Stock Market Live November 4: S&P 500 (SPY) Dropping on Palantir Decline

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After testing all-time highs, the major indices are in the red this morning.

Dow futures are down 301 points. Nasdaq futures are down 344, as the S&P 500 sinks about 70 points. The SPDR S&P 500 ETF Trust (SPY) is also down about 1%, or by $6.74 this morning.

All thanks to a decline in the Palantir (NASDAQ: PLTR) stock, despite the company beating earnings estimates with solid guidance to boot. EPS of 21 cents beat estimates of 17 cents. Revenue of $1.18 billion was above estimates of $1.09 billion.

While impressive, the market has become nervous about Palantir’s valuation – especially as it trades at 200x forward earnings. That’s also raising concerns about the stretched valuations of other key AI stocks and their ability to boost profits to justify numbers.

Goldman Sachs Warning of a Market Correction 

The CEOs from Goldman Sachs and Morgan Stanley are warning of a potential market drop.

“It’s likely there’ll be a 10 to 20% drawdown in equity markets sometime in the next 12 to 24 months,” said Goldman Sachs CEO David Solomon, as noted by CNBC. “Things run, and then they pull back so people can reassess.”

In fact, investors may want to prepare as if it were 1929, 2000, or even 2008.

That’s because today’s market is eerily similar.

Right now, the Dow Jones, the NASDAQ, and the S&P 500 are at all-time highs. All as investor optimism soars, sending valuations to unbelievable, unjustifiable highs. Even with trade war issues, geopolitical tension, and economic issues, investors have shrugged it all off.

Unfortunately, they’re acting just like investors did before the major crashes of 1929, 2000, and 2008. And unfortunately, it’s only a matter of time before it happens again.

Between 1923 and 1929, the Dow Jones rallied about 300%.

Investors believed stocks could only go up. Speculation forced stocks to unbelievable highs with unjustifiable valuations. Then, it all fell apart. Then, between 1929 and 1932, the Dow Jones lost 86% of its value. Unfortunately, many weren’t prepared.

In 2000, dot-com optimism sent the Dow Jones screaming higher to unjustifiable valuations. That fell apart, and saw the Dow wiped out. Again, unfortunately, many weren’t prepared.

In 2008, rampant speculation sent the Dow Jones to a high of 14,038 on the heels of a housing boom. Americans were buying homes they couldn’t afford. Stocks were exploding on economic optimism and unjustifiable valuations. Then it all fell apart. The Dow Jones would sink to 6,500.

Many weren’t prepared.

It’s happening again now. And again, many aren’t prepared.

Also worrisome is how overextended the Shiller P/E has become at 40.95. It’s now at its second-highest peak in history and is second only to the massive dotcom crash in 2000.

In short, be prepared for an eventual pullback – even if everyone else jumps on the bullish bandwagon.