The article highlights significant market risks, including a warning of potential 40%+ declines in specific industry groups over the next two years, an S&P 500 trading at a high forward P/E of 23x, and an analyst forecast for a steep Bitcoin correction to $80,000 or below $50,000 that could impact equities. A partial government shutdown has delayed critical economic data, while the administration's strategic investments in companies like Intel and Lithium Americas signal increasing state influence in key sectors. Concurrently, the AI sector continues its strong performance, though substantial bubble concerns persist, with one analyst suggesting it's 17 times larger than the dot-com bubble.
Stocks in these industries are at higher risk of crashing over the next 2 years Also: A combined warning about the stock market and bitcoin, the AI wave, and dividend compounders Referenced Symbols Mark Hulbert has long studied U.S. investment markets from the top down. This week he has a warning — and it is not about a broad stock-market crash, which investors might expect at this time of the year, since the 1987 and 1929 crashes both took place (or began) in October. Instead, Hulbert looked at the history of crashes — defined as declines of at least 40% — for smaller groups of stocks, based on a study by researchers at Harvard University and the University of Hong Kong, which was updated in May. Stocks in these two industry groups are especially ripe for painful declines over the next two years. More from Mark Hulbert: This stock and bond strategy is so disliked — and it’s probably your best investment move for the next 10 years Thoughts about the partial shutdown of the federal government Various federal agencies shut down, at least in part, on Wednesday, after Democrats and Republicans in Washington failed to come to an agreement on extending funding for the government. There have been many partial government shutdowns, during which many essential government services have continued. But you might still be affected. Victor Reklaitis explained what the shutdown might mean for you and your money. He also dug into the details of the budget disagreement to shed light on how a deal in Congress might end the shutdown. The monthly Employment Situation Summary would normally have been released by the Bureau of Labor Statistics early on Friday, but this data was delayed by the shutdown. Jeffry Bartash spelled out what other data were showing about the health of the U.S. jobs market. More: How the government shutdown and TSA could delay your flight Auto-industry news This was a busy week for Tesla Inc. and Rivian Automotive Inc. . Here is some of this week’s auto-industry coverage from MarketWatch::- Tesla delivers a big sales beat, and the end of EV tax credits may not be the only reason - Rivian unveiled upbeat sales. Here’s why the stock is still dropping. - Carvana has a ‘competitive moat’ over CarMax. But don’t sleep on CarMax’s stock, Morgan Stanley says. - Trump sees Lithium Americas as a vital investment. Here’s why Wall Street agrees. Here’s where Trump might invest your money next In the wake of President Trump’s decision in August to have the federal government take a 10% ownership stake in Intel Corp. , followed by this week’s news of a 5% government stake in Lithium Americas Corp. , investors may love to know which companies could next be targeted for a taxpayer-funded investment.USA Rare Earth Inc.’s stock was trading at $26.36 Friday afternoon, up 16% from the previous close and nearly doubling from a month earlier. The company’s new chief executive, Barbara Humpton, said during a CNBC interview Thursday that USA Rare Earth had been in “close communication” with the Trump administration. James Rogers looked into Humpton’s background and the importance of rare-earth magnets as investors speculate about a possible investment in the company by the U.S. government.More from MarketWatch’s companies coverage: - Why the bad news that sank Zillow’s stock is good for new investors - Running shoes and retail gains are helping Nike’s turnaround — and cranking up the heat on rivals - As Warren Buffett nears retirement, he’s making his biggest purchase in years - Here’s the latest sign that Boeing is going on the offensive against Airbus What the stock market and bitcoin have in common The S&P 500 keeps setting records, but the large-cap U.S. benchmark’s price doesn’t tell the entire story. At Thursday’s close, the index traded at a forward price-to-earnings ratio of 23, compared with a 15-year average valuation of 17.2. These are prices divided by rolling 12-month consensus earnings-per-share estimates for the index’s component companies among analysts polled by FactSet, and weighted by market capitalization.Meanwhile, bitcoin was trading at $120,554 early Friday — up 98% from $61,030 a year earlier, and 342% from $27,268 two years earlier. And front-month contracts for gold were trading at $3,906.60 an ounce on the New York Mercantile Exchange early Friday — up 45% from $2,697.20 a year earlier, and more than double the price of $1,841.50 two years earlier.Michael Sincere