Wall Street investors woke up to a bleak outlook in global markets on Monday. The Daily Breakdown is here to help you break it all down.
Monday’s TLDR
- Risk assets around the world sell off.
- US stocks start the week under significant pressure.
- Warren Buffett dumps a huge portion of Apple stake.
Weekly Outlook
Mondays are typically the day where I highlight what to expect this week, including big earnings reports and key economic events. It’s not normally a time where we wake up and see that Nasdaq futures are down more than 5% amid widespread selling pressure.
The selloff isn’t just in the US, either.
At one point today, the Nikkei — a leading stock index in Japan — was down 13%, while Bitcoin was off more than 14% at this morning’s low.
Wall Street’s so-called fear gauge — the VIX — is screaming higher, more than doubling this morning and clearing the $60 level, a mark it hasn’t hit since the Covid selloff.
We’re seeing a ton of headlines fly around and a lot of complex positions unwinding.
Three weeks ago, the S&P 500 hit an all-time high and the VIX was lulling traders to sleep. Take some comfort that so far Q2 earnings have grown 11.5% year over year — the best growth the S&P 500 has seen since Q4 2021.
But let’s also not be blind to the current risk, particularly as we see volatility surge and risk assets — many of which are investors’ favorite names — come under significant pressure.
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The Setup — Some Tips
We usually look at a chart and scan for potential opportunities. I don’t know that that’s the most helpful given today’s price action. Instead, it’s a good time to remind investors of a few key investing principles.
1. First, “when in doubt, stay out.”
We don’t see the VIX above 60 very often. In fact since 2000, we’ve only seen it during Covid and the financial crisis in 2008-09. Above all else, capital preservation is a key principle for investors and traders alike.
There’s absolutely no shame in sitting out some of the crazy sessions and simply watching — you don’t need to be involved in every trade!
Second, position size is key.
Being over-exposed or over-leveraged can be a portfolio crusher. I like to say, “When markets speed up, it’s time to slow down.” If you’re going to be involved, tread carefully on days like this and keep position sizes small. Volatility is way too high to take huge positions.
Lastly, know your timeframe.
There’s a big difference in trading a weekly option vs. making a multi-year investment. Before entering a trade, know the type of timeframe you are considering and plan accordingly.
That goes for big selloff days and normal days too.
Always know what you own, how much you own, how long you want to own it for, and at what levels you’ll consider taking profits or cutting your losses.
What Wall Street is watching
AAPL — Warren Buffett’s Berkshire Hathaway significantly reduced its Apple stake by nearly 50% in Q2, cutting its position from 789 million shares to about 400 million shares.
NVDA — Like most of big tech, Nvidia stock is under significant selling pressure this morning. Aside from being caught up in the broader market selloff, concerns around the company’s next-generation AI chip — Blackwell — being delayed have some investors worried.
XOM — Exxon exceeded earnings expectations with record production in Guyana and the Permian Basin. Q2 earnings reached $2.14 per share on revenue at $93.06 billion, beating estimates of $2.01 per share and $89.7 billion, respectively.
Disclaimer:
Please note that due to market volatility, some of the prices may have already been reached and scenarios played out.