The More Things Change...(2)
September 13. 2025
Is there more turmoil in the world than usual…or are we just better, and more rapidly, informed about everything, everywhere? The planet doesn’t give off the feeling of being a happy place; the mood in this country is further evidence of that. Conflicts, both violent ones and the merely political, continue to pop up all over the globe. This week, we added a domestic political assassination to the mix. And yet, through it all, the markets have maintained a positive aspect and in the last couple of weeks have settled out repeatedly at new, all-time record highs. It frankly feels a little unreal to me though I feel like an outlier having this viewpoint.
Bullish sentiment is rampant. Individual investors have poured billions more in new capital into the markets in 2025. Apparently, they are counting on an enormous impact on productivity and economic activity from artificial intelligence. Now the rallies are extending, seemingly because the Federal Reserve is expected to begin a rate cutting cycle next week with at least a 25 basis point reduction in the Fed Funds rate. I again feel on the margin here as I do not see how that quarter point reduction is going to make such a big difference. History has shown that when sentiment is very bullish as it is now, it is often a negative market indicator. When everyone is very bearish, it is usually a good time to look to for companies to invest in. Now would fall into the former category obviously.
As readers in this space know, I have been leery of this market for some time now. And, in the main, I have been incorrect, my concerns not reflected in the market activity. Speculation, such as aggressively investing in the AI boom, in quantum computing, in crypto, has been rewarded. I have been surprised and yet remain concerned. This week, after Oracle’s surprising announcement of several multi-billion-dollar contracts and projections of tremendous growth in the next few years, the stock went up 35% - its value increasing by $300 billion…in a day! Over the next two days, it retreated 15%, giving back half the gains, a $150 billion loss in value. That kind of market action in a company with a valuation that approached a trillion dollars does not inspire confidence. To me it signals FOMO and investors chasing the shiny new thing…last week Broadcom, earlier this year Nvidia, now Oracle. Rapid declines are ever more possible from lofty valuations in a market that has already seen this kind of stock price movement to the upside.
I am not suggesting withdrawing from the market, far from it. The market isn’t weak, it is just frothy and a bit overvalued. Earnings have been surprising to the upside, the IPO market has returned and is vibrant. We’ve repeatedly addressed the futility of timing the market...no need to repeat it. So stay invested. Still, realistically, however, how much more upside do you think there really is at this point? And while the Fed may start cutting rates, what of all the continuing policy uncertainty and abrupt shifts? I believe it will continue to be prudent to do a little trimming, a little portfolio rebalancing. Certainly, caution should be exercised in putting new money to work. Dividend payers, preferred shares, reasonably valued banks stocks, some overlooked small company stocks, even medium term fixed income…there are places to put money to work. Just don't chase. As for the noisy parts of the market, patience please. Don’t let FOMO have you lusting after the shiny bits…if history is any guide, you will have a chance to buy those securities at lower prices soon enough.
Switching gears (pun intended)…I have been reading (well, listening to) Abundance by Ezra Klein and Derek Thompson. (A very interesting take on American productivity, and lack thereof, with people of all sides, especially the left, taken to task for well-intentioned yet often counterproductive policies). The high-speed rail project fiasco in California is one topic they dig into. As I listened to that story, I serendipitously found myself reading this very interesting, brief interview with a transit expert. He has a plan for achieving almost high-speed train travel at less than 1/10 of the cost of most high-speed projects. It would be a real boon to people living in the Northeast corridor, and surely elsewhere as well. More for less has to be of interest to all US citizens these days as the country, and many of its individual states, have challenging balance sheets, too much debt. Take a look.