Image Source: Pixabay

It’s all about the chips right now, and I’ll be upfront with you here: The Nvidia (NVDA) news this week about certain chip export restrictions is a bad sign.

When I commented earlier this week about bulls capturing a beachhead, it was centered around technology, and specifically chips, outperforming their peers at a sector level.

But what happens if there’s no follow-through from tech and chips? Here’s some food for thought over the long weekend…

Mr. Market Says…

The situation for the tech sector isn’t getting any better. Going back to the start of the fourth quarter in 2024, it’s the second-worst performer behind basic materials.

It doesn’t take a rocket scientist to understand that the indices are going to have a tough time sustaining a rally without the tech sector, which makes up around 30% of the S&P 500.

So, what’s the worst-case scenario here? I don’t actually think it’s a washout to new lows in the coming weeks and months. Instead, I think the worst-case would be a sideways market that plays out for years.

The Magnificent Seven are in a tough spot right now; they are right in the crosshairs of all the ongoing tariff tantrums. They could weigh heavily on the indices, too.

This means that we’re going to have to focus on selective opportunities and unique themes found off the beaten path.

I pounded the table on precious metals and miners at the beginning of the year, and now they have everyone’s attention. I think this trend can continue.

But another one that I’m watching potentially emerge is a decoupling of the crypto market from stocks. I am impressed by the lack of volatility we’ve seen in crypto as of late. It’s still early to confirm, but this could be the start of a big, big shift for global markets.

More By This Author:

Markets Pause… But Volatility Is Far from Dead
Two Sectors That Can Hand Us Up To 5% A Month
I See Some Strength… But It’s Almost Too Quiet