As we discussed in my note yesterday, the coming regime change at the Fed could squeeze excess out of the market.
It may be starting with Bitcoin. It's now down 44% from the October record high.
If we look back at the 40% or greater declines in Bitcoin (since it first broke $5,000), we get four other episodes.
Let's take a look …
What did stocks do in these periods?
Mixed results.
That's not too surprising. These deep Bitcoin drawdowns were often crypto-specific events — regulatory tightening and/or corruption being exposed.
That said, any forced selling in stocks that may come from a Bitcoin decline should be considered non-fundamental. That's a welcome dip to buy in a 4%+ growth economy, with 11%+ earnings growth, rates headed lower, and (for the next few months) a Fed that's pumping $30-$40 billion per month into the system.
Meanwhile, while the market obsesses over the noise, a real industrial revolution keeps accelerating.
The signal from Google today was clear: this company is on track to do half-a-trillion dollars in revenue next year, growing near 20% with a 30% net income margin.
They invested over $90 billion in AI infrastructure last year, and were still left with over $73 billion in free cash flow.
And they will double capex in 2026 just to keep up with the demand.
So, are the companies building AI supply behaving like demand is being satisfied?
No. They are acting like they still can't build fast enough.