The company reported another blowout quarterly result after the close on Wednesday. Yet NVDA is down about 12% since then as I’m writing this, in a slightly down market.

There was a similar period about a year ago, when the stock fell from $140 or so into the low $90s. The reason back then, I think, was that the stock had run so far ahead of other AI-related names that the market rotated in two directions–away from AI into cheaper areas and into admittedly inferior plays on the AI theme that were, however, substantially less expensive.

My cursory glance says this time is slightly different, in that the secondary plays also appear to be selling off.

two things, maybe three, are going on, I think

–Nvidia, Apple, Alphabet (two classes) and Microsoft together make up about 25% of the value of the S&P 500. Nvidia has already been a stellar performer for a long while. now having the largest market cap, about 7.5% of the index, of any S&P 500 member.

It’s extremely well-known. Every professional manager has likely long since made a decision about the stock, the successful managers presumably holding considerably more than the market weighting. Detractors presumably have had no inclination to buy, especially after the rocket ship ride of the past two years.

So, where are the new buyers needed to send the stock higher coming from? Sounds kind of stupid, but it’s a legitimate issue. And I think the market is reading the weakness of NVDA as meaning there are none.

–the US-as-a-third-world-country trade that has (unfortunately for us as US citizens) been a great success since the inauguration is getting long in the tooth. This is partly a question of relative value between the stars of the past year or so, which, generally speaking, have US costs and foreign revenues vs. the laggards (with the reverse structure). Here the gap between the haves—foreign revenues–and the have-nots–foreign costs—has become wide enough, I think, that portfolio managers who have been successful to-date are deciding to lock in gains. They’re doing this by shrinking their AI overweights and building up their domestic economy-oriented positions. They may still be betting on continuing domestic economic weakness, just not so much as before.

–since the inauguration, the S&P 500 is up by about 10%. EAFE, the standard measure of the world’s major stock markets ex the US, is ahead in US dollars by about 40%. Not only is the US at the bottom of the pile among world markets today, but this may be the worst relative market performance of the US since the mid-1980s. forty years ago. Two consequences: foreign portfolio investors are most likely shifting away from the US market to higher potential return markets elsewhere and domestic managers are likely doing the same. It may also be that foreign PMs are being directed by their clients, where collective memories of the Axis powers of WWII may still be vivid, to do so.

That’s what I think today’s US stock market feels like.

Several issues:

–yes, the US has been the worst-performing major world stock market last year, as well as so far this year. This weak performance comes despite the powerful upward thrust provided by US-based AI multinationals. Tancial press is just beginning to work out how poorly, in relative terms, the S&P has been performing–presumably because the last time we’ve seen a situation like this was over a quarter of a century ago

–domestic government policy during the current administration has been the unusual, GDP growth-inhibiting, combination of shrinking the workforce and raising the domestic cost of living through tariffs. The (sensible) stock market reaction has been to focus on bidding up the prices of companies with costs in $US and sales abroad. These stocks are no longer obviously cheap, howeverp. Arguably, they’re at least temporarily overpriced

–the usual stock market answer in situations like this is to roll out of recent winners and pick through recent laggards for possibly underpriced names. But these are by-and-large victims of the administration’s peculiar, anti-growth, economic policies. And to much of the rest of the world, the administration–ICE, in particular–brings echoes of the early 1930s in Europe. Not a good look, either for tourism or for investment

–in addition, there’s the executive branch suppression of the Epstein files, despite a Congressional order to release them. Wall Street is drawing the conclusion that the former is being done to protect high administration officials against prosecution for abuse of children. Again, not the stuff high PE multiples are made of.

Overall, then, it would appear that there’s no clear safe domestic haven to roll into. Hence, the move into EAFE names.

Hard to know how long this will last. My guess is that we’re far enough away from a move back to the US that this isn’t a concern for today. More relevant is how much of the portfolio to shift away from the US economy.

For what it’s worth, I’ve shifted maybe 40% of the money I actively manage out of US stocks, most of that in Hong Kong-listed Chinese names.

So far in 2026, the performance of the major world stock markets is as follows:

NASDAQ -3.5%

S&P 500 -1.2%

Russell 2000 +5.3%

EAFE (=Europe, Australia and the Far East) +7.9%

Things to note:

–the tech-heavy NASDAQ is weakening, both in absolute terms as well as versus other US-listed stock indices, as well as the EAFE index of foreign stocks

–continuing dollar weakness is one cause of US relative poor performance, but it’s only one. Tariffs are another, as several studies indicate they’re uoltimately being paid in very large measure by US consumers. ICE terror is another. There’s also continuing, deliberately induced by Washington, dollar weakness, as well as the fear that Trumpification of the Federal Reserve will push the dollar lower (launching a replay of the 1970s devastatingly bad money policy).

