SQQQ - The Final Stages Of A Mega Cap Blowoff And Serious Equity Market Risks
2024-07-09 13:21:11 ET
Summary
- The rise in Nvidia Corporation shares, mega cap stocks, and capitalization weighted indices are reminiscent of past generational stock market peaks.
- Market psychology of fear and greed driving current exuberance based on AI growth expectations, leading to potential market decline.
- Recommendations to reduce equity exposure, increase commodities, and monitor economic indicators to prepare for potential market correction.
The current rise in Nvidia Corporation ( NVDA ) shares, mega cap stocks, and capitalization weighted indices has all the markings of a generational stock market peak like 1929, 1974, and 2000. Like past historic bubbles, the current market is manifesting a parabolic ascent, historically high valuations, and an “irrational exuberance” based this time on the extraordinary growth expectations for “AI” (artificial intelligence). The psychology of fear and greed are repeated throughout history. Academics have chronicled how the psychology of crowd behavior in boom and bust cycles throughout history remains constant regardless of the bubble asset, whether it is tulip bulbs, real estate, commodities, or equity markets.
Humans are herd animals. When the current extraordinary ascent reverses, crowd psychology, and market history lead us to believe a bust in the AI exuberance and a crash in mega cap stocks will ensue. We think a market decline on the order of 80%, 83% and 52% could ensue for NVDA, the NASDAQ (COMP.IND), and the S&P 500 (SP500) respectively once this market peaks. Those were the respective declines following the 2000 bubble experienced by Cisco Systems (CSCO), the NASDAQ, and the S&P 500....
The Final Stages Of A Mega Cap Blowoff And Serious Equity Market Risks