I agree, Steve.
For a few months, the US stock markets have shown signs of being overextended, especially in sectors like technology, industrials, and consumer defensive stocks.
High-growth areas, such as tech stocks fuelled by AI enthusiasm, have traded at premium valuations, even after substantial gains over the past two years.
Although the market has remained resilient, correction risks exist, significantly if economic growth slows as projected for 2025.
The recent election of former President Donald Trump has led to what some are calling a ‘Trump trade’, characterised by rallies in specific sectors like crypto.
His past administration’s policies generally favoured deregulation, which could bring renewed optimism in specific industries if similar approaches are anticipated.
Historically, stocks have performed well during transitions, regardless of political outcomes. However, it’s important to remember that the composition of winners may shift based on policy expectations.
In this climate, fixed-income investments are becoming more appealing as they could offer better returns relative to elevated equity valuations.
