One Reason to Bet on a Sideways Summer

Alan Greenspan famously warned about “irrational exuberance” in the stock market in late 1997.

Stocks surged higher for two years before the dotcom boom went bust.

Likewise, we see high market valuations today, as the AI story and a passive bid of investment capital continue to move markets higher.

The trend likely isn’t over yet – there are still plenty of voices also warning on today’s valuations. And plenty of cash on the sidelines that could fuel one last speculative jump higher.

What does matter is that the AI boom is playing out just like the dotcom boom. It’s eerie. Just check out the chart:

Turn Your Images On

Since the start of the AI boom in late 2022, stocks are following the dotcom pattern eerily closely.

Given how closely that markets have followed a similar path to the dotcom boom, a few months of sideways trading appears to be in store. That also fits in with usual seasonal patterns of a market trending lower in August and September, before rallying to close the year.

Yesterday’s news that Nvidia would be allowed to sell advanced chips to China sent shares back to all-time highs. However, given the extent of the market bounce from its April lows, it may be prudent to trim back some portfolio positions now.

Doing so will allow you to take advantage of the high yields in cash – especially with 30-year bond yields back to 5%.

~ Andrew

P.S. Tariffs are still hitting the news, and could lead to a wild market performance in the next few weeks. It’s still part of President Trump’s Great Reset plan, designed to reshore high-paying jobs, increase private sector growth, and push to improve America’s financial standing.

As always, your reader feedback is welcome: feedback@greyswanfraternity.com (We read all emails. Thanks in advance for your contribution.)

Alan Greenspan famously warned about “irrational exuberance” in the stock market in late 1997.

Stocks surged higher for two years before the dotcom boom went bust.

Likewise, we see high market valuations today, as the AI story and a passive bid of investment capital continue to move markets higher.

The trend likely isn’t over yet – there are still plenty of voices also warning on today’s valuations. And plenty of cash on the sidelines that could fuel one last speculative jump higher.

What does matter is that the AI boom is playing out just like the dotcom boom. It’s eerie. Just check out the chart:

Turn Your Images On

Since the start of the AI boom in late 2022, stocks are following the dotcom pattern eerily closely.

Doing so will allow you to take advantage of the high yields in cash – especially with 30-year bond yields back to 5%.

~ Andrew

As always, your reader feedback is welcome: feedback@greyswanfraternity.com (We read all emails. Thanks in advance for your contribution.)

Gold has led people to do the most brilliant, the most brave, the most inventive, the most innovative and the most terrible things. ‘More men have been knocked off balance by gold than by love,’ runs the saying, usually attributed to Benjamin Disraeli. Where gold is concerned, emotion, not logic, prevails. Even in today’s markets it is a speculative asset whose price is driven by greed and fear, not by fundamental production numbers.

Fresh GDP data — the Commerce Department revised Q2 growth upward to 3.3% — fueling the rally. Investors cheered the “Goldilocks” read: strong enough to keep the music going, not hot enough (at least on paper) to derail hopes for a Fed pivot.

Even the oddball tickers joined in. Perhaps as fittingly as Lego, Build-A-Bear Workshop popped after beating earnings forecasts, on track for its fifth consecutive record year, thanks to digital expansion.

Neither represents a bellwether of industrial might — but in this market, even teddy bears roar.

In modern finance theory, only U.S. T-bills are considered risk-free assets.

Central banks are telling us they believe the real risk-free asset is gold.

Our Grey Swan research shows exactly how the dynamic between government finance and gold is playing out in real time.

When we compare apples to apples—median home prices to median household income, both annualized—we get a much more nuanced picture. Housing has indeed become less affordable, with the price-to-income ratio climbing from roughly 3.5 in 1984 to about 5.3 today. In other words, the typical American family now has to work much harder to afford the same home.

But notice something crucial: the steepest increases coincide precisely with periods of massive government intervention. The post-dot-com bubble recovery fueled by Fed easy money after 2001. The housing bubble inflated by government-backed mortgages and Fannie Mae shenanigans. The recent explosion driven by unprecedented monetary stimulus and COVID lockdown policies.

Neither represents a bellwether of industrial might — but in this market, even teddy bears roar.

In modern finance theory, only U.S. T-bills are considered risk-free assets.

Central banks are telling us they believe the real risk-free asset is gold.

Our Grey Swan research shows exactly how the dynamic between government finance and gold is playing out in real time.