The Compound and Friends Stocks in Pre-Crisis Mode, Multiple Compression, the Citrini Crash, Halo Goes Viral
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Feb 25, 2026 They debate PE multiple compression and why valuations may not provide a floor. They explore the Citrini crash thought experiment and real-world AI job displacement. They unpack the rise of halo stocks and why non-tech sectors are showing breadth. They survey private credit risks, BDC stress, and worrying housing signals.
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Five Forces That Could Compress Multiples
- Savita at BofA lists five drivers of multiple compression: disruption math, equity supply, strong EPS with compressed multiples, rising asset intensity, and private-to-public index risk.
- The largest risk is supply shock from mega private IPOs and slowing buybacks, which could press multiples lower even with good earnings.
Mag Seven Vulnerability Can Drag Market
- A sharp drawdown in mega-cap tech (the Mag 7) would likely pull the broader market down despite strength elsewhere.
- Michael warns NVIDIA and other reports can spark sentiment hits that cascade into broad selling even if fundamentals remain solid.
Prefer Expensive Fast Growth Software After Selloffs
- After software sector de-ratings investors often get better forward returns buying the expensive, fast-growing software names rather than the cheap laggards.
- Adam Parker's backtest shows the most expensive software quintile outperformed the cheapest over the six months after valuation compression.