What a month for the stock market.In January, high

What a month for the stock market.

In January, high-beta growth went to the moon.

Literally.

Any random name in nuclear, quantum, space, drones, etc. were up 40-50% within weeks.

In February, those same names were down just as much.

So the drawdown was isolated to growth stocks then right?

Well…large cap tech put up some of the best earnings in public market history. All of them got wrecked. Meta went to $740 then came right back down to $640. Google did 48% cloud growth and got sold off. Nvidia said they would grow 80% next quarter and the market laughed.

But, not only did high-beta and large cap tech get hit…in early February, Anthropic started to show how powerful some of their tools were becoming. The market looked at that and said cool…we’re going to sell off Software companies. SaaS names are now trading at their lowest valuation relative to the S&P since 2014.

PCE inflation was worse than expected. PPI was worse than expected. We added 130K jobs and beat the 70K expectation but then revised 1M jobs down for 2025.

Private credit concerns this month sent Apollo, KKR, and Blue Owl down the drain. Now fears around debt financing for datacenters continue to grow and is putting strain on financials.

So what worked this month?

Consumer defensives, industrials, memory, some parts of healthcare. Basically, people ran to the most crucial sectors in the semiconductor trade and value/stocks that can’t be replaced by AI. Coke is up 18% YTD.

Why stay bullish?

Well….

The Fed will cut rates. CapEx continues to grow. Big Tech trades at less than 20 times. Tax refunds will be huge fiscal stimulus. The market might not continue to pay 45x for Walmart’s earnings with 5% growth vs 16 times for Nvidia’s 80% growth.

We are year 4 into a bull market. To ask for a vertical line up is unreasonable. But the consolidation phase we are seeing in the indices along with the overall earnings growth continuing to be strong does not signal to me that now is the time to run for the hills. If everyone is preparing for a crash (short interest in tech is the highest in a decade) it feels like that is the least likely for when a crash happens, especially when valuations have already been materially compressed.

Here’s to hoping March is a bit better as we continue chugging along and analyzing the greatest show on Earth.

Source: amit