Disruptive Stocks Strategy @II-Disruptive: "Portfolio Review – August 2025 Global..."

Smart Portfolio

Portfolio Review – August 2025 Global equity markets have seen an unusually steady upward trend since early June. Stock indices have advanced gradually, and the market fear gauge—VIX—has declined, indicating reduced volatility expectations. During the past week, however, risks have emerged in the markets S&P 500 & Technology Stocks: Cracks in Leadership Tech stocks have been the main engine of the rally, with the Nasdaq 100 outperforming the S&P 500. However, since peaking on August 12 th, the relative performance of tech has turned downward. The recent weakness is due to a pause in high-flying AI-related semiconductor stocks, which saw a sharp drop over the past week (semiconductor index -4%). Notable recent one-day drops (August 19 th) included: $NVDA (NVIDIA Corporation) -3.50% $AMD (Advanced Micro Devices Inc) -5.45% $AVGO (Broadcom Inc) -3.55% $ORCL (Oracle Corporation) -5.80% $PLTR (Palantir Technologies Inc.) -9.36% Investors appear to be either taking profits after a strong run or reallocating toward stocks and sectors with greater short-term upside. Many AI/semiconductor names have rallied 50–100% since April lows, constraining further upside in the near term. The Calm Before the Storm? After the August 19,2025, markets experienced a light tech-driven pullback, led by selling in top AI-semiconductors. The overall environment remains optimistic, but caution is warranted. US equity valuations are historically high: P/E based on 2025 earnings estimates is 23.7, or over 22 on a 12-month forward basis—more than 10% above the five-year average. Europe and emerging markets also trade at elevated valuations, but still well below the US, largely due to slower earnings growth and less tech sector exposure. Key short-term risks include Fed Chair Powell’s upcoming speech. Markets now price in more rate cuts, so any shift in central bank tone could trigger a sell-off. We do not expect major corrections, but a 5% S&P 500 and 10% Nasdaq pullback in coming months would be healthy and likely reinvigorate the market, especially as September-October are historically weaker periods. The main structural risks are related to current tariff levels and their effects on the real economy. Additionally, US jobs data raise concerns: The recent four-month average for new jobs has fallen below the critical 100,000 mark. Sustained economic weakness could threaten the current premium valuations in US stocks, which are based on expectations of robust earnings growth. @II-Disruptive