A 5-10% market correction would be sensible, not irrational: Aureus' Kari Firestone

Market Overview - The market has seen a 12% increase this year and a 25-26% rise over the last two years, suggesting a potential for a correction [2][3] - A correction of 5-10% is considered healthy for the market, as it has been on a continuous upward trend [3][4] - There are concerns about "rolling bubbles" in certain sectors, indicating speculative behavior that could lead to market instability [4][5] Technology Sector - Major tech companies like Google, Meta, Apple, and Microsoft are highlighted as having substantial revenues and profitability, which provides a buffer against market fluctuations [7][8] - A potential reduction in capital expenditures by these companies, particularly in AI, could significantly impact related sectors, especially chip manufacturers [8][11] - The chip industry, previously viewed as cyclical, may face corrections if major tech firms scale back their orders due to insufficient returns on investment [9][11] Economic Indicators - Interest rates are declining, which may alleviate some stress in the market, although there are concerns about the overall valuation levels of various asset classes [14][23] - The investment community is aware of the substantial liquidity in money markets, estimated at $7 trillion, which could influence market dynamics [16] - Recent fiscal policies, including tax breaks for corporations, are expected to provide further support for public markets and could lead to an increase in IPOs [15][17] Financial Stability - The resilience of the financial system is emphasized, with comparisons to the 2008 financial crisis indicating that current conditions are not as severe [23] - There are concerns about private credit markets and potential issues arising from less stringent lending conditions, but these are not expected to be systemic [22][23] - The market has absorbed previous shocks, such as the failures of First Republic and Silicon Valley Bank, indicating a capacity to manage financial disruptions [19][20]