Key insights
- The author expresses caution regarding the current market rally, noting its narrow breadth and over-reliance on the AI narrative. Rising oil prices, Middle East instability, and potentially persistent high interest rates pose risks to earnings and valuations. The author advises investors to consider their risk tolerance in the event of a 10% pullback and emphasizes a disciplined, less active trading approach.
To be honest, I’m not feeling that confident about the market right now. Not because it’s not going up, but because the move feels too narrow. If you look closely, the index is rising, but not everything is rising with it. A lot of stocks are being lifted, not actually breaking out on their own.
Everyone is talking about AI right now, and that story makes sense. It’s probably the core driver of this rally. But when everyone starts believing the same thing, risk builds at the same time.
At the same time, some things are being ignored. Oil is creeping up, the Middle East situation is still unstable, and rates might stay higher for longer than people expect. None of this crashes the market overnight, but it slowly impacts earnings, valuations, and risk appetite.
The question I get the most is, can we still chase here? I never answer directly. I just ask, if this pulls back 10 percent, can you handle it? Most people don’t lose money by missing trades. They lose it by giving everything back in a pullback.
The biggest change for me over the years is simple. I do less. I don’t fight the trend, I don’t trade without confirmation, and I don’t trade out of boredom. Simple works. Boring makes money.
So the market is still tradable, but you need to be clear. Are you making money from trend or from emotion? Curious where you are right now, still adding or starting to scale back?