Hello, Reader.
Investing in the stock market during President Donald Trump’s second term feels a bit like swimming off Amity Island – the sunny, fictional beach town from Jaws.
The sky is clear, the water is calm, and the lifeguards assure everyone it’s safe to frolic in the surf. But then…
Dun dun… dun dun… dun dun…
Cue that ominous, staccato music.
An attack is nearing. And this shark’s name is “Tariff.”
Every time the market starts to relax, every time the indexes edge toward complacency, that fin slices through the surface – a presidential pronouncement, a trade threat, a sudden “Liberation Day” declaration – and the water turns red. Stocks hemorrhage trillions in value. Fear ripples through every sector.
Then, just as suddenly, the shark vanishes.
President Trump reverses himself, the terror subsides, and investors wade back into the water in as if nothing happened.
As of today, for instance, Trump and Chinese President Xi Jinping have agreed on a preliminary framework for a trade deal ahead of their scheduled meeting later this week. What will happen later this week is anybody’s guess; even the shark may not yet know.
And that means that the predator never truly leaves. It merely circles deeper, waiting for the next opportunity to strike.
This pattern is the new rhythm of the Trump market. Each abrupt policy pivot takes a devastating bite out of stock market values and drags them into the deep. Horrified investors run for their financial lives… until the immediate danger passes.
What makes this volatility especially menacing now is where the market stands: balanced on the highest valuation cliff in modern history.
The Shiller CAPE ratio is flirting with all-time highs. The CAPE – short for cyclically adjusted price-to-earnings ratio – is a valuation metric developed by economist Robert Shiller of Yale University. It’s designed to assess whether the S&P 500 is overvalued or undervalued relative to historical norms.
At present, the CAPE ratio is hovering near 39.5, which is higher than before the 1929 crash, higher than before the dot-com crash, and more than double its long-term average of 17.
The market, in other words, is priced for perfection — for smooth seas and fair winds and shark-free sunbathing.
When valuations are this inflated, even a small shock can rupture confidence. A trade war threat, a geopolitical misstep, a retaliatory tariff from China or Europe – each one is a dorsal fin on the horizon.
When stocks are priced for perfection, anything that reminds investors of risk can tear through sentiment like a great white through a surfboard.
That is what makes the current environment so treacherous. The market isn’t merely overvalued – it’s fragile. Each day it skims higher across the glossy surface of record earnings multiples, complacent volatility, and speculative liquidity.
So yes, the water still sparkles.
The indices shimmer at all-time highs. The tourists are back in the surf. But the great white risk remains – unseen, restless, circling. And when markets are priced this high, it doesn’t take much blood in the water to start a feeding frenzy.
That said, I don’t believe the current market environment warrants panic or extreme defensive measures. There is a way to swim smartly in dangerous, unpredictable waters.
There is a four-trait approach to follow to ensure that the water – and your portfolio – stays out of the red. I’ll share that below. But first, let’s take a look at what we covered here at Smart Money last week…
Smart Money Roundup
October 22, 2025
Why This Company Could Be the “Forever Stock” of AI Healthcare
In 1979, General Electric introduced its famous tagline, “We bring good things to life.” It then brought its healthcare operations to life as GE HealthCare Technologies Inc. (GEHC) in 2023. Since then, GE HealthCare has been deeply involved in AI-healthcare. Read on to discover why I believe this company to be a “Forever Stock.”
October 23, 2025
The Rules of Investing Just Changed — Are You Ready?
The way information moves, how investors react, and where the biggest opportunities appear have all changed. That’s why InvestorPlace Senior Analyst Louis Navellier is partnering up with two brilliant young investors to unveil what they call the “Ultimate Stock Strategy.” Click here to learn more.
October 25, 2025
Amazon’s Outage Wasn’t a Fluke — It Was a Warning
Amazon Web Services (AWS), the cloud arm of Amazon.com Inc. (AMZN), suffered a worldwide outage, affecting more than 1,000 companies and millions of online users. This mishap tells us one thing for sure: Much of today’s digital economy runs on AWS, and that dependence makes them vulnerable
Likewise, investors overly concentrated in AI face the same kind of vulnerability. The safest way to navigate these kinds of black-out moments in your portfolio is by investing in “outage-proof” stocks.
October 26, 2025
This New Stock System Could Hand You a 100% Winner by Christmas
Louis Navellier recently shared how he’s working on a project to fuse his legendary Stock Grader system – the same model that’s helped him identify hundreds of market-beating stocks – with powerful new digital data. Now, we’re joined by Andy Swan, cofounder of LikeFolio, which tracks millions of online consumer mentions and trends to spot stock opportunities before Wall Street does.
Andy and his brother Landon Swan have teamed up with Louis on a collaboration that, in testing, found more than 240 double-your-money opportunities over five years. Learn more here.
Swim Smartly
You can still respect the shark without hiding on the beach. To do that, I recommend a disciplined investment approach that features four specific traits…
- Minimal exposure to heavily hyped, widely adored AI stocks.
- Modest exposure to lowly valued stocks that belong to the categories of opportunity I call “AI Appliers” or “AI Survivors.”
- Modest exposure to non-U.S. stocks that can prosper, no matter what the U.S. tariff regime may be.
- Modest exposure to traditional portfolio hedges, like cash and precious metals.
Markets always contain risk, but risk isn’t the same as doom. The goal isn’t to avoid the water; it’s to swim smartly.
The investors who thrive over time are not the ones who recoil in fear. They’re the ones who embrace intelligent risks, while avoiding unnecessarily dangerous ones.
As a group, the recommended positions in my Fry’s Investment Report portfolio strike a prudent balance between risk and reward.
They are picks across the four categories outlined above, and the best way to survive shark infested waters.
Regards,
Eric Fry
