diverse some money from area and move to the another area that is trending. But energy and defense stocks have gone crazy also...not sure how this plays out...keep going up cuz of the conflict or sharp drop once it the clouds are over...or will it be like russ-ukr that will last for years...but that leads back to more downside.
What is everyone plan for next (1-3 months) and (4-6months)? What stocks are you considering to value add on the next rotation of trend/hype (seems that is how the stock market works now).