Bear Sighting Was Premature

Like UFOs and Bigfoot, far more bear market sightings are imagined than real. I thought I’d spotted Papa Bear myself when Nvidia announced terrific earnings a couple of weeks ago, only to see their shares reverse and dive sharply after a deceptive spike higher. Was this the needle prick that burst the AI bubble? It certainly seemed so, for it was not merely plausible, but logical, given that Wall Street and the entire investment world were desperately counting on the world’s only $5 trillion company to turn sagging markets around. They got their wish, but it was a delayed reaction that must have spooked many investors. Stocks plunged for several days after the announcement, before catching a bottom and reversing steeply.

Your editor was one of the non-believers who were sure stocks had entered a bear market long overdue. It wasn’t just Nvidia’s performance, either. Trump’s fortunes, if not to say his credibility, seemed to be on a downswing, in part because his nemesis Epstein was creeping back into the headlines. The President was uncharacteristically back on his heels, seemingly in synch with falling stocks. But within a few days, NVDA was basing, Trump was diverting the media toward a possible peace pact between Russia and Ukraine, and stocks were in a steep recovery. It was ferocious enough to seem like a classical bear rally, and that’s what I assumed it was  — until, that is, in just three days, the broad averages were already within easy distance of new record highs. That was on Friday, and there’s no point pretending the rally is a fake, destined to end with a whimper.

Place Your Bets

I continue to believe nevertheless that stocks are in a topping process. However, a bear market is unlikely to begin now, with bullish seasonality revved to the max and the legacy media beating the drums for more Fed easing. In a sane world, investors’ fatal addiction to Fed credit injections would have been rebuked years ago by a severe recession. These are crazy times, though, and ending them may call for a more potent kind of symbolism than NVDA’s price histrionics:  the question of whether Elon Musk will become the world’s first trillionaire, for instance. It’s time to place your bets.