Summer Tech Warning From a 50-Year Quant Legend
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In This Digest:
- A summertime tech warning from a 50-year quant legend
- This is your last chance to trade with our new AI strategy
- Why Lucas Downey is steering clear of the SpaceX IPO
The peace deal pop was the biggest gain since April…
For the first time in months, the weekend rumor of a peace deal with Iran didn’t fall apart by Monday morning.
On Monday, the U.S. and Iran signed a deal to reopen the Strait of Hormuz and continue negotiating a true end to the war.
Oil prices sank to just over $80 a barrel. And stocks posted their best day since mid-April – just after the first ceasefire. The tech-packed Nasdaq 100 surged more than 3%. And the S&P 500 posted a 1.7% gain.
AI-related stocks did even better. Memory chipmaker Micron Technology (MU) shot up 10%, AI chip and networking company Marvell Technology (MRVL) rose 9%, and hard-drive maker Western Digital (WDC) climbed 16%.
And Elon Musk’s rocket and space exploration company, SpaceX (SPCX), tacked on a 19.6% gain after its Friday debut.
It’s easy to get excited after a day like yesterday. A true end to the war in Iran would mean lower fuel prices and smaller inflation pressures.
That would give the Fed room to cut interest rates — and cheaper borrowing costs tend to act like rocket fuel for stocks.
But there are reasons to be cautious, too…
That’s according to growth stock investing legend Louis Navellier, who remembers the last time tech stocks shot to the moon in the late 1990s.
In the launch presentation for our new AI-powered Tactical Profits Portfolio, here’s what Louis told our CEO, Keith Kaplan:
This year feels like 1999 to me.
For one, AI is a massive tailwind for the market. It’s being adopted at breakneck speed and is creating widespread improvements in productivity, across virtually every sector.
Just like the internet did back in 1999.
And earnings and the fundamentals underlying many of the biggest businesses, most specifically the stocks I’m recommending — are super STRONG.
Just like they were back in 1999.
So it’s probably no surprise that the stock market this year is closely tracking that of 1999 — almost to a T.
That sounds like good news for investors in AI stocks, until you remember what happened that summer. Here’s Louis again:
From its peak in July to the September low, the S&P 500 dropped 10%.
And even though the market as a whole dropped 10% — which is rough, but not too painful — many of the most popular stocks at the time fell even more that summer.
Dell (DELL), for instance, dropped by more than 50%. Lucent Technologies— one of the biggest telecom equipment manufacturers at the time — dropped as much as 26%. Microsoft (MSFT) fell nearly 30%. And Intel (INTC) dropped 45% from July to October.
If you were trading tech stocks in the summer of ’99, you likely have a few nasty memories of the time – even as markets went on to soar into year-end.
Louis’ memories run even deeper. He started his career as a professional investor 47 years ago. He’s invested through the “lost decade” of the 1970s… the 1987 Black Monday crash… the dot-com bust… and the 2008 financial crisis.
He’s seen what happens when a red-hot stock market suddenly seizes up and heads south. And in his new collaboration with TradeSmith, we built something for exactly this kind of summer: the Tactical Profits Portfolio.
Each week, it narrows down the entire market to the five best trades. These trades all must pass two tests. They have to carry A grades on Louis’ battle-tested Stock Grader system and be in Green Zones on our Short-Term Health Indicator. Then we use a layer of AI to pick the top stocks that meet these two criteria…
In our backtesting, this strategy delivered a 5x return going back to 2021.
It even held up when the market couldn’t. In 2022, the year when the S&P 500 fell 20%, this strategy delivered a 50% return.
Keith and Louis covered how it works – and how to get access – in their launch event last Wednesday. And the doors close tonight at midnight.
If you haven’t caught the event yet, now’s the time.
If you’re eyeing SpaceX, Lucas Downey urges you to think deeper…
SpaceX IPO popped nearly 20% in its debut. By Monday’s close, the company was worth $2.4 trillion – the sixth most valuable on Earth.
But our own quant-based stock picking expert Lucas Downey is staying away from it. And the reason tells you a lot about how we invest here at TradeSmith.
Lucas runs Quantum Edge Pro, where he tracks the unusually large institutional buying activity with our Quantum Score. This tool rates every stock from 0 to 100 by combining fundamental strength with big-money momentum.
In his recent weekly update to subscribers, he showed that his problem with SpaceX isn’t the company itself. It’s that, at a $2.4 trillion valuation, it’s too big to deliver the kind of fast gains he hunts for.
It’s easier for a $20 billion company to double than for a $2.4 trillion one. And after 24 years as a private company, there’s barely any financial data to run our systems on.
Lucas has seen this movie before. When Facebook went public in 2012 amid deafening hype, shares popped more than 18% on day one – then fell below their IPO price by the close. Four months later they’d nearly halved. And first-day buyers had to wait over a year just to break even.
So Lucas is skipping the headline and going where the data already points.
The space economy hit a record $613 billion in 2024, and Morgan Stanley expects it to top $1 trillion by 2040. More satellites have launched in the past six years than in the previous 60 combined. And every one of them needs specialized materials and chips built to survive a launch and the vacuum of space.
That’s where Lucas’s favorite space stock comes in – and it doesn’t have “space” anywhere in its name.
It’s Carpenter Technology (CRS), which makes the high-performance specialty alloys that go into aerospace engines, rocket components, and the advanced materials space and defense applications demand. If something has to survive a rocket launch or the airless cold of orbit, there’s a good chance Carpenter’s metal is in it.
The business is firing on all cylinders. Management just raised its 2026 outlook and now expects operating income to grow 33% over last year, with new long-term contracts being signed at prices more than 30% higher. They called the aerospace and defense market the start of a growth cycle.
The data agrees. Carpenter’s Quantum Score sits at an excellent 88, and Lucas’s system has logged 20 big institutional buy signals over the past 12 months – 11 of them this year alone.
CRS is up 255% since it entered the Quantum Edge Pro model portfolio in September 2024, including a 66% run this year. That means it’s well above the recommended buy-up-to price.
But if you’re looking for ways to play the space theme that aren’t the world’s flashiest IPO, keep an eye on materials producers like Carpenter. No matter the ambitions of the space companies on the market now, they’ll need these companies to build what goes on the launchpad.
To building wealth beyond measure,
Michael Salvatore
Editor, TradeSmith Daily