Sam Badawi
ARE WE HEADED FOR A CORRECTION?
2/28/2025, 3:56:31 PM
Economic Summary
- Market sentiment is highly fearful despite being only ~4% below all-time highs, driven by concentrated tech weakness and social/political noise (e.g., Trump tariffs).
- AI sentiment survey shows 19.4% bullish vs. 60.6% bearish, a level of pessimism not seen since 2022, implying potential contrarian buying opportunities.
- Tariff talk could lower consumer spending and inflation — companies may cut investment, which could lead the Fed to cut rates in coming months, supporting equities.
- 10-year Treasury yields have fallen from ~4.8% in January to ~4.2%, easing mortgage rates and potentially stimulating housing and consumption if sustained.
Bullish
- RSI and technicals show oversold conditions that often precede a bounce.
- Large, profitable mega-caps (Google, Microsoft, Amazon) have strong cash flows and buybacks.
- Proprietary cloud chips (Google/Amazon) and Blackwell ramp support cloud providers' margins.
- Disinflation and falling yields could spur Fed cuts and re-rate equities higher.
Bearish
- Tariff rhetoric from Trump could act as a tax on consumers, reducing spending and slowing GDP.
- AI sentiment is deeply bearish (60.6%); extreme fear can drive further selling in concentrated mega-cap holdings.
- NVIDIA demand may be capped and gross margins are compressing, reducing upside expectations.
- Market concentration in mega caps makes broad indexes vulnerable when a few names sell off.
Bullish tickers
GOOGLAMZNMSFT
Bearish tickers
NVDASMCIWMT
NVDA
Bullish
Remains the leader in compute and networking; long-term dominance likely as Blackwell and next-gen products ramp.
Bearish
Concerns about capped demand and compressing gross margins; recent earnings beat was narrower, stock fell ~8–9%.
GOOGL
Bullish
Strong cash flows, buybacks, expanding margins, Waymo optionality, and fast-growing cloud position this company to benefit from AI and buy-the-dip strategies.
AMZN
Bullish
Amazon has proprietary chips (Tranium) and strong cloud demand, supporting margins and long-term growth.
Bearish
Tariffs could raise consumer prices and weigh on retail volumes, indirectly hurting Amazon's sales.
MSFT
Bullish
One of the mega-cap, highly profitable firms likely to attract buying during market dips.
META
Bullish
Large, profitable company included among mega caps that may see value-driven buying on weakness.
SMCI
Bullish
Retained a long-term SMCI position targeting 2027, indicating conviction over a longer horizon.
Bearish
Sentiment flipped for short-term positions; host liquidated short-term SMCI exposure.
BAM
Bearish
Host trimmed a Brookfield position amid volatility.
WMT
Bearish
Walmart signaled consumer slowing; tariffs act like a tax that could reduce spending on goods.
People mentioned
Donald TrumpElon MuskKash PatelStanley DruckenmillerScott BesantThomas KurianWarren Pies