Dubious records are being set in financial markets,” and investors are being forced to confront a difficult question: “Will you have to decide whether you can afford to ignore them?”
Across markets, price signals are becoming harder to read. “Gold and silver prices are swinging wildly,” the article notes. Silver alone “fell more than 25 percent, its worst day since 1980,” erasing part of the dramatic gains seen in recent weeks. These sharp moves are “baffling businesses that rely on precious metals” and “bewildering many investors.”
And the confusion is not limited to commodities. “Hard-to-decipher price signals have cropped up way beyond the commodity markets,” stretching into equities, bonds, and even government data itself.
A Stock Market That’s No Longer Balanced
The technology boom has pushed the U.S. equity market into unfamiliar territory. During the artificial intelligence surge, “big tech companies like Nvidia, Microsoft, Alphabet, Amazon, Broadcom, Meta and Tesla have risen so much that the market has breached a longstanding legal threshold.”
As a result, “it is no longer diversified, by the Securities and Exchange Commission’s traditional standard.” The concentration is extreme. “The U.S. stock market has become more highly concentrated than it has been since the 1960s,” increasing risks that many investors may not fully recognize.
The imbalance is global. “In the United States, the top five stocks account for more than 25 percent of the entire market’s value; the top 10 account for more than 40 percent.” Meanwhile, “U.S. stocks now constitute more than 70 percent of the value of the MSCI World Index,” compared with “less than half” as recently as 1988.
Pressure in Bonds, Money Markets, and Policy
Stress is also building in fixed-income markets. “The U.S. bond and money markets are under stress, too,” amid “the Trump administration’s relentless attacks on the Federal Reserve.”
Although “President Trump’s nomination of Kevin M. Warsh as the next Fed chair appears to have calmed these markets and bolstered the dollar initially,” it also “raises the possibility of a protracted struggle within the Fed over its framework for setting monetary policy.”
At the same time, “bond market tremors in Japan may spill over to fixed-income securities in the United States and elsewhere around the globe, as they did last year.”
Reliable data is becoming harder to obtain as well. “The monthly jobs report was delayed again,” due to political conflict in Congress, and “a partial shutdown could happen again soon if the underlying issues aren’t resolved.”
Trade policy remains another source of uncertainty. “U.S. tariffs… come and go, depending on the president’s changeable wishes, the response of other governments and the courts.” A potential Supreme Court ruling “might, at least temporarily, derail the administration’s tariff program,” which has “contributed to rising prices and disrupted longstanding trade patterns.”
The Classic Advice — And Its Limits
With anxiety everywhere, many investors are asking, “What should I do about this?”
The traditional response remains familiar: “Do nothing.” The article stresses that “quick responses to market fluctuations tend to be misguided,” and that for long-term investors, “your short-term losses may become longer-term gains — if major markets rebound and you stay the course.”
But this approach rests on assumptions. It assumes “that your portfolio has already been set up properly and that your asset allocation is sensible.” Under current conditions — with markets more concentrated than they have been in decades — “it’s worth re-examining your investing strategy.”
The conclusion is careful but clear: “This is undoubtedly a time to be cautious. But that doesn’t mean fleeing global markets.”
Asset Allocation Under Strain
“Asset allocation — choosing what proportion of your holdings should be in major categories like stocks, bonds and cash — is an important investing tool, perhaps the most important.”
The familiar “60/40 portfolio” is described as “a reasonable starting point but by no means the last word.” Adjusting exposure based on risk tolerance and time horizon remains central, and “using broad, low-cost index funds for the core of a portfolio is what academic wisdom has suggested for years.”
The author emphasizes: “I think it still works, with some important caveats.”
One caveat is concentration. Another is policy risk. “The U.S. government is changing global politics and markets,” through deregulation, pressure on agencies, trade disruptions, and even “openly calling for a weaker dollar.” Whatever one’s view, “there’s no question that global markets are under tremendous pressure.”
Choosing Whether to Follow the Market
Investors must decide “whether you are willing to follow the markets wherever they lead,” which broad index investing often implies. Alternatives exist: selecting individual stocks, using “an ‘equally weighted’ index fund,” or choosing “an actively managed fund that emphasizes value stocks.”
But each move carries meaning. “Whenever you shift from the core assets in major markets, realize that you are making a choice.”
As Rodney Comegys of Vanguard puts it: “You’re basically saying the market’s wrong.” He adds, “Everybody who takes an active position is deciding that the market is wrong.”
The article acknowledges that markets can misprice assets: “Short-term stock prices are often out of whack with economic fundamentals.” Still, “arguing with the market over the long haul is a different story.”
Taxes, Timing, and Small Adjustments
There is also a practical constraint: taxes. “Selling an enormously appreciated tech stock could lead to a huge tax liability,” making sudden shifts costly outside tax-sheltered accounts.
Yet timing matters. “This is a marvelous time to make adjustments because stock markets around the world have performed splendidly over the last year.” It is “far easier to make changes when you’re sitting on handsome profits.”
John C. Bogle’s example looms large. While known for index investing, “he wasn’t a purist.” He “adjusted his own portfolio periodically,” but carefully, “at the edges — adjusting, say, 5 percent or 10 percent.
