Latest / Bull Market Conversations with Fexingo: Rallies, Momentum, and Riding Market Strength / The Great Rotation from Growth to Value in June 2026
Transcript
- Lucas: Luna, let me start with a number that stopped me this afternoon. The S&P 500 closed at 7,253 today — down 4 percent in five days. That's a real pullback. But here's the weird part. Luna: Let me guess — the Dow barely budged? Lucas: Exactly. The Dow lost only 0.8 percent over the same stretch. So we have a classic divergence, but it's not the NASDAQ versus Dow thing we talked about a few episodes ago. This is much more concentrated. The NASDAQ is down 6.8 percent in five days. The Russell 2000 small caps, down 3.4 percent. The NYSE composite, which has more value and industrial names, down just 0.9 percent. Luna: So the pain is almost entirely in growth stocks. Specifically, the high-multiple, ai adjacent names that led this bull market for the past year. Lucas: Right. And it's not subtle. CrowdStrike lost 16.8 percent in five days. Cloudflare, 13.2 percent. Datadog, 12.2 percent. Palantir, 10.2 percent. These are double-digit drops in a single week for some of the most celebrated names in enterprise software and AI security. Luna: And yet, the broader economy is fine. GDP growth just came in at 1.6 percent annualized, up from 0.5 percent. The Fed is holding steady at 3.63 percent. There's no obvious macro catalyst for this sell-off. Lucas: That's what makes it interesting. This feels like a rotation, not a panic. The market is repricing expectations for these growth names, not fleeing risk altogether. If it were a panic, the Dow and the NYSE would be down much more. Luna: So the question is, why now? What changed? Lucas: I think there are two things. First, there's growing skepticism about the pace of AI monetization. We've had this massive buildup in AI infrastructure — Nvidia's chips, data centers, cloud capacity — but the revenue from AI services hasn't materialized as quickly as some hoped. JPMorgan just announced plans to deploy 'more powerful AI agents' this year, which is a great headline, but it also signals that the biggest enterprise customers are still in pilot mode, not full deployment. Luna: Right, so the companies selling the picks and shovels — Nvidia, CrowdStrike, Cloudflare — they've already priced in a future that hasn't arrived yet. And when earnings season doesn't accelerate, the multiples compress. Lucas: Exactly. And the second factor is interest rates. Even though the Fed held steady, the rate is still 3.63 percent. That's not accommodative. For growth stocks, whose value depends on cash flows years in the future, higher rates are a direct headwind. When you discount those future earnings at a higher rate, the present value drops. Luna: So what you're describing is classic duration risk — growth stocks are long-duration assets, and they're getting repriced. Lucas: Bingo. And what's fascinating is that the market is doing this while still in a bull market. The S&P at 7,253 is still up significantly from last year. But the internal composition is shifting fast. The Russell 2000, which had been lagging for months, is now actually outperforming the NASDAQ on a relative basis. Luna: That suggests money is rotating into value and small caps. Which, historically, is a healthy sign for the later stages of a bull market. Lucas: If you look at the data, the iShares S&P 100 Growth ETF, ticker i w f, is down 5.7 percent in five days. The Vanguard Growth ETF, V-U-G, down 6.2 percent. And ARK Innovation, the famous high-growth ETF, down 7.5 percent. Meanwhile, the Dow's 0.8 percent drop tells you that value — banks, industrials, consumer staples — is holding up fine. Luna: So who's actually buying the dip in growth? Or is everyone just waiting? Lucas: That's the million-dollar question. I think institutional investors are waiting for clearer signals on AI earnings. And retail, which has been very active in these names through social media and trading apps, might be getting shaken out. But there's also a contrarian case: if you believe AI is truly transformative, these pullbacks are buying opportunities. Luna: If today was actually useful to you — and I hope it was — the way Fexingo stays ad-free and independent is through listener support. If you've ever gotten a concrete idea from one of our episodes, buy me a coffee dot com slash fexingo. That's the only way this thing keeps going without sponsors. Lucas: Yeah, and we really mean that. No ads means we can talk about exactly what we think, whether it's a rotation or a rally or a correction. So if you value that, the link is simple: buy me a coffee dot com slash fexingo. And thank you. Luna: Alright, so back to the rotation. Lucas, you mentioned institutional investors waiting. But what about the companies themselves? CrowdStrike is down 16.8 percent in a week. That's a massive swing. Do they do anything about it? Lucas: They can't do much in the short term. They can't control macro sentiment or interest rates. What they can do is deliver strong quarterly results and forward guidance that justifies their valuation. CrowdStrike reports in late August, I believe. So we've got a couple of months of uncertainty ahead. Luna: And in the meantime, the market just sits and waits. Lucas: Essentially, yes. But there's another layer here. Look at the price action in Cloudflare — down 13.2 percent. Datadog, down 12.2. These are companies with strong fundamentals, growing revenue 25 to 30 percent year-over-year. But the market is saying, 'That's not enough.' The bar has been raised. Luna: The bar is always raised in a bull market. Eventually, even great companies can disappoint if expectations are too high. Lucas: Right. And I think that's the key takeaway from this week. The bull market isn't over. But the easy money in growth stocks — that phase might be. We're entering a period where stock selection matters more than just being in the right sector. Luna: So if you're an investor watching your portfolio drop 5 or 10 percent this week, what do you do? Lucas: First, don't panic. This is a rotation, not a crash. Second, look at your holdings. If you're heavy in high-multiple growth, consider whether you have the conviction to hold through a 20 to 30 percent drawdown. If not, trimming into strength — when it comes — might be wise. And third, pay attention to what's working: value, dividends, small caps. The market is telling you something. Luna: That's a pretty disciplined framework. I like it. Lucas: Thanks. And one more thing — keep an eye on the Fed. The next FOMC meeting is in late July. If rates stay at 3.63 percent, growth stocks will continue to face headwinds. If there's a surprise cut, all bets are off. Luna: So for now, buckle up. The bull market is still intact, but the ride just got a lot bumpier. Lucas: Exactly. Thanks for listening, everyone. We'll be back tomorrow with more.