Bubblicious
You're not late. You're early.
I still remember May 24th, 2023, like it was yesterday. NVDA exploded 30% higher on its earnings report after weeks of rallying into the print. Scrolling through Twitter, nearly every post dismissed the move as stupid, irrational, or proof the market was broken. But in hindsight, that surge was drastically underpriced. The market had only begun to scratch the surface of what was coming. Since that report—just two and a half years ago—NVDA’s stock has gone on to climb sixfold.
We were bullish NVDA all the way up. At $50 a share.
At $75 a share.
At $97 a share during the yen carry trade collapse, when VIX was 65.
All this highlights a simple truth: secular themes and their corresponding equity moves tend to run much longer—and much further—than most expect. Investors often bail out far too early.
We’re seeing the same dynamic today with AI and the broader market at 6666. The real challenge is calibrating your response to big moves. The natural instinct is to stand aside, convinced the run is already over. Yet again and again, markets prove otherwise: trends stretch beyond what seems rational. They don’t stop at “overdone”—they keep going until they look absurd. Then they go even further.
I wanted to touch base and share some thoughts on where stocks are headed over the next year or so. This is not for the short term book. This is all about the long-term, secular trend. I will look for spots opportunistically to increase my equity exposure over the coming months.
On the weekend that we finally reached SPX 6666, heres why I am more interested in 7777.
Don’t fight the Fed. The Fed is embarking on a cutting cycle, meanwhile latest GDP estimates are running at a blazing 3.4%.
Let me remind you, it has been over 16 years since the economy was in a recession (if you ignore the artifical, self induced 2 month COVID recession). The Fed is going into a cutting cycle with a historically tight labour market (4.3% UR), above trend GDP growth, and unprecedented fiscal stimulus. And a President who loves a stock market making new all time highs.
History is on your side. SPX returns after the Fed resume cutting after being on hold has a 100% hit rate for positive returns. The sample size is small, but its the best we have to go on.
Career risk. Have fun explaining to your boss why the SPX is up 10% on the year and you are lagging by multiple percentage points.
Inflation is dead. 5y breakevens for inflation have remained range bound in a tight channel around 2.5% since 2023. This is a more high level view of inflation that looks through one-time or short lived passthroughs due to tariffs. These inflation expectations have been referenced to multiple times by Powell. This is what the Fed is concerned with long term, and there is nothing to be alarmed about. This the runway to an unencumbered cutting cycle.
Do not make the mistake of measuring fear/euphoria by price. Judge that condition by actual positioning by market participants. We are not even close to thinking about, thinking about euphoria.
A history of bubbles. If the AI capex supercycle is going to be a bubble, then it has alot of work to do to get there. Speculation has much more room to run. If this is a baseball game we are maybe in the 6th or 7th inning here.
I believe we have been blessed with a stock market bubble. As the great George Soros says, when I identify a bubble in the stock market, I rush in to buy. The last bubble was the dot-com, internet bubble roughly 25 years ago. They don’t come around often. Recognize that you have been lucky enough to be able to experience one. Make the most of it.