This Bloomberg article is worth paying attention to!

Today, the S&P 500 hit a new high again, but the market seems overly optimistic. Our recent strategy has gradually started to appropriately reduce positions in some popular #AI stocks and crypto assets, preparing to keep some cash, take on some defensive sectors (healthcare, consumer), and allocate part of it to gold or short bond ETFs for balance.

In the past six months, the market capitalization of U.S. stocks has increased by $16 trillion, which can be called the "U.S. stock miracle." However, the problem is that this upward trend seems a bit hollow right now.

On one hand, indicators measuring the cost of bearish and bullish positions in the derivatives market have started to steepen, indicating that institutional funds are increasing their downside protection, essentially "buying insurance."

It's like when you buy a house and see your neighbors installing security doors—everything seems calm on the surface, but everyone knows the risks are accumulating.

On the other hand, there is increasing uncertainty at the macro level, and there are many concerns in the market right now:

1️⃣ Trump's trade war rhetoric is resurfacing. This reminds many of the U.S.-China tariff war in 2018-2019. Although Trump is more politically motivated this time, the market is always afraid he might suddenly "bang the table"—this uncertainty will make funds tend to be cautious.

2️⃣ Credit issues at regional banks have re-emerged. Many people might immediately think of the 2023 Silicon Valley Bank collapse when they hear "regional banks + credit issues." If another "mini SVB" occurs, market sentiment could potentially collapse instantly.

3️⃣ #AI concept stocks are now in earnings season and are about to face a reality check. This week, five leading #AI companies (Microsoft, Google, Amazon, Meta, Nvidia) will be reporting earnings. This will basically determine whether the AI sector continues to celebrate or starts to retreat. If one or two of them underperform, the market may react excessively.

Finally, there's the role of the Federal Reserve: currently, it is "flying blind" amid uncertainty. Logically, cooling inflation + weak economic data = the Fed should lower interest rates, and the market should cheer. But the problem now is: the government shutdown has led to a lack of many official data, and the Fed itself is also "flying blind." This leads to the possibility that their policy judgments may lag or even misjudge. For the market, this is an invisible risk.

Recently, I resonate with a statement from the Chief Investment Officer of Verdence Capital: "We may be borrowing from future earnings." The money in the stock market is actually supported by "optimism about the future." #AI, interest rate cuts, economic soft landing, corporate profit recovery… these are all expectations. But once one or two of these stories break, such as worsening employment data or companies starting layoffs (Amazon and General Motors are both reducing staff), the support for stock prices will waver. Therefore, large institutions are starting to keep cash, buy hedges, and reduce positions in overvalued stocks—these relatively rational actions are something we can learn from. Recent volatility may be inevitable, and emotions are driving the market. Don't be overly FOMO or blindly chase highs; waiting for the dust to settle may be more prudent! 🧐

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