Every decade has its investment themes…Where investors pile money into one group of stocks until they reach an absurd amount of over-investment then they go kablooey.In the 60’s, it was the Nifty Fifties.In the 70’s, it was gold and oil prices.In the 80’s, Japan boomed.In the 90’s, the Nasdaq soared from American tech innovators.In the ’00s, the oil shot up again…In the 10’s, FAANG stocks ballooned.Today, we have AI, EVs, and the Magnificent 7 swallowing up more than its fair share of the market…And so, the crackdown begins.Not only because of the wide gap between the S&P 500’s price and its 30-day and 200-day moving average but because of this decade’s theme – AI and EVs.Bloomberg reports:
JPMorgan Says Stocks Are So Crowded They May Crack at Any Time
“A lot of goodies have gotten priced in,” he said, from earnings and Fed expectations, to even a potential election victory for former president Donald Trump, which he said would be viewed as helpful for the market…
…Moreover, looking at recent history, the rush into popular momentum stocks like the Magnificent Seven typically is followed by a correction. It’s happened three times since the Global Financial Crisis.
“Historically, whenever you had such a high degree of crowding it was a question of weeks before the momentum factor faced a big fat left tail unwind,” Lakos-Bujas said, pointing to Tesla Inc.’s 27% plunge and Apple Inc.’s 10% drop this year after strong 2023s as examples of what’s to come.
“Who is going to be the next one — and when?” he said.”
The most obvious stocks to come down are those that take up the biggest market share in the S&P 500:Nvidia (NVDA) is still sitting in a bubble.I would also say that Tesla (TSLA) (the EV/Greenmarket in general) is still overvalued.Apple bailed on their plans for an EV.Audi is focusing on hybrids now.Mercedes Benz is pushing back EV goals to 2030.And many Americans, despite the electric vehicles subsidies and tax rebate advantages still can’t afford, or aren’t willing to buy Tesla’s cheapest vehicle, the $35,000 USD, Model 3.It’s just that the adoption curve is slowing…As will the growth of Tesla’s stock price, while classic American car manufacturers, who received major subsidies from the Federal government, will also slow down production.Reuters reports:
Industry pain abounds as electric car demand hits slowdown
“It’s true, the pace of EV growth has slowed, which has created some uncertainty. We will build to demand,” General Motors (GM.N), opens new tab CEO Mary Barra said on an earnings call Tuesday.
GM previously cut EV production targets due to the slowing demand, but Barra told analysts GM was “encouraged” by industry forecasts that EV sales in the United States are forecast to rise at least 10% this year from about 7% in 2023.
Ford (F.N), opens new tab also previously cut EV production due to a growth rate that is rising more slowly than previously expected.
“There’s no doubt that the limitations – EV charging and the lack of battery resiliency at low temperatures – are causing consumer anxiety,” said Tim Piechowski, portfolio manager with ACR Alpine Capital Research, which owns GM shares.
“The reality is that the adoption curve will be slower and there will be pushback to regulators about fuel economy,” he added. “It’ll just be a longer ramp than perhaps was initially anticipated.”
If you don’t know how to take advantage of potentially falling stock prices, pick up your phone and call your local broker.They can help you short a stock, place an option, or re-allocate some of your current positions to address your concerns of a falling EV sector, and major corrections coming to the S&P 500 while you consider placing a portion of your portfolio into commodities.An easy, simple investment into gold, for example, is Barrick Gold (NYSE: GOLD). But you could do better…More By This Author:Return on Chocolate: How will Hershey’s Chocolate Company Respond to HyperInflating Cocoa Costs?
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