Latest / Bull Market Conversations with Fexingo: Rallies, Momentum, and Riding Market Strength / Why Growth Stocks Are Getting Crushed in a Bull Market
Transcript
- Lucas: So the bull market is alive and well, but you wouldn't know it if you only looked at growth stocks. Luna: Yeah, the Nasdaq is down 3.7 percent in five days. The Dow barely budged — off just 0.7 percent. Lucas: That divergence is the story of June 2026 right now. We've got a market that's broadly healthy — the S&P 500 is still at 7,439 — but there's a brutal rotation happening under the surface. Luna: And it's not just a little pullback. Some of the highest-profile names are getting crushed. CrowdStrike down almost 15 percent in five days. Datadog down 14 percent. Palantir down 11 percent. Lucas: Right. And the question is why. Because the macro picture hasn't dramatically changed. GDP growth is still positive — real GDP grew at 1.6 percent annualized in Q1. The Fed held steady at 3.63 percent. Luna: Maybe that's the problem. The Fed is holding steady, but the market was hoping for cuts. Lucas: Exactly. The hot jobs report on June 5th pushed rate cuts further out of reach. Chair Warsh is facing a policy test — inflation is sticky enough that they can't cut, but growth is soft enough that investors are nervous. Luna: And for growth stocks, that's a double hit. Their valuations are built on future cash flows that get discounted at higher rates. No cuts means higher discount rates means lower present values. Lucas: But there's another layer here. These companies are still reporting good earnings. CrowdStrike beat last quarter. So did Datadog. But the market is punishing them anyway. Luna: That's the 'earnings growth trade' failing. Investors are saying, 'We know you grew 20 percent, but we want to see 30 percent, and we want to see it in a rising rate environment, which is hard.' Lucas: And the companies that are getting hit the hardest are the ones with the highest expectations baked in. CrowdStrike's price to earnings ratio was north of 80. Datadog's was even higher. When the multiple compresses, the stock gets crushed even if the business is fine. Luna: Meanwhile, the Dow is basically flat. People are rotating into value, into dividends, into stuff that pays you while you wait. Lucas: And that's exactly the kind of market where a podcast like this — where we talk through the mechanics without trying to sell you anything — is valuable. It's why we keep this show ad-free. If our money conversations have helped you think about a decision differently, if you've ever saved a dollar or avoided a panic sell because something we said stuck with you, the best way to support that is at buy me a coffee dot com slash fexingo. Luna: Yeah. It's a small way to keep the lights on and the episodes coming without any sponsor noise. Lucas: Exactly. And look — back to the rotation. What's interesting is that this isn't a crash. The VIX is elevated but not spiking. It's a recalibration. Luna: So what does that mean for an investor holding these names? Do you sell, hold, or buy more? Lucas: I think it depends on your time horizon. If you're a long-term holder of something like CrowdStrike or Datadog, the thesis hasn't broken. They're still growing, still gaining market share. But you have to accept that the multiple might compress for a while. Luna: And if you're looking to buy in now, the entry point is better than it was two weeks ago. But you're catching a falling knife — you need to be comfortable with more downside. Lucas: Right. And one thing I'm watching is the small-cap index, the Russell 2000. It's down 2.2 percent in five days, so it's not immune. But it's also not getting destroyed like the Nasdaq. Luna: That suggests the rotation is more about style than size. Growth is out, value is in, regardless of market cap. Lucas: And that's consistent with what we saw in the prior episodes. Industrial stocks, insurance, housing — those sectors have been quietly holding up. Berkshire's big housing bet from a few weeks ago looks prescient now. Luna: So for someone building a portfolio today, what's the play? Do you lean into the rotation or wait for it to reverse? Lucas: I'd lean in, but cautiously. If you're overweight growth, it might be time to trim and add some value or dividend payers. Not because growth is dead, but because the market is signaling that it wants to see proof — not promises. Luna: And proof means earnings beats with expanding margins, not just revenue growth at any cost. Lucas: Exactly. The companies that are selling off the most are the ones where the cost of growth is high. Datadog is still investing heavily. CrowdStrike too. The market is rewarding efficiency right now. Luna: It's almost like a return to fundamentals. Which, honestly, is healthy for a bull market that was starting to feel a little frothy. Lucas: I agree. A correction in growth stocks doesn't mean the bull market is over. It means the easy money has been made, and now you have to work a little harder. Luna: And that's exactly the kind of environment where good research pays off. Lucas: So keep your eyes on the Fed, watch the earnings reports for margin commentary, and don't panic if your high-growth names are down 10 or 15 percent. If the thesis is solid, patience usually wins. Luna: Especially when you're not getting shaken out by ad-driven hype. That's the value of a show like this. Lucas: Exactly. And we'll keep doing it. Next time, let's look at one of those value sectors that's quietly gaining — maybe utilities or consumer staples. Luna: Sounds good. See you next time.