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Speculative stock downturn accelerates amid Middle East conflict

The factors key to these speculative themes are out of favor.

Luke Kawa

Speculative stocks levered to AI and other thematic pockets of the market are getting crushed in early trading on Monday, extending their recent run in the red as credit worries resurface.

The start of a kinetic conflict in the Middle East is seemingly the latest r̶e̶a̶s̶o̶n̶ excuse for investors to flee the space.

Stocks seeing intense selling pressure in early trading include:

The factors most closely linked to these pockets of the market have fallen out of favor. Since the S&P 500’s last record close on January 27, the three worst-performing equity factors are earnings variability, trading activity, and volatility — characteristics that are common to most of these stocks. Value, a factor that is loosely the antithesis of most upstart AI companies and quantum computing firms, is the top-performing factor.

(That’s per long/short, market-neutral factor portfolios compiled by Bloomberg.)

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