None of this is radically new.

What is, though, is the rotation within the US market away from tech. My read is that this is based mostly in software and on relative valuation. Hard to know how long it will last, since the move is just beginning. But, given Washington policy, the long-term best positioning, I think, continues to be having costs in the US, revenues abroad, and the possbility of shifting operations to, say, Canada, if the ICEification of government policy intensifies.

My thoughts:

–this only really matters if you’ve shaped a portfolio that’s extremely sensitive to minor market movements, or you think that your edge over other investors in the market is your ability to call this kind of move correctly–and, of course, you’ve presumably thought out the tax implications of this kind of trading

–experience shows that even the best professional money managers in the US, which is pretty much the All Star game for the profession, have lots of trouble outperforming an index fund.

This is a two-edged sword. Yes, active management is a lot harder than it looks from the outside but if pros as a group are net losers, the rest of us must be net winners. I don’t have a great explanation for why is the case, but I think it has to be so. Maybe we have smaller portfolios that we can make dance in a way that’s impossible for elephantine professional portfolios.

–according to the Trump-crafted Bureau of Labor Statistics, the country has lost about half a million jobs since the inauguration–much of that from firings of federal government employees. Arguably, the number the Biden administration would have published is significantly bigger. Also, the USD has also declined by about 15% over the past year, meaning the world value of US GDP is about $30 trillion less today than a year ago. …and the US stock market has been the worst-performing major stock market in the world over this time span.

On the surface, this isn’t the stuff that “trees don’t grow to the sky” usually applies to. To me, it’s more like “you can’t fall off the floor.”

–Still, I think there’s a reasonable argument that the AI-related stocks in the US are, as their performance over the past months illustrates, relatively fully priced. For holders with a long investment horizon, this may not matter too much. The traditional move for more aggressive US investors would be to rotate either into Consumer discretionary names with strong growth prospects, or into asset-rich, somewhat duller names, on the value idea that they can’t go down much and are potential takeover targets.

On the other hand, GDP growth doesn’t appear to be a high priority for Washington right now. ICE killings haven’t done much good for the US brand name. And efforts to thwart investigation of the (shockingly widespread) Epstein sex trafficking network have given the country another unneeded black eye. So I find it hard to see substantial movement into domestic-oriented US stocks, even though I’ve done a little of this already.

My guess is that, ex special situations, the bigger move will be to markets outside the US. My favorite here would be reaching into China through Hong Kong. Around 25% of my actively managed equity money (the large majority of my equity is in index funds) is there already–with mixed results so far.

All in all, I think that if today’s US stock market followed the pattern I’ve seen domestically over the past 40+ years, a correction would be on the cards. But I think that Washington (I include Congress here, too) has done a large amount of damage to the domestic economy in a short period of time. So my guess is there won’t be much rotation into purely domestic names. Money will go abroad instead.

Those of us old enough to have lots of stock market battle scars will, if prompted, recall vividly the stock market collapse that occurred as we entered the 21st century.

The portfolio I was managing at the time had a large position it had held for about a decade in a transformative tech firm. It was the last thing I wanted to sell, but it was tech and my fund owned a lot. Undecided, I flew to the west coast to attend the company’s annual analyst day. Everything sounded fine …and then came the Q and A session with the CEO and his heir apparent.

An analyst asked what I thought was an incredibly obsequious question–what do you think has been your greatest accomplishment as founder, owner, CEO? The reply was surprisingly revealing–the greatest accomplishment was that success gave him the ability to give jobs to his friends (like the soon-to-be new CEO). The new CEO then satepped to the midrophone and berated the audience for not understanding how hard it would be to have eps grow faster than, say, 5%. In other words, his aspirational goal was to have the firm not lose ground to inflation.

I sold everything.

A decade+ of stagnation later, activist investors tried to unseat the founder’s friend. It took them years to overcome the founder’s resistance. But they were finally successful. I bought a bunch. The stock has been up by over 10x since, or about 3x the performance of NASDAQ. My wife and I are now making charitable donations to unwind.

My thought?

The current cabinet in Washington, chock full of wealthy business people, seems to me to be unusually inept at, well, doing things. Maybe its main super power is the ability to become friends with powerful entrepreneurs.