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This Week’s Market Recap… 📊

Sunday night, as I was drafting my Monday morning blog, the Nasdaq had dropped over 1.5% and Nvidia was down more than 5%. I found myself puzzled by this sudden dip until I stumbled upon news about the new AI contender, DeepSeek—touted as a "Better ChatGPT."

I brushed it off and went to bed. But Monday morning painted a different picture. I turned on Bloomberg Surveillance to find the Nasdaq down over 4%, the S&P 500 off by more than 2%, and Nvidia plummeting over 12%. The shock set in, and there it was again—DeepSeek dominating the headlines as the next great AI disruptor.

As the morning unfolded, panic rippled through financial media and Twitter. Analysts and commentators flooded Bloomberg, drawing parallels to 1999 and warning that the dot-com bubble's ghost was back. The negativity persisted throughout the day, with Nvidia continuing its downward spiral, closing the session down 17%. That translated to a staggering $600 billion loss in market cap—the largest single-day drop ever.

Predictably, the bears emerged from hibernation, puffing their chests and flooding Twitter and CNBC with their doom-laden proclamations. This was their moment. After two years of predicting market collapse while the S&P 500 soared over 20% annually, they finally had their "I told you so" moment.

For the past two years, as the Magnificent 7 stocks propelled the market upward, many fund managers lagged behind the benchmarks. Perma-bears like Nassim Taleb repeatedly warned of an impending massive correction, only to watch the markets defy their predictions. But Monday gave them the narrative they’d been waiting for.

Tuesday morning, like clockwork, Bloomberg featured Taleb with the headline, "Nvidia rout is a hint of what’s to come." The Financial Times wasn’t far behind, quoting Ray Dalio: "Wall Street’s AI bubble echoes dot-com excesses." The bears wasted no time, seizing the moment to reinforce their gloomy outlook.

But here's the flaw in their narrative: it hinges on short-term panic rather than long-term perspective. If you take a step back and consider the broader implications of DeepSeek, it becomes clear that innovations like this can benefit the tech sector. Open-source models like DeepSeek promise cost savings and efficiency, potentially bolstering the very companies investors panicked about.

By Tuesday’s opening, the market had already started to rebound. Nvidia was up 8%, and the Nasdaq climbed over 1.5%. The Monday sell-off was an overreaction to new competition in the AI space. Once investors had time to digest the news, cooler heads prevailed, and the market corrected itself.

The key takeaway? Don’t overreact. Today’s market is hypersensitive to every headline and data point, leading to frequent, exaggerated swings. It’s crucial to remain calm and see these overreactions for what they are—potential buying opportunities. Monday’s dip, in my view, was exactly that. And if we encounter more of these dramatic sell-offs shortly, they’ll likely present similar opportunities.

In this era of heightened volatility, staying calm and focused is more important than ever. Keep a long-term perspective, resist the urge to panic, and look for chances to capitalize on market overreactions.

Stay positive, stay invested, and keep an optimistic outlook.

Thank you for reading, and have a fantastic weekend!

My Schedule This Week!

Have a Blessed Weekend!

Disclaimer: Wolf Financial does NOT offer financial advice. All content provided is strictly for informational purposes. Wolf Financial is not registered as an investment, legal, or tax advisor, nor as a broker/dealer. Please be aware that trading any stock or crypto-related asset carries inherent risks and may lead to substantial capital losses.