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There is nothing so disturbing to one’s well being and judgement as seeing a friend get rich – Charles Kindleberger

On Friday, the S&P briefly hit 6,666 before closing the week at 6,664. That is up 10x or 1000% from Friday March 6 2009 when it briefly hit 666 – the low of The Great Recession. The last 16 1/2 years have been perhaps the greatest run for any equity market in history.

But nothing lasts forever. As regular readers know, I have become increasingly concerned about the manic pace of the rally and the frothiness of the market over the last month or so. Indeed, I believe we are in the very late stages of another bubble. How do you rationally navigate a bubble?

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The first thing is to stay invested. While it seems like you should sell everything and get out at top dollar, that is the wrong move for two reasons. One: the market can stay irrational for a long time, to paraphrase John Maynard Keynes. Two: You don’t want to lose your positions in great companies. The way you make big money in the stock market is to “Buy right and sit tight” and let The American Tailwind do its work as well. The long term trend in the United States for the last hundred years is powerfully clear: up and to the right (“Why You Should Have A Bullish Bias”, May 17, 2025). You just can’t bet against that.

On the other hand, I do think it makes sense to become more disciplined, sell lower conviction ideas, take partial profits in big winners, etc.. to raise some cash at this stage of the cycle (“Is This The Top? Reflections on Cycles and Macro”, September 3, 2025).

The one thing you don’t want to do is let FOMO get the best of you. On Twitter these days, you see a lot of people posting images of the incredible gains in their portfolios and I’m sure your friends are telling you how much money they are making which can drive you insane as Charles Kindleberger pointed out in the quote in the epitaph. Even the great Stan Druckenmiller couldn’t take it at the top of the Dot Com Bubble in March 2000 (see quote from him above) – and paid a big price.

What evidence do I have that it’s late in the game?

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The primary piece of evidence is Technical: fewer and fewer stocks are driving the gains in the market of late. To be specific, the mega-caps are pulling the market higher while the rest of the market languishes. You can see this in a chart comparing the performance of The Top 20 ETF (TOPT) – which owns the largest 20 US stocks – versus The S&P Equal Weight ETF (RSP) – which weights all of the stocks in the S&P equally. The former continues to be strong while the latter has made little progress over the last month meaning that only the big stocks are moving higher and pulling the market cap weighted indexes up with them.

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This is also born out by the negative Advance/Decline Line in the S&P 500 over the last four weeks. That is, more stocks in the S&P have declined than advanced in each of the last four weeks.

Because the largest 10 stocks in the market now make up nearly 40% of the S&P’s market cap, their strength can and is masking a lot of weakness beneath the surface. When they stop working, the market will lose its only source of propulsion.

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The other two pieces of evidence are Sentiment and Valuation. You can’t quantify sentiment the way you can technicals or valuation. It’s anecdotal. But all these people positing their massive gains is one indicator that it’s too easy to make money right now. Another is the massive moves in some stocks, sometimes on no news. Consider the move in nuclear play Oklo (OKLO) on Friday. