Research

After the market sells-off, like it has here over the last several weeks, there is a phrase that nearly always gets trotted out by the Sell-Side Institutional community, “The Pain Trade Is Higher.”

We entered 2025 the most cautious on risk taking we have been in several years, worried about several issues:

Not surprisingly, the question we have gotten most in the last few days is “how far through this sell-off are we?” The large banks are generally telling their institutional clients that the sell-off is more than half over based on the amount of hedge fund deleveraging they have seen in their prime brokerage businesses, implied volatility in the options market, and trading flows.

Costco (Ticker: COST) reported earnings last week, and the stock was down 6% on Friday, and is down over 10% from its mid-February highs.

Given the recent volatility of the market broadly and the Technology sector specifically, we have been asked about how to think about risky Technology stocks.