The Nasdaq-100's market cap has surged to $41 trillion from $30 trillion in March, a concentration that Bear Traps Report author Larry McDonald says mirrors the setup before the 2020 selloff.
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Larry McDonald warns tech's $41 trillion rally mirrors 2020 risk
The Nasdaq-100's market cap has surged to $41 trillion from $30 trillion in March, a concentration that Bear Traps Report author Larry McDonald says mirrors the setup before the 2020 selloff.
Former Lehman trader Larry McDonald warned tech's $41 trillion market cap mirrors the 2020 setup, predicting a rotation into hard assets.
"This is like a rubber band stretching, and it's a lot like just before COVID," McDonald, author of the Bear Traps Report, said. "Everyone was hiding out in tech. It's the same thing today."
The Nasdaq-100's aggregate market cap expanded to about $41 trillion from $30 trillion in March, McDonald noted, as a K-shaped economy pushes investors out of retail-sensitive areas and into what is perceived as the safe tech trade. He said looming mega-IPOs from SpaceX and OpenAI are pulling capital away from other sectors. SpaceX plans to offer 555 million Class A shares at $135 each, targeting a near $1.75 trillion valuation and raising up to $86 billion.
McDonald sees a 90% to 100% probability that an inflation bounce over the next two months will drive money out of tech and into hard assets. Oil faces pressure from summer driving demand and AI-related energy consumption, with the Strait of Hormuz remaining all but shut, he said. A stagflation scenario could trap the Fed, unable to hike rates with an already wounded consumer.
Gold and Uranium Set for Inflows
McDonald said the rotation will benefit gold miners and uranium. He is starting to buy Agnico Eagle and other gold miners, calling gold a buy around $4,100 an ounce with a target of $6,500 to $7,000 an ounce in 2027 or 2028. The strategist noted that the 1968-to-1981 period of higher rates and global conflicts was profitable for precious metals and uranium, with household wealth allocated to those assets now below 1% versus 3% to 4% historically. On uranium, he said industrial buyers are locking in longer-term contracts after a 10-year bear market, with a supply crunch expected as early as 2027 from AI build-out and nuclear power demand. Sprott Physical Uranium Trust has been his preferred uranium vehicle due to a value disconnect between the trust and miners.
Inflation Shock as the Catalyst
McDonald said the trigger for the rotation will be an inflation shock driven by the summer driving season and the World Cup, which could create a hawkish bias at the Fed. That would push money out of gold and silver in the near term, he said, creating buying opportunities in miners at reduced prices similar to 2022 and 2023. The VIX, a measure of expected volatility, rose 3.18% to 16.57, while the 10-year Treasury yield stood at 4.481%, up 3.30 basis points over five days. Gold traded at $4,500.10, down 0.60% over five days, while oil climbed 6.45% to $94.24 over the same period.
This article is for informational purposes only and does not constitute investment advice.
