Momentum Stock Slaughterhouse - The Compound and Friends Recap

Podcast: The Compound and Friends

Published: 2026-02-06

Duration: 1 hr 25 min

Guests: John Mowrey

Summary

The episode dives into the recent downturn in software stocks and the wider implications for various investment sectors. It also explores the dynamics of the crypto market and discusses what constitutes a value stock today.

What Happened

John Mowrey, a guest on the podcast, shares his unique journey into the finance industry, highlighting how an internship at NFJ Investment Group kickstarted his career despite a non-financial academic background. Mowrey discusses the challenges of homeschooling and dyslexia, which shaped his early perceptions and career choices. The conversation shifts to the sharp decline in software stocks, where heavyweights like Oracle and Microsoft have faced significant drops, with Oracle down by 55% and Microsoft by 26%, illustrating the broader market volatility.

Josh Brown emphasizes the staggering $2.5 trillion shift into passive investments, which has fundamentally altered market dynamics. This movement reflects a significant change in investor behavior, influencing how stocks are valued and traded. The discussion on momentum factors reveals that these have seen a remarkable run over the past two years, driven largely by human behavior and market psychology.

The episode delves into the crypto market's struggles, drawing parallels with tech stocks due to their correlation. Bitcoin and Ethereum face liquidation pressures, while Coinbase experiences a 64% drawdown, demonstrating the volatile nature of the crypto space. The hosts argue that crypto's integration into ETFs has increased its correlation with traditional tech stocks.

John Mowrey and the hosts explore the notion of value stocks, noting how companies like Amazon have transitioned into this category. They discuss the evolving criteria that define value stocks, particularly in a market where traditional growth companies are being reclassified.

The episode highlights the strong performance of energy stocks, which have shown resilience with a 23% uptick in the best performance decile. This performance is contrasted with the struggles in the software sector, indicating a shift in investor focus towards more stable energy investments.

The hosts also examine the impact of macroeconomic factors on different investment sectors. Regional banks are benefiting from a steepening yield curve, while refiners are seeing growth faster than the NASDAQ due to expanding crack spreads. These factors illustrate the interconnectedness of global financial markets and the importance of macroeconomic trends.

Finally, the episode touches on the outperformance of international markets, with emerging markets like China showing significant gains since October 2022. This contrasts with the slight downturn in India's market, highlighting the complexities and unpredictability of global investments.

Key Insights