Latest / The Bear Market Podcast with Fexingo: Surviving Downturns, Buying the Dip, and Long-Term Resilience / Why the Nasdaq Dropped 4 Percent in a Week While the Dow Rose
Transcript
- Lucas: So the Nasdaq has lost four and a half percent in the last five trading days. The Dow, over the same window, is up one percent. That's not a typo — it's a real divergence, and it's the kind of market action that makes you ask whether the old playbooks still work. Luna: Four and a half percent in a week — that stings if you're heavy in tech. And the VIX is sitting at 19.09, up more than ten percent over the same period. So fear is creeping in, but not panic-level yet. Lucas: Right. The VIX below 20 still signals complacency in historical terms, but the move is the story. When the VIX jumps from the low 17s to 19 in a week, you're seeing institutional hedging, maybe some systematic deleveraging. And that's happening while the Dow and the Russell 2000 are actually positive over five days. Luna: So money is rotating. Out of the mega-cap names that led for years, into value, into small caps, into banks. The Russell is up nearly a percent this week. That's a total role reversal from most of 2024 and 2025. Lucas: Exactly. Let's put a concrete number on it. The Nasdaq has been driven by five or six stocks — Apple, Microsoft, NVIDIA, Alphabet, Amazon, Meta. If those names drop three to five percent in a week, the index gets crushed. Meanwhile, the Dow has a heavier weighting in industrials, financials, healthcare — sectors that benefit from a steepening yield curve. Luna: And the yield curve is steepening. The ten-year Treasury yield is at 4.50 percent, the two-year at 4.16. That spread widened to 34 basis points earlier this week, now it's 30. Still the steepest it's been in months. Lucas: A steeper curve is a tailwind for banks. They borrow short, lend long. So it makes sense that financials are holding up. And we got a big piece of news today that ties directly into this — JPMorgan announced that Doug Petno and Troy Rohrbaugh are replacing Marianne Lake as co-presidents. Lake is leaving after a long tenure. Luna: That's a significant leadership shift. Petno runs the commercial bank, Rohrbaugh runs the markets division. So you've got the two biggest profit engines for JPMorgan now at the top. The market seems to like it — JPM stock is flat to up this week while tech gets slaughtered. Lucas: It's a signal that JPMorgan is doubling down on its core strengths. And it fits the broader rotation narrative: when the economy is growing at a real GDP pace of over two percent, as we saw in the latest data, banks and industrials tend to outperform. Tech, especially high-multiple tech, becomes vulnerable to repricing. Luna: So is this 2022 all over again? Because that was the last big tech rout. The Nasdaq fell 33 percent that year. Lucas: I don't think it's 2022. Back then, inflation was surging, the Fed was hiking aggressively, and the ten-year yield went from 1.5 to over 4 percent. This time, inflation is more subdued, the Fed is on hold or potentially cutting later this year, and the ten-year is actually down from its recent peak of 4.51. The macro backdrop is different. Luna: But the sell-off feels similar in tech. What's driving it if not rate fears? Lucas: I think it's a valuation reset within the sector, not a macro panic. Look at NVIDIA — it's still up something like 150 percent from a year ago. Even after this week's drop, the P/E ratios on the mega-cap names are stretched. The market is re-pricing the risk that AI spending might not deliver immediate returns. And there's probably some profit-taking ahead of the second half. Luna: So the question becomes: is this a dip to buy or a trend change? The VIX at 19 suggests it's not a crash. But the VVIX, which measures volatility of volatility, is at 94.5, up almost seven percent this week. That tells me options traders are pricing in tail risk. Lucas: The VVIX above 90 is a yellow flag. It means the market is pricing in a non-zero chance of a spike — a VIX explosion above 30 or 40. That doesn't mean it will happen, but it means the hedging activity is real. For a dip buyer, the risk is that you catch a falling knife if the sell-off accelerates into July. Luna: Let's talk about the dip-buying strategy specifically. A lot of our listeners have been trained to buy the dip in tech because it's worked for a decade. But this week, buying the dip on Monday would have left you down another two percent by Thursday. Lucas: Right. The old playbook was: buy the dip in the Nasdaq, wait a few weeks, profit. That worked in 2023 and 2024 because the Fed was cutting and AI hype was building. Now the Fed is on hold, and the AI narrative is getting