Press Releases
Don't look now fans but there is a new "fear trade" in town. You remember how these work, right? To review, a fear trade starts with traders shouting their negative narratives from the rooftops while shorting stocks at the same time. "The sky is falling!" they proclaim. "The market has it all wrong," they contend (I'm looking at you Mr. Big Short). "Trust us, we know how this will end," they say. And "Get out now, before you lose all your money," they cry.
Next, emotion starts to set in. As prices move down in a violent, disturbing fashion (driven by undiscerning computers, of course), investors lose their resolve and forget why they bought the positions in their portfolios now creating all the anxiety. Worry becomes the theme of the day, every day. Selling begets more selling because (a) the trade becomes a trend covered in the media and (b) the outlook seems to become more dour by the day. So little time, so much to fear!
As an investor who's watched this type of trade play out a time or two in my career, I can say the great thing about a fear/scare trade (assuming you are the one making the trade) is you don't really need any metrics - or even any facts on which to base your thesis. Nope, you just need to find/create a good narrative, have a great deal of capital, lots and lots of conviction, and then continue repeating your view over and over again until the panic that turns your trade into gold sets in.
To be sure, we've seen this movie before. Many, many times. The theme changes with the times (the Fed will make a mistake, tariffs will kill the economy, inflation will soar, a recession is coming, oil is going to $0 (or $200), WW III is about to begin, etc.) but the trade does not.
This time around it's a little something called the "AI Fear Trade." And while the major indices have been holding up pretty darn well lately, there has been some serious pain in certain segments of the market. You know, the areas that we're told we need to be so very fearful of. As in, anything that can be disrupted by AI.
The Fear Narrative
The narrative for the current fear-of-what-might/could/maybe-happen trade goes something like this: AI is going to destroy the business models of companies in the software, legal, real estate, wealth management, tax advice, and even trucking/logistics industries. Yep, that's right, these industries are doomed by the efficiencies created by AI (which, of course, may or may not itself be in a massive bubble - I'm not exactly sure how both of these arguments can exist at the same time, but no worries, just keep selling!).
As such, our furry friends in the bear camp tell us that a meaningful correction to the multiples at which these companies trade (aka a "reset") is necessary - and fast! (Why else would a trucking company's stock fall -24% in one day without any news?)
The Heck With Fundamentals
Never mind the fact that the current earnings (as well as future guidance) for the companies in these industries show no signs of any distress. Nor do the analysts and executives of these companies expect any difficulty in the future. For example, according to Bloomberg, "There's little fundamental evidence of deterioration" in these companies. For example, "earnings for software and services companies in the S&P 500 [are] projected to rise +19% in 2026".
The best way to see if we’re a good fit is to have a conversation. Call, email, or fill out the form below to speak with one of our team members. We’ll get in touch as soon as possible.