06/11/2026
Just as I thought I had run out of ideas to talk about, something comes up – specifically today (06/09/2026).
After a solid market open, the market is once again correcting with tech leading the way South. I’ve discussed similar occurrences before and as always, I wish to add some context to the situation.
As you are probably aware, on last Friday the market had a similar and steep downturn after announcement of the BLS jobs report that showed added jobs much higher than expected for the month of May.
More job creation is a good thing, isn’t it? But the primary concern is that despite a new Fed chair, interest rates might not drop any time soon given still high inflation and what seems to be more stabilized employment over the past few months. In fact, it is more likely the Fed will raise rates before the end of the year, at least once if the Iran War does not subside.
The reason higher interest rates are a problem for stocks is that stock valuations are conceptually based on a discount rate and a risk premium. So if interest rates rise by 25 or 50 basis points, stock prices should adjust accordingly. This simply means that stocks are worth less when someone can park their money risk free in a higher interest earning vehicle.
Of course, corrections such as these are never proportionate, nor usually is bull market enthusiasm. The two extremes balance each other out. So when you have markets at or near all time highs, it only takes a small catalyst to abruptly shift gears, like lighting a match to gasoline. Once a downtrend kicks in, algos respond automatically, stop losses are triggered, and sometimes margin calls kick in, all requiring further stock sales.
Another reason for the chaos is that many speculators are looking to raise capital for the purchase of IPOs coming shortly, including Space X on Friday, as well as Anthropic and Open AI before the end of the year. A move like this seems ironic because the IPOs are far more speculative than typical tech stocks that drive the market, despite their high valuations. Most tech valuations are well deserved because of their historic growth rates in revenue and profits due to the acceleration of AI, but of the three IPOs coming due, only Anthropic has reached profitability and Space X won’t be launching rockets to Mars any time soon.
So generally, I’m not surprised by any of this because this is just the difference between speculation and investing. Unfortunately, both occur in the same market, and that’s what creates the volatility we are witnessing.
As I manage portfolios, my fundamental question is where markets might be 5, 10, 30 years from now, what not where they might be next week. The same is even more true for individual stocks – my selection and maintenance criteria are how these companies are positioned to take advantage of emerging industry trends, especially whether they are driving industry trends by their importance, and who the dominant players are along with their competitive advantages. The quintessential example of that now is the development of artificial intelligence and the whole infrastructure involved including chips, cloud, data center buildout, and memory storage – this is obviously the most dominant theme that is driving growth in the markets. But concentration here is a one-sided endeavor, and that’s why other industries and asset categories are important, even if they grow less, because inclusion of them will balance risk.
The bottom line is that I am not concerned with short term volatility nor am I trying to time the market. Once again, that defines speculation, not investing, and speculation is not much different than gambling unless you are Gordon Gekko. If you can, I highly recommend you watch the series “Billions” on Showtime. It is a highly insightful series that depicts how hedge funds operate and is no exaggeration. However, it is fiction, and by the same token, hedge funds often fail to produce superior risk adjusted returns after their exorbitant management fees.
On the other hand, investing is like building an empire – it often takes more time but results over the long term are often far more reliable than speculation. But the only credible investment advice must consider anyone’s personal financial situation and goals, and how portfolio allocation and security selection matter within those parameters, not to mention potential tax impacts. That’s my fiduciary obligation.
So if you haven’t become a client yet, what are you waiting for? And for those of you who have, I appreciate you equally!
Meanwhile, please stay tuned for another topic I would like to address within the next few weeks – I am due to release a video which discusses the importance of estate planning given changes to your family and financial situation. Once again, my observations have been struck by experience, especially recently, and I would like to share them with you.
Questions? My contact information appears below.
Neil H. Gendreau CFP, ChFC
415 Boston Turnpike Rd., Ste. 213
Shrewsbury, MA 01545
Phone: (508) 845-8585
Fax: (508) 845-9705
Mobile: (508) 864-6053
www.ngendreau.com
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Neil H. Gendreau, CFP, ChFC is not affiliated with Kestra IS or Kestra AS.
https://www.kestrafinancial.com/disclosures
