Nasdaq and Russell 2000 Enter Correction Territory; S&P 500 Breaks Down to Six-Month Lows
Market sentiment is still far from washed out despite the Nasdaq and Russell 2000 entering correction terrain.
Key Takeaways
Still No Market Panic: One of the most interesting aspects of this market is the complete lack of capitulation. The VIX, at 29, is still nowhere near the 40 threshold for believing it is safe to add risk back to the portfolio. The bull share from the Investors Intelligence survey has naturally come down from its peaks, but believe it or not, at 39.3%, it still far exceeds the bear camp, which sits at 25%. The fact that there are still so many more bulls than bears speaks to the extent to which investors are underpricing the Iran war risks, not to mention the fallout, not yet fully seen, from the problems surrounding private debt and equity. And we have Market Vane bullishness at 60%, whereas the washout lows during prior crises were typically between 20% and 40%.
A No-Firing, No-Hiring Labor Market: Initial jobless claims stayed at an unbelievably low level of 210k (March 21st week) — nobody is firing, which means all the sclerosis in the labor market is coming from a nationwide hiring freeze. What was interesting was that the backlog of continuing claims dropped to 1.819 million (March 14th week) from 1.851 million — the lowest since May 25th, 2024. That is fascinating, but it may just reflect the fact that people’s benefits are running out — this may be less of an economic positive than meets the eye.
Alternative Energy’s Strategic Moment: Alternative energy comes out as a structural winner in this war (EVs too). Alternative energy is shifting from a climate-driven theme to one centered on energy security. This creates strong policy and investment tailwinds across the sector. The supply shock from the Strait of Hormuz has highlighted the importance of a diversified set of energy sources, especially in Europe and Asia.
