Latest / Bull Market Conversations with Fexingo: Rallies, Momentum, and Riding Market Strength / High-Growth Stocks Are Crashing While the Dow Holds Steady
Transcript
- Lucas: Luna, we talk a lot on this show about which parts of the market are running hottest. But right now, the most interesting story isn't the leaders—it's the laggards. Because some of the biggest names in this bull market just got hammered. Luna: Yeah, I've been watching the screens today. Shopify, CrowdStrike, Datadog, Palantir—all down double digits over the past five days. That's not a small wobble. Lucas: Exactly. Let's put some numbers on it. As of market close on June 5, 2026, Shopify is down 11.4 percent in a week. CrowdStrike off 11.9 percent. Datadog lost 15.5 percent. Palantir dropped 14.6 percent. And it's not just them—the broader growth ETF, the iShares S&P 100 Growth ETF, ticker IWF, is down 3.6 percent. The Vanguard Growth ETF, VUG, down 3.7 percent. Even ARKK, Cathie Wood's flagship, is off 7.5 percent. Luna: And meanwhile, the Dow Jones Industrial Average is basically flat—up 0.2 percent on the week. The NYSE Composite is barely down 0.1 percent. So the pain is intensely concentrated in high-growth, high-multiple stocks. Lucas: Right. The S&P 500 is down 1.9 percent, the NASDAQ down 3.8 percent, the Russell 2000 down 1.8 percent. So the small-cap index is actually holding up better than the NASDAQ. That's a big shift from just a few weeks ago, when the Russell was leading to the upside. Luna: So what's driving this? Is it a macro fear, or is it something more specific? Lucas: I think it's partly a rotation out of the names that had run the hardest. If you look at Palantir, for example—it was up something like 60 percent year-to-date before this week. CrowdStrike had more than doubled over the past year. So some profit-taking was almost inevitable. But there's also a macro backdrop here. Luna: You mean the Fed? Lucas: Yeah. The effective federal funds rate is at 3.63 percent, and the Fed shows no sign of cutting. The interest on reserve balances is at 3.65 percent. So money market funds are yielding over four percent risk-free. That puts pressure on high-duration assets like unprofitable or high-multiple growth stocks. When you can earn four percent in cash, why pay 50 times sales for a company that might grow into its valuation in five years? Luna: And a lot of these growth names—Shopify, CrowdStrike, Datadog—they're wonderful businesses, but they trade at very high multiples. So when rates stay higher for longer, those multiples compress. That's basic finance. Lucas: Exactly. And there's another layer here, Luna. If our conversations about navigating these kinds of market shifts have helped you think about your own portfolio or just understand what's happening a little better, we'd love for you to consider supporting the show. It's listener-supported, ad-free, and every bit of support goes right back into making episodes like this one. You can find us at buy me a coffee dot com slash fexingo. No pressure, just a simple way to keep the conversations going. Luna: Yeah, and it really does make a difference. Even a small gesture helps us keep the lights on and the research deep. Lucas: So back to the rotation. We've seen this pattern before—in late 2021, early 2022, when the Fed started tightening. Growth stocks got crushed while value and cyclicals held up. But the difference this time is that the economy is actually solid. Luna: Real GDP growth just came in at 1.6 percent annualized for the first quarter, up from 0.5 percent in the prior quarter. And nominal GDP is over 31.8 trillion. So it's not a recession scare driving this. Lucas: No, it's more of a valuation reset. And the market is rewarding the parts of the economy that are more directly tied to current cash flows—industrials, financials, energy. Those sectors have been quietly chugging along. The Dow's resilience is a signal that the bull market is broadening, even as the growth leaders take a breather. Luna: But if you're an investor who owns a lot of these growth names, this week has been painful. What's the right move? Do you ride it out, or do you trim? Lucas: There's no one-size-fits-all answer, but I think the key is to ask whether the thesis for each stock has changed. For CrowdStrike, cybersecurity spending is still growing. For Shopify, e-commerce is still taking share. For Datadog, cloud monitoring is still a tailwind. So if you believe in the long-term story, a 15 percent pullback might be a buying opportunity. But you have to be prepared for more volatility. Luna: And that's where the Fed comes back in. If rate cuts start to get priced in again, these stocks could rebound sharply. But if rates stay at 3.6 percent for another year, the pressure stays on. Lucas: Right. The market is essentially pricing in a higher for longer scenario. The FOMC hasn't cut since March, and the next meeting is later this month. The futures market is implying about a 40 percent chance of a cut by September. So it's not a slam dunk either way. Luna: What about the small-cap side? The Russell is down only 1.8 percent, and we talked a few episodes ago about how small caps were leading. Is that rotation still intact? Lucas: I think it is, but it's quieter. Small caps are less correlated to the mega-cap growth narrative. They tend to be more domestic, more cyclical, more tied to Main Street. And with GDP accelerating, that's a decent tailwind. The Russell actually outperformed the NASDAQ this week by a wide margin. That's a signal that money is moving away from the high-flying tech names into more reasonably valued areas. Luna: So if I'm an investor, I should be watching the IWF versus the Dow, or maybe the Russell versus the NASDAQ, to gauge how deep this rotation goes. Lucas: Exactly. And keep an eye on the VIX, too. It's been creeping up, but it's not spiking. That suggests this is more of an orderly rotation than a panic. The credit markets are calm—spreads are tight. So it doesn't feel like a systemic event. It feels like a repricing. Luna: That's reassuring. But it also means the easy money in growth stocks might be done for a while. The next leg of this bull market could be led by different names. Lucas: I think that's exactly right. And actually, that's healthy. A bull market that's too narrow is fragile. When it broadens out to include value, small caps, industrials, and even some defensive sectors, it becomes more durable. So in a strange way, this week's selloff in growth could be the thing that extends the cycle. Luna: As long as the Fed doesn't surprise to the hawkish side. Lucas: Always the wildcard. But for now, the data says the economy is growing, inflation is moderating, and the labor market is still solid. The JOLTS data from earlier this week showed job openings ticking down but still above pre-pandemic levels. So the soft landing narrative is intact. It's just that the market is rotating within that narrative. Luna: So where do you look for opportunity this week? If I'm a listener with a long-term horizon, what's the play? Lucas: I'd be looking at the Dow stocks that have been ignored. Companies like Caterpillar, Honeywell, UnitedHealth—they're not exciting, but they generate cash. And I'd be dollar-cost averaging into some of the growth names that got oversold, but only the ones with strong balance sheets. Shopify has over five billion in cash and no debt. CrowdStrike has a recurring revenue model with 90 percent gross margins. Those are the kind of businesses you can own through a rotation. Luna: And what about Ark Invest's bet on SpaceX? They said Starlink alone supports a two trillion dollar valuation at IPO. That's a growth story, but it's not publicly traded yet. Do you think that kind of narrative is driving some of the speculative fervor in growth? Lucas: Probably. When you see headlines like that, it reinforces the idea that there's still huge upside in disruptive technology. But the problem is that the public market comps—like Palantir and CrowdStrike—get bid up in anticipation. And then when reality sets in that rates are high, they correct. So the SpaceX narrative might be a tailwind for the IPO market later this year, but for now, it's adding to the volatility in growth. Luna: So a lot of moving parts. But the big picture, as you said, is a broadening bull market, not a breakdown. Lucas: Exactly. The Dow at 51,172, the S&P at 7,455—these are not crash levels. They're pause and rotate levels. And that's a healthy sign for the months ahead. Luna: Alright, Lucas. Good conversation. Let's see how the Fed meeting shapes up later this month. Lucas: Absolutely. We'll be watching.