Mizuho analyst warns: Geopolitical tensions persist, markets are paralyzed

Investing.com – Mizuho analyst Jordan Klein described a market environment characterized by low activity and forced liquidations on Thursday, as investors maintained a wait-and-see attitude amid ongoing geopolitical tensions.

Klein pointed out that Thursday’s stock trading volume was the second-lowest of the year, only behind the trading activity on January 2. The analyst stated that he received no inquiries from technology investors regarding the price movements of the day.

Klein noted that fund managers are largely in a wait-and-see mode, reducing risk and net exposure. He indicated that if a ceasefire agreement is reached, excessive selling could pose risks, but he highlighted that despite President Trump claiming Iran is “eager to reach an agreement,” the market continues to decline, and this statement seems to have had the opposite effect on investor sentiment.

The analyst observed that as the VIX index rose before the weekend, and with the ceasefire deadline extended by 10 days, CTAs and quantitative funds continued to sell off to reduce exposure.

Klein reported that semiconductor stocks were hit hard on Thursday, and popular artificial intelligence concept stocks also suffered. Software and IT services stocks rose, while previously shorted hardware and wireless semiconductor stocks also saw gains, indicating that pairs trades are being unwound.

The analyst noted that the optics and semiconductor capital equipment sub-sector is particularly under pressure. He mentioned that no investors are willing to try to bottom-fish or add positions during the decline.

Klein pointed out that rising interest rates are concerning, stating that if the 10-year U.S. Treasury yield approaches 5%, all stocks will face challenges. He observed cryptocurrency being sold off in early trading on Friday, with futures indicating potential further declines before the weekend.

Despite concerns over interest rate levels, Klein still believes that a 5% rate will not hinder the expansion, use, and investment in artificial intelligence and large language models.

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