Stonks sold off hard recently as – you know – AI spending fears roiled the chip makers. We’ve seen this more times than we can count and talked about it more still. Run for the hills if you want – but know that the markets are the only store on earth where customers fear a sale, writes Keith Fitz-Gerald, editor of 5 With Fitz.
Markets reset periodically for a variety of reasons. Last week, it was a combination of the reaccelerating war in Iran, oil prices, and rising yields. All of that means the cost of leverage goes up and, with it, the need to sell shares in anything hotter than normal – like oh, I dunno, chips.
(Editor’s Note: Keith is speaking at the 2026 MoneyShow Masters Symposium San Francisco, scheduled for Aug. 25-28. Click HERE to register.)
Chip stocks are always first “on sale” when the cost of leverage rises because they’ve got less room for error and even less room to absorb multiple compression. In other words, situation normal. The underlying case for owning the world’s best companies is getting a lot stronger, particularly if they continue to put up good numbers.
Once upon a time selloffs like this were driven by fundamentals, but these days, not so much. In fact, my research suggests that roughly 84% of daily volatility is now driven by market structure, not stocks themselves.
Think about that for a moment. There’s a 98% correlation between earnings and price over time – which means that if earnings remain strong, guess what follows over time?
Yep. Price.
So when you've got a “sale” on your hands because others don’t understand the relationship, guess what history also clearly suggests you should be doing?
Yep, again. Buying.
Not blindly, mind you. But buying the world’s best companies – particularly those making “must have” products and services the planet can’t live without. Contrary to what many believe, it’s actually a pretty short, sharp list.