more skeptical scrutiny. The dip might be a value trap for some names. Luna: So what's the alternative? Where do you put money if tech is shaky? Lucas: The rotation into value and small caps is one answer. The Russell 2000 is up this week. The Dow is up. Energy, financials, materials — those are sectors with pricing power and real earnings. And with the yield curve steepening, the environment favors them. But you have to be selective. Luna: Speaking of being selective — we should talk about what we're doing here. Lucas and I have been doing this podcast for over 70 episodes, and we deliberately don't run ads. No sponsor reads, no interruptive commercials. We keep it ad-free because we want the conversation to be about the markets, not about selling you something. Lucas: Yeah, and we've heard from listeners that they appreciate that. If our money conversations have helped you think about a decision differently — maybe you avoided a panic sale in 2022, or you understood a yield curve move better — and you want to support that choice, there's a simple way. It's buy me a coffee dot com slash fexingo. That's buy me a coffee dot com slash fexingo. No pressure ever. Luna: We mean it. The show stays free and ad-free regardless. But if it's added value for you, that link is a way to keep the lights on. Now, back to the rotation — because I think there's another layer here with the bond market. Lucas: Good point. The ten-year yield has actually declined slightly from 4.51 to 4.50 this week, even as equities sold off. That's a classic flight to safety move. Money is flowing into Treasuries not because rates are attractive, but because investors want a haven from the equity volatility. The three-month yield is at 3.85, so the front end is still inverted relative to the long end, but the curve is steeper than it's been in a year. Luna: So the bond market is saying: we're not worried about inflation reigniting, but we are worried about growth. The real GDP growth came in at 2.1 percent annualized, which is solid but not booming. That's actually a Goldilocks number — not too hot, not too cold. But the equity market seems to be pricing in a different story. Lucas: That's the divergence. The equity market is focused on the mega-cap tech names that have the most to lose if AI hype deflates. The bond market is focused on the macro picture, which is actually pretty stable. So the question is which market is right. Historically, the bond market has been better at predicting recessions, but equities are better at predicting sector rotations. Luna: So for the individual investor, what's the actionable takeaway? Should you rebalance? Should you sit tight? Lucas: I think the most important thing is to not panic. The VIX at 19 is not a crisis signal. But if you're overexposed to tech, this week is a reminder to check your allocation. The rotation into value is real, and it might have legs. If you haven't looked at your portfolio since January, now is the time. For long-term investors, the best move might be to do nothing — but to do it with eyes open. Luna: And if you're a dip buyer, maybe wait for the VIX to spike above 25 before committing new capital. That's been a reliable entry point in the past. Lucas: That's a good rule of thumb. Historically, buying when the VIX is above 25 and the S&P is down five percent from its high has produced above-average returns over the next six months. We're not there yet — the S&P closed at 7,356 today, which is only about three percent off its high. So the dip isn't deep enough to call it a buying opportunity in the broad market. Luna: And the Nasdaq is off more, but that's concentrated in a few names. The average stock in the S&P is actually flat or up this week. So the pain is narrow. Lucas: Exactly. That's the nuance. The headline numbers look scary, but beneath the surface, it's a healthy rotation. Financials are up, small caps are up, energy is stable. The market is broadening out, which is actually a sign of sustainability. A bull market that's too narrow is fragile. One that includes more sectors is more durable. Luna: So maybe this week is not the beginning of a bear market, but the end of the mega-cap monopoly. Lucas: I like that framing. The mega-cap monopoly has been the dominant story since 2023. If this rotation continues, the next leg of the bull market could be led by banks, industrials, and small caps. That would be a completely different environment — and one that many investors aren't positioned for. That's the real takeaway. Not to panic, but to prepare. Luna: And to keep listening. Next episode we'll dig into whether the JPMorgan leadership change signals a shift in the banking sector more broadly. Lucas: We'll see you then.