Market Melt-Up and Froth (with Matt Miller, Dani Burger)

Ethan Devitt sees a melt-up with frenzy and exuberance, primed for a correction. He follows the money from hyperscalers into semiconductors, data centers, energy, and ultimately banks. He is concerned about retail leverage, FOMO, and lack of interest in bonds, even among retirees. He sees SpaceX's fast-track index inclusion as a sign of froth.

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Monetta Global Wealth 2.5
Wealth Manager
Ethan Devitt 7.0

Market Melt-Up and Froth (with Matt Miller, Dani Burger)

ndx

We are in a melt-up with frenzy and exuberance. It seems primed for a correction.

rut

Ethan notes concentration is an issue and other sectors are being left behind, implying small caps (Russell 2000) are not participating in the rally.

Asks if the rest of 2026 brings a melt-up to Goldman's 8000 target.

Dani Burger
Ethan Devitt

We are in a melt-up with frenzy and exuberance. It seems primed for a correction. A more moderate pace would be welcome.

Momentum is leading the way, raising questions about concentration and other sectors being left behind.
Asks about 800-900% gains in memory chip makers in the first five months of the year.

Matt Miller
Ethan Devitt

It's about following the money from hyperscalers into picks and shovels: semiconductors, data centers, energy stocks, and ultimately banks. The fact that banks are trailing means we are in the early innings of this AI effect.

Banks have to finance some of this CapEx spend; it's not all going to be financed from cash.
Asks why banks remain less loved despite being beneficiaries of the AI trade.

Dani Burger
Ethan Devitt

Financials are classic old economy, not in vogue today. Private credit exposure to software may have tainted them. But banks are more stable and less levered than during the last crisis.

They have withstood crisis after crisis and a fairly unpredictable reversal around interest rates.
Asks about frothy signs of a market top, specifically SpaceX's fast-track into the Nasdaq 100.

Matt Miller
Ethan Devitt

SpaceX's fast-track inclusion is a sign of froth. Little regard is being paid to valuations. The sense of FOMO is strong.

Private wealth investors are also looking for allocation. The limited allocation might save them from themselves.
Asks about retail money being thrown at the market, including margin loans in South Korea and Robinhood AI agents.

Dani Burger
Ethan Devitt

It worries me hugely. Memories of the financial crisis are receding. There is a massive appetite for risk reinforced by new highs. Even people in their 70s and 80s are all in on equities, which is concerning.

Bonds, which used to be a traditional anchor, are being ignored. No one is interested in long-duration bonds.

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