It’s time for investors to get serious. I am sick and tired of hearing that we are in a bull market.
I have battled this narrative not because I’m a perma-bear, but because of the facts I see in front of me. For starters, just one company – Nvidia (NASDAQ:NVDA) – is driving the market. We have never had so much concentrated momentum driving the major indices. We have never had so few stocks participating to the upside. And we’ve never had so much delusion by market pundits.
Throughout history, on a year-to-date basis, there have never been so few stocks outperforming the S&P 500.
The fact that so many investors are ignoring these facts furthers my belief that we are in one of the most dangerous stock markets ever. Today’s market is propped up by a fantastical narrative around an AI-driven future where the only company in the world that will benefit is Nvidia.
To be clear, I believe there are still incredible opportunities for investors out there. I believe small-cap stocks are due to significantly outperform following their worst stretch of underperformance relative to large-cap stocks ever. And I believe that when all is said and done, companies will come out of this higher-interest-rate cycle more efficient and stronger.
Stop Ignoring the Stock Market Risks… It Will Soon Be Too Late
But for right now, the market’s structure is fundamentally broken. If AI is revolutionary, then all companies should benefit as the productivity enhancements coming from AI increase margins. That isn’t happening, and the market is not pricing that in whatsoever.
Instead, so-called diversified funds are no longer diversified. They are no longer a reflection of the market. And that means investors are taking on way more concentration risk in their portfolios than they realize. Has it worked? Sure. That’s not the issue.
The issue is the illusion that this is a real bull market, when so much weakness continues to live beneath the surface. It’s time to wake up before that weakness gets even worse.
On the date of publication, Michael Gayed did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
