The episode analyzes the market's whiplash reaction to the rapidly shifting news around a potential US-Iran ceasefire. It argues that individual investors have no edge in predicting these events and should avoid reactionary trading, instead relying on a pre-defined, rules-based investment plan.
A significant sell-off in major tech and software stocks has occurred year-to-date, with the Magnificent Seven losing over $2 trillion in market cap. Despite this price decline, many of these companies, like Microsoft, have not missed earnings or lowered guidance, indicating the correction is driven by sentiment and multiple compression rather than a fundamental business deterioration.
The discussion contrasts the market's treatment of private AI "halo" stocks (e.g., OpenAI) with public tech companies. Private AI firms are afforded massive valuations and forgiven for enormous cash burn in the pursuit of growth, while public companies face intense scrutiny on the immediate profitability and ROI of their AI initiatives.
The episode raises serious concerns about potential insider trading linked to the Iran ceasefire announcement, citing suspicious activity in oil futures and prediction markets. The conversation weighs the cynical view that this is an unavoidable part of the system against the risk that a perception of a rigged game could alienate a generation of investors.
While US tech stocks have faltered, the episode notes the significant outperformance of international markets and sectors with heavy physical assets. On a rolling one-year basis, emerging and developed ex-US markets have returned 55% and 48% respectively, while sectors like Energy (+36%) have soared.
Keep pulling the thread on Josh Brown.