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This Week Saw More Selling in Technology, AI-Related Stocks and Bitcoin: Market Commentary from Cabana’s CEO – February 28, 2025  

2 months ago

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The past week has seen lower prices across all the major stock indices, but the selling has been especially pronounced in technology, AI-related stocks and beloved Bitcoin. These high-flying investments have been sarcastically referred to as the “Bro Trade” and have made up most of the big returns seen by investors over the last two years. We began picking up on signs of this rotation several weeks ago and you can read my thoughts on it in past commentaries. I believe this is inevitable and as the economy normalizes, we will see valuations and earnings begin to matter again. With bond yields (10-Year Treasury) now north of 4% (as of this writing) and corporate grade bonds paying even more, stocks have a legitimate competitor for investor money.  

All this plays into the movement out of technology stocks that don’t have current positive earnings or whose valuations (price) relative to their earnings is too high. This dynamic also tends to get rid of the “casino” type mentality that prevailed during the Covid era. After all, investing is (or at least should be) serious business. What we have seen in many instances with meme stocks and other “investments” is neither serious nor fundamentally reasoned. Below is a seven-day chart of the Nasdaq 100 (QQQ) and Bitcoin (BTC) compared to consumer staples (XLP), health care (XLV), dividend payers (DVY) and the 7–10-year treasury ETF (IEF). It is obvious what is being sold and what is not.  

As of 2/28/2025 via StockCharts.com:  

There are lots of other issues and unknowns out there, as there always are. These currently include tariffs causing rising inflation pressures, ongoing war and a reversal of globalism, which has resulted in significant cost efficiencies over the past 40 years. Undoubtedly these will have an impact on companies doing business here in the U.S. and abroad. Ultimately, those impacts will show up as they always do in earnings, interest rates and stock prices. The assimilation and response to these data points is what investing is about.  

What is most notable to me right now is that the days of gambling on the advice of some “influencer” or chasing the latest fad seems to be coming to an end – and for many I am afraid it will not end well.  

Earnings remain strong and unemployment remains historically low for the time being. As such, we remain in a “bull market” but what that means for many investors is changing. 

At Cabana, we remain in our Bullish Scene.  

Terms to know:  

  • The Invesco QQQ ETF is an exchange-traded fund (ETF) that tracks the Nasdaq 100 Index. 
  • Grayscale Bitcoin Trust ETF is solely and passively invested in Bitcoin. Its investment objective is to reflect the value of Bitcoin held by the Trust, less expenses and other liabilities. 
  • The XLP, or Consumer Staples Sector ETF, includes companies involved in the development & production of consumer products such as food & drug retailing and household or personal products. 
  • The Health Care Select Sector SPDR Fund (XLV) is an exchange-traded fund that is based on the Health Care Select Sector index. The fund tracks health care stocks from within the S&P 500 Index, weighted by market cap.   
  • The iShares Select Dividend ETF (DVY) seeks to track the investment results of an index composed of relatively high dividend paying U.S. equities. 
  • The iShares 7-10 Year Treasury Bond ETF (IEF) seeks to track the investment results of an index composed of U.S. Treasury bonds with remaining maturities between seven and ten years. 
Disclaimers

January 17, 2024

This material is prepared by Cabana LLC, dba Cabana Asset Management and/or its affiliates (together “Cabana”) for informational purposes only and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. This material may only be distributed in its original format and may not be altered or reproduced without the prior written consent of Cabana. The opinions expressed reflect the judgement of the author, are as of the date of its publication and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by Cabana to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by Cabana, its officers, employees or agents.  

“CARA” is Cabana’s Cyclical Asset Reallocation Algorithm. Scenes assigned as per the judgment of The Cabana Group. Scene names and number of scenes have changed over time in an effort to obtain efficiencies and provide clarity of investment objective. 

This material may contain ‘forward looking’ information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader. Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy. All investment strategies have the potential for profit or loss. All strategies have different degrees of risk. There is no guarantee that any specific investment or strategy will be suitable or profitable for a particular client. The information provided here is neither tax nor legal advice. Investors should speak to their tax professional for specific information regarding their tax situation. Investment involves risk including possible loss of principal.  

Cabana LLC, dba Cabana Asset Management (“Cabana”), is an SEC registered investment adviser with offices in Fayetteville, AR and Plano, TX. The firm only transacts business in states where it is properly registered or is exempted from registration requirements. Registration as an investment adviser is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability. Additional information regarding Cabana, including its fees, can be found in Cabana’s Form ADV Part 2A or Form CRS. A copy of which is available upon request or online at www.adviserinfo.sec.gov/. 

Past performance is no guarantee of future results. All investment strategies have different degrees of risk and the corresponding potential for profit or loss. Asset allocation and diversification will not necessarily improve returns and cannot eliminate the risk of investment losses. “Target Drawdown” is merely a descriptive term used to describe the general strategy and objective of the portfolio, it is not a guarantee, nor should it be construed to suggest safety or protection from loss. There is no guarantee that portfolio performance will remain consistent with the targeted drawdown parameter. While risk tolerance and targeted “drawdown” are identified on the front end for each portfolio, Cabana’s algorithm does not take any one client’s situation into account and there is no guarantee that Cabana’s strategies will be suitable for any investor. Investors and advisors should not simply rely on the name of any portfolio to determine what is suitable. It is the responsibility of investment advisors to determine what is suitable for their clients. Cabana manages assets on multiple custodial platforms. Performance results for specific investors will vary based upon differences in associated costs and asset availability.  

Cabana claims compliance with the Global Investment Performance Standards (GIPS®). GIPS® is a trademark of the CFA Institute. The CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein. To receive a GIPS Report and/or a firm’s list of composite/pooled fund descriptions please email your request to info@thecabanagroup.com.

All recommendations made in the prior 12 months are available upon request. Cabana’s allocation history is available here. For additional information regarding our services, including performance disclosures and award methodology, please visit https://thecabanagroup.com/disclaimers/. 

Commonly used index/benchmark definitions:  

All indices and categories are unmanaged and an individual cannot invest directly in an index or category. Index returns do not include fees or expenses. Benchmark indices will likely materially differ from Cabana’s portfolio strategies. Detailed information as to how the returns are calculated can be obtained online from the following link: https://thecabanagroup.com/disclaimers/performance-reporting-methodology/. 

Morningstar’s Moderate Target Risk index  follows a moderate equity risk preference and is based on well-established asset allocation methodology from Ibbotson Associates, a Morningstar company.  

Morningstar’s Tactical Allocation category includes portfolios that seek to provide capital appreciation and income by actively shifting allocations across investments. These portfolios have material shifts across equity regions, and bond sectors on a frequent basis. 

The S&P 500 Index is a market-capitalization weighted stock market index of 500 widely held large-cap stocks often used as a proxy for the U.S. stock market.  

The Russell 2000 and 3000 indices are market-capitalization weighted stock market indices that include, respectively, 2000 and 3000 of the most widely-held stocks and are often used as proxies for the U.S. stock market. 

The Nasdaq Composite Index is a market-weight capitalization index that covers more than 3,000 stocks listed on the Nasdaq Stock Market. What is the Nasdaq Composite, and What Companies are in It? | Nasdaq