This selloff is not just because of tariffs/Consumer and business confidence, 'uncertainty whiplash'/Avocados

It's easy to blame the tariffs and scattershot approach being employed for the decline in the stock market but it's broader than that. I argued last month (February 18th to be exact) that the AI tech trade was over in terms of their stock market dominance and it's become clear of that, with the DeepSeek news in January being a key catalyst for that, along with the unclear revenue drivers all this spend will generate. Also, we now have multiple compression also being a notable part of the stock performance as earnings growth slows. You lose the special 7 stocks, which at its peak made up about 35% of the S&P 500, you are without a net in the broader market unless the baton is immediately passed to someone else.

I also said then, "In a way, the big 7 have become its own reserve currency where foreigners around the world have parked their money in and kept a bid under the US dollar." Well, we've seen the US dollar tank along with the big 7 stocks. And many international stock markets have done great instead and where we remain bullish and long of. To this point that the selloff is not just worries about tariffs, the Mexican stock market is up for the year by 4.5% and the Canadian market is down only slightly, by 1.4%.

My point here is, and I'll say again, a regime change is taking place in the markets and what used to work is not going to work from here anywhere to the same degree. The stock market has a history of handing the baton over to other things and now seems to be one of those times.

I also want to point out that we are also possibly losing the massive fiscal influx into the US economy that I've talked about here and Treasury Secretary Bessent referred to last week as needed 'detox.' The nearly 7% budget deficit as a % of GDP was also a big boost to corporate earnings and profit margins. I need to add now too, the other big leg holding up the US economy has been upper income spending, as we know, helped by a record net worth for those that own stocks and their homes. Thus, we lose the stock market right now, you can be sure upper income spending will falter. You want to debate the odds of a recession? you need to have an opinion on the S&P 500.

Southwest Airlines is repeating pretty much what Delta said last night in response to the now cloudy economic outlook. This morning they are lowering their Q1 revenue per available seat mile (RASM) growth rate to a "range of 2% to 4% on capacity down approximately 2%, both on a y/o/y basis. They blame part of this on "less government travel, and a greater impact from the California wildfires than originally estimated." But also this, "The remainder of the decrease is primarily attributable to softness in bookings and demand trends as the macro environment has weakened."

This is what Delta said last night in its 8k: