Tanaka
Founder of Kollab3, DeFi Researcher
US equities look vulnerable to a significant correction before another sustainable rally: 3.4% inflation, roughly $100 Brent, a 5.2% 10-year yield and just 29K new September jobs contrast with fresh index highs, while the Magnificent 7 make up 34.9% of the S&P 500. Strong AI earnings expectations and liquidity could keep shares elevated longer than expected. x.comÂ
US stocks can't hold up much longer if the 10-year Treasury yield stays near 5.16%, its highest since July 2007, because near risk-free returns above 5% make extra risk hard to justify. Higher yields lift the cost of capital and discount rates, compressing valuations, especially for growth and tech names whose value rests on future cash flows, while US equities already trade at very high valuations. Crypto faces the same pressure, with high-valuation alts lacking revenue most exposed. x.comÂ
US large-cap equities are vulnerable because earnings have not caught up with total market capitalization. The market is farther from its 200-week moving average than at any point in 18 years, and cracks are starting to show; staying bullish ignores these risks. Rate hikes remain possible, oil is still high, and yields may climb again, so now is the time for caution. x.com x.comÂ
Rising inflation, costlier AI infrastructure financing and growing Iran escalation risk point to the final major S&P 500 correction before the biggest phase of the AI boom. The index is near its 125-day average; its last break below in March was followed by another 10% drop. Keep cash ready: the next sell-off will create generational buying opportunities as neoclouds and hyperscalers turn infrastructure spending into explosive revenue and earnings growth. x.comÂ
US stocks can keep rising even as yields climb, because corporate earnings growth far outpaces inflation. In 1994, bond yields rose 263 basis points while earnings grew 18%; the S&P 500 went flat, then 1995 brought one of the greatest bull runs ever. Today rates are up 100 basis points against 32% earnings growth, and real GDP growth could reach 7%. Earnings and inflation drive stocks and bonds, not the other way around. x.comÂ
US stocks face a potentially bigger selloff as rising inflation compounds concerns about AI spending. PCE inflation reached a four-month high of 3.6%, increasing pressure on the Fed to raise rates; Alphabet shares fell after disappointing earnings, slowing ad growth and more than $51 billion of quarterly capital investment. x.comÂ
US stocks need not rise just because profits are strong: that is first-level thinking, and everyone already knows earnings are growing. P/E multiples fell over the past six months despite upward EPS revisions, and years like 2018, 2006, 2005 and 2004 saw EPS growth near 17-20% with weak or negative index returns. Valuations sit in the 98th percentile, inflation, rates and deficits are rising, policy may turn anti-corporate after November, and AI capex has inflated profits. x.comÂ
US stocks could face a meaningful correction because the macro backdrop is deteriorating across bonds and inflation. The secular bull market is still expected to continue afterward, with a key factor potentially limiting the correction's severity. x.com x.comÂ
US large-cap equities face an AI-leadership valuation reset, not yet a recession selloff. AI capex is outrunning visible monetization, and semiconductors were the most crowded trade in Bank of America's July survey, so stocks can beat estimates and still fall. Brent near $100 and a 4.68% 10-year yield compress multiples, and the S&P 500 entered at about 20.1x forward earnings versus a 19.0x 10-year average. Big Tech earnings and the late-July Fed meeting will decide if a deeper reset follows. … Show more
The 10-year yield above 5% limits how far the US equity rally can stretch, even as stocks shrugged off the Fed hold. Two policymakers wanted a hike, the 10-year rose to about 5.04%, and bonds sold while all four major indices closed higher. Rates need to cool for the rally to extend. x.comÂ
Hyperscaler credit stress and weak financials-versus-staples leadership warn of downside risk in the S&P 500 consolidation. Spreads have broken July wides, though an upside breakout is probable if financials stabilize. So far, tech weakness has lowered yields as Fed hikes are priced out, letting defensives rally and the S&P chop. If the Fed signals Nasdaq weakness won't stop tightening without better data, the tech-yield link could break in an uncomfortable, 2018-like direction. x.com x.com … Show more
High debt and rate hikes make a big US equity correction likely. Warsh said nothing useful despite hot CPI and PPI after two weeks of hawkish rhetoric, while the rest of the Fed fence-sits. A debt crisis is incoming, and some funds will blow up soon. Big caps are the last leg; the bigger correction could be something like 20%. It is not a good time to buy dips. x.com x.com x.com x.com x.com x.com x.comÂ
