Key insights
- The author suggests the market is entering a manic phase, citing high real yields, a dot-com era CAPE ratio, and surging options volume. Despite potential for further gains, they are reallocating to companies with low AI correlation and strong pricing power, focusing on industrial compounders. This defensive shift indicates a cautious outlook on the sustainability of current market valuations, potentially signaling a future downturn or rotation away from speculative assets.
We’re indisputably entering a manic phase of the market. Real yields at 2.73% for 30 years. CAPE ratio matching dot-com. Same-day options volume up 3.7x since 2021. The fourth most valuable company in the world having less revenue than Macys. I know this can run longer and I could be leaving gains on the table, but I’m ready to start aggressively reallocating.
I’ve been trying to identify names with little AI correlation and long track records of compounding through cycles. Industrial compounders that earn real returns from real pricing power regardless of what the Fed does.
What I’m looking at:
- Visa - Mastercard - Safran - TransDigm - Linde - Atlas Copco - Epiroc - CNI - Union Pacific - Moody’s - Constellation Software - Waste Management - Medpace - McDonald’s
Not calling a crash, but interested if anyone else is starting to get defensive and where you’re looking.