Anyone who has observed the market’s spectacular intraday volatility over the last four trading sessions should realize that something is amiss. The market is not behaving normally — it seems destabilized.
* Is it simply an overvalued market that is in the process of correcting?
* Is it an overvalued and concentrated market led by large-cap technology that is rotating into new leadership?
* Is it a signal that the AI revolution might face growing fundamental headwinds?
* Is the proliferation of leveraged ETFs and the growing acceptance of the market as a casino (with the ubiquitous presence of 0DTE options) undermining market stability, acting like an infant splashing around in a bathtub (violently moving from side to side)?
* Is it the consequences of the evolution of market structure (the tail wagging the dog), in which passive products and strategies dominate the investment landscape?
* Or, have the machines and algos “gone wild” (in dealing with a potential inflection point or price momentum change)?
To me, its all of the above — some of each.
We are likely entering a slippery slope — great for opportunistic traders, lousy for the buy-and-hold crowd.
Doug Kass is a world-renowned hedge fund manager with decades of experience and success navigating through some of the most turbulent periods in market history. He is known for his time-tested analytical skills and ability to look past the current noise and herd mentality.
On TheStreet Pro, Kass provides frequent market commentary and investing ideas for active investors throughout each trading day in Doug’s Daily Diary. He also serves as president of Seabreeze Partners Management Inc. Previously, he served as a senior manager at Omega Advisors, a $6 billion investment partnership. He co-authored a book with Ralph Nader and the Center for the Study of Responsive Law called “Citibank: The Ralph Nader Report” and can be found as a guest host on CNBC's "Squawk Box."
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