interviewed Jeffrey Bierman, chief market technician at TheoTrade.com, who said: “When gold outpaces the stock market this dramatically, it suggests the U.S. dollar is weak and equities are running on borrowed time.” He went further, saying that trading patterns indicate bitcoin is “vulnerable to a very, very steep correction to around $80,000, and potentially below $50,000.” He added that such a decline for the virtual currency would also place a drag on the stock market.This is what Bierman suggests investors do to protect themselves from declines in the stock market, bitcoin and the dollar. Related: Why the silver squeeze is finally about to end, analyst says Another overlooked business line for Amazon Last week, Charles Passy explained how Amazon.com Inc. has been building up a new corporate-supply business.This week, Needham analyst Laura Martin called Amazon’s advertising business a “crown jewel.” She explained why the advertising unit could be critically important for Amazon and its shareholders, as it competes with fellow tech giants like Meta Platforms Inc. and Google parent Alphabet Inc. in the coming years.More coverage from MarketWatch’s technology team: - The AI trade increasingly hinges on OpenAI — and that’s a big risk for the entire market - These chip stocks are falling in the face of a new China setback - Alphabet’s stock is now beloved on Wall Street. Here’s what matters next for Google. - These AI ‘loser’ stocks were left for dead. Now it might be their turn to rally. Are you nearing the age of 60? Beth Pinsker writes the Fix My Portfolio column, with a focus on financial planning for retirement. She interviewed Kerry Hannon, co-author of “Retirement Bites: A Gen X Guide to Securing Your Financial Future,” who discussed Social Security timing, paying down debt, generating investment income and second career acts. A plan: My husband and I have $2 million in savings and $1.65 million in real estate. Can I retire at 58? Riding the AI wave while worrying about a market bubble Joseph Adinolfi surveyed the stock-market scene, where big spenders on hardware and data centers to develop generative artificial-intelligence technology — including Alphabet, Meta and Microsoft Corp. — have shown double-digit returns this year, with dividends reinvested. Nvidia Corp. — the dominant supplier of graphics processing units being installed by the data centers to support AI — has performed even better, as you can see in the chart, above.He also looked into the AI-driven bull market from several perspectives — both positive and negative: - As stocks power higher, investors feel they have no choice but to keep riding the bull market - Here’s one clear sign investors aren’t worrying about an AI bubble right now - AI bubble talk is bubbling up again on Wall Street. Here’s what investors need to know. A related warning: The AI bubble is 17 times the size of the dot-com frenzy — and four times the subprime bubble, analyst says A different way to think about dividend stocks Some investors seeking current income will look for dividend-paying stocks with high yields. But those high yields may come at a price: The dividend yields may be high because the stock prices are low, because enough investors expect a dividend cut. A stock screen narrowed the S&P 500 to a group of companies that compounded their dividend payouts at double-digit rates. Their dividend yields were as low as 1.5% five years ago, but the increased dividends mean dedicated investors have been rewarded with high income streams. Want more from MarketWatch? Sign up for this and other newsletters to get the latest news and advice on personal finance and investing. The market is exhibiting significant cross-currents, with elevated valuations and specific risk warnings clashing with strong momentum in thematic sectors. The S&P 500 is trading at a forward price-to-earnings ratio of 23, well above its 15-year average of 17.2, while academic research highlights a risk of 40% or greater declines in certain industries over the next two years. This cautionary backdrop is amplified by a technical analyst's forecast for a steep Bitcoin correction that could create contagion for equities, citing gold's dramatic outperformance as a signal of dollar weakness and market froth. Uncertainty is further compounded by a partial government shutdown delaying key economic data, including the monthly jobs report. In this environment, specific themes are driving performance and attracting capital. The AI sector remains a focal point, with companies like Nvidia (NVDA) posting exceptional returns, though this is accompanied by explicit warnings of a potential bubble 17 times the size of the dot-com era. Concurrently, a new trend of direct government investment is emerging, with stakes taken in Intel (INTC) and Lithium Americas (LAC) and speculation mounting around USA Rare Earth (USAR), signaling a strategic focus on semiconductors and critical materials.
AI-powered research, real-time alerts, and portfolio analytics for institutional investors.
Request a DemoOverall Sentiment
moderately negative
Sentiment Score
-0.50
Ticker Sentiment
