A Wall Street veteran says the stock market has already crashed beneath the surface. Larry McDonald points to the S&P 500’s record highs as a misleading signal. He argues that many individual companies are actually in steep declines.
McDonald is a former Lehman Brothers executive and author of a popular financial newsletter. He believes the index’s strength masks widespread weakness in specific stocks. This gap creates opportunities for investors willing to look beyond the headlines.
His current focus is Nike, which he calls the ultimate turnaround trade. The sportswear giant has struggled with falling sales and shifting consumer trends. Its stock has dropped significantly from previous highs.
Nike faces pressure from newer competitors and changing demand for athletic wear. Inventory problems and weaker margins have added to investor concerns. These issues have pushed the share price down to levels not seen in years.
McDonald sees this decline as an overreaction rather than a permanent setback. He notes that Nike still holds strong brand recognition and global reach. The company’s cost-cutting efforts could improve profitability in coming quarters.
The broader market’s record run hides similar stories across many sectors. While major indexes climb, a large number of stocks remain well below their peaks. This divergence suggests the rally is narrower than it appears.
For investors, McDonald’s strategy involves finding beaten-down names with solid fundamentals. He argues that patience and selective buying can pay off when sentiment shifts. Nike serves as his prime example of this contrarian approach.
The S&P 500’s gains have been driven by a small group of technology and AI-related stocks. Outside that group, performance has been far weaker. McDonald warns that ignoring this split can lead to poor investment decisions.
Nike’s turnaround depends on execution and consumer demand recovering. The company must fix its product mix and reconnect with core customers. If it succeeds, the stock could reward investors who bought during the downturn.
