The Stock Market Bubble Has Finally Burst
The December Crash Cannot Be Stopped Anymore!
Wall Street’s leading stocks are taking a major beating in recent days, with some trader favorites collapsing up to 50 percent over the past few weeks. The bubble has reached its peak, and it seems that it’s all downhill from here. The market’s highest flying stocks, such as Tesla and Facebook, have experienced the worst downfall since last year’s market sell-off. Netflix and Nvidia also sharply dropped, resulting in hundreds of billions in losses.
On Friday, the selloff gained force amid renewed fears of widespread lockdowns, pushing the NYSE FANG+ Index of the tech-industry’s giants to correction territory. Some stocks are aggressively plunging from their highly-inflated peak. These so-called momentum stocks, which including big tech names, were among the market’s top performers in 2021, with their high ‘prospects of growth’ sparking a panic buying frenzy for stocks.
According to Bank of America’s weekly fund flow statistics, investors on the top levels of the market are already rushing to the ultimate safe-havens like cash, gold, silver and U.S. Treasuries. Only on Friday, giants like Tesla plunged by 6.4%, while Nvidia fell 4.5%. Both companies were leading the market’s rally and weighed heavily on the S&P 500 and Nasdaq 100 Index. Swings in shares of companies that couldn’t justify growth or valuations have been even more extreme: Rivian Automotive faced a 40% crash from its all-time highs.
Still, many valuations are at sky-highs, so the carnage is far from over. In fact, some market veterans say it has just begun. In fact, in a recent interview, Warren Buffett’s deputy, Charlie Munger, said that markets are “even crazier” right now than they were during the dot-com bubble. Just like in the late 90s, today’s boom was fueled by a period of breakneck growth in technology stocks, with investors pouring giant piles of money into companies that had little to no prospects of real growth or made no revenue or profits.
It’s undeniable that today’s bubble is much bigger, and that’s a very worrying indicator. Particularly because, the huge 2000s stock market crash led the Nasdaq to fall as much as 9% in one day and 25% in a week. This means that the coming collapse is going to be considerably more hurtful. Sadly, many are still choosing to learn the hard way. Despite the series of warnings issued over this year, investors kept on fueling the meme stock bubble and now they’re facing some exceedingly painful losses.
A sudden slide in the market is mercilessly pounding online Reddit traders’ favorite shares, such as AMC Entertainment, GameStop, Peloton Interactive and Digital World Acquisition. Those are just some of the hardest hits, highlights the Investor’s Business Daily analysis of data from S&P Global Market Intelligence and Market Smith. In some cases, the pain can be brutal.
From the 25 meme stocks fueling the current bubble, 24 of them are down on average by 25%, which represents a damaging $44.5 billion loss on them in just a couple of weeks. Evidently, at some point, all bull markets come to an end. But sometimes, the ending can be unexpectedly dramatic. The problem is — with some many new players in the market — the vast majority of investors on a retail level right now is seeing the recent downward trend as a mere dip, not as the start of a bigger decline.
At this stage, volatility is taking over the crypto market too. The price of Bitcoin on early Friday was around $56k. By the time markets closed, Bitcoin suffered a massive liquidation and crashed down to the $42k level, effectively tumbling into a bear market. Over 410K crypto accounts were liquidated since then, totaling $2.6 billion in losses, with the largest liquidation being $27 million, according to Coinglass data.
Such dramatic losses are a sign that the U.S. stock market has reached a turning point as global equities sink in markets all over the world. The risk of aversion is going to be unbearable for most people, and the fact that spiking inflation is forcing the Federal Reserve to tighten monetary policy in the coming weeks, reducing liquidity for risky assets, actually means that there’s no way to reverse this trend. Those who have seen it happening before can tell that we’re on the same ruinous path right now. The losses we’ve seen so far are just hinting what is coming next. Get ready for 70 to 80% stock market crash this month. A financial meltdown like no other is right at the corner.