Pullback, Not Panic: FOMC, Hormuz, and the Case for Patience
Strong jobs, sticky energy risk, and higher yields are testing growth stocks — but the bull market is not broken yet.
Photo by John Salzarulo on Unsplash
Macro
May jobs: 172K vs 85K expected. The economy is strong. Markets sold off anyway.
Why? Strong growth means the Fed stays higher for longer. That hurts growth stocks.
The real risk isn’t jobs. It’s the chain: energy stays elevated → inflation stays sticky → Fed stays hawkish → stocks reprice. Brent crude is still +42% year-on-year. Hormuz isn’t resolved.
One offset: real-time inflation (Truflation) is running at 1.81% — well below the official 3.80%. No recession signal. GDP nowcast at 2.67%. The economy is fine. The fear is about rates, not growth.
We need to watch the 10-year yield. If it keeps going up, the selloff might get worse.
Index
SPX −2.6%. NASDAQ −4.7%. Both still above all key moving averages. Weekly MACD intact. RSI cooling but not broken.
Structure is fine. Breadth isn’t. Only 40% of S&P 500 stocks are above their 50-day MA. The recent rally was narrow. AI and semis did the heavy lifting. Now they’re giving it back.
Mid-cycle earnings growth (+17.7% LTM) keeps the bull case alive. This is a pullback, not a trend change. For now.
Sectors & Themes
Winners: Healthcare, Utilities, Real Estate, Financials. Defensive rotation, not an equity exodus. That distinction matters.
Losers: Tech (XLK −7.9%), Software (IGV −11%), AI (AIQ −10%), Semis (SMH −6.3%).
Their 3-month returns are still +24% to +42%. This week’s damage is a pruning, not a collapse.
Implications
Two events dominate the next few weeks: FOMC and Hormuz.
FOMC first. New Chair Warsh is untested. A hawkish tone pushes yields higher and extends the correction. Base case: cautious tone, no relief rally, sellers stay in control.
Hormuz is the wildcard. Any resolution deflates energy prices, cools inflation expectations, and revives the AI cycle fast.
This is not 2022. Earnings are growing. The bull market isn’t broken. But the easy part of the rally might be behind us.
Rational posture: Tighten stops on extended names before FOMC. Don’t add to growth positions into uncertainty. The best setups will come after the dust settles — not before.
Corrections create opportunities.
Portfolios
10X Momentum Portfolio
I was stopped out of RDW. That move up and down was very fast.
I lost 6% on the trade.
I now have 4 positions left.
Below is a snapshot of the current positions, stop-loss levels, and current scorecard for this portfolio.
10X Easy Doubles Portfolio
Last week, the following buy-stop orders were triggered:
Ticker - Price - Qty
HIMS - 26.19 - 95
NTNX - 53.9 - 46
ONDS - 13.2 - 189
RDDT - 179.9 - 13
UPST - 34.15 - 73
ZETA - 23.66 - 105
Below is what the portfolio looks like now:
ONDS and ARDX are close to my standard stop-loss level of -25% for this portfolio.
If any stock in the portfolio is below -25% next Friday (last hour of the trading session), I will sell it.
I am not adding anything in this environment.
Next week, there are many variables that could strongly impact the markets.
Let’s see how the week goes.
This is not investment advice. Consult a licensed financial advisor before making any investment decisions. AI tools used for editing.