More gloom from the tech sector — this time from Meta Platforms — is combining with continued pressure on Treasury yields to spark talk of a Red Thursday, or stock selloff, to come. Tech is again set to lead the way lower after the Nasdaq Composite fell into correction territory on Wednesday.
Hopes are now hanging on Amazon.com to belt out some good news after the close. Ahead of that GDP data came in right near 5%, thought that may not stave off a recession.
Our call of the day comes from a pair of money managers who have been banging the table about a crash brewing for this market, and are warning even louder now. They are warning investors to get prepared.
The pair are Michael Gayed, a portfolio manager at Tidal Financial who offers trading strategies via the Lead Lag Report, and Michael Kramer, founder of Mott Capital Management. They posted a discussion on Wednesday that spoke of an “imminent market crash.”
“What we’re seeing in Treasurys should make a lot of people nervous. I’ve never seen anything like it, and I’ve been following this market since the mid-90s,” said Kramer, who recently discussed how the new bull market was already over.
In their chat, Kramer told Gayed that it makes sense to see Treasury yields this high, given the Fed jacked up interest rates 500 basis points and the market tried to get ahead of the Fed each time it expected a rate hike. When the Fed started to “mess around with slowing rate hikes,” hinting of a pause and the market tried to second guess that as well.
He said the surge in Treasury yields may be “near the end,” but there may be a bit to go. Kramer also told subscribers on Wednesday that the S&P 500 decline “doesn’t look complete yet,” and 4,115 can’t be ruled out.
One chart Kramer has been focused on for awhile is shown here, and in followup comments he tells MarketWatch that he suspects, as he has for awhile, that the S&P 500 has been in the grips of a long bear market rally, rather than the start of a new bull market:
Where does he think investors should be investing right now? For those excited about bitcoin recently, Kramer sees cryptos as way too volatile, so he’s sticking to “money market accounts, taking my 5%-ish and leaving it at that. To me that’s the best hedge against volatility. And for me, that’s the best hedge that provides me the liquidity to be able to move in and out of the market if I so choose.”
Gayed posted a few days ago on Seeking Alpha that the fact many stocks are underperforming is “consistent with a market crash.” He argued in January that a melt-up later in the year was coming, but also predicted a “credit event” due to lagged effects of the fastest rate hike cycle in history.
What Gayed does see, is that the Treasury selloff risks turning into a corporate credit event. “Credit spreads ARE starting to widen, consistent with what you see in a traditional credit event and stock market crash,” he said, offering up this chart:
So after the crash in Treasurys, Gayed is on guard for Part 2, when “credit spreads blow out and stocks collapse.” Note, that widening credit spreads indicate looming defaults.
“If I’m right, the mother of all short squeezes is still set to come in Treasuries, and people suddenly realize too late they were tricked into a narrative around AI and a ‘bull market’ that in reality made them exit liquidity,” he wrote on Seeking Alpha.
You can listen to the two discuss the market troubles on YouTube.
And here’s the last word via X from Gayed:
Stock futures ES00,
Third-quarter GDP rose 4.9%, which was slightly stronger than forecasters exepcted, with weekly jobless claims rising 10,000 to 210,000, durable goods jumping 4.7%, and the trade deficit widening. At 10 a.m., pending home sales will be released.
The European Central Bank has left interest rates unchanged as expected, commenting that inflation has dropped “markedly” in the region.
Meta Platforms’ META,
More late reporters: Mattel MAT,
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