Volatility has returned to the markets over the past few days. Particularly in technology. This is not tech-specific market volatility. What we’re seeing is a broad derisking/deleveraging of momentum trades. Investors are selling anything that’s moved sharply higher in recent months. This includes technology, precious metals, cryptos, copper, nuclear energy, satellites, and even industrial stocks.
At the same time, the broader market has remained surprisingly resilient. One of the clearest signals of this rotation can be seen in the Consumer Staples Select Sector SPDR Fund (XLP). This ETF holds defensive stalwarts like Walmart (WMT), Procter & Gamble (PG), and Coca-Cola (KO) – businesses with stable cash flows and steadily growing dividends. Even during the recent market pullback, XLP has continued to push higher.
Expect to see more volatility in the weeks/months ahead, especially for those who are using high leverage to trade. I heard some crypto platforms allow traders to control 50 Bitcoins ($3.5 million) with only $100 dollars. This kind of insanity will of course wipe out people's money very quickly with any slight volatility. Don't be one of them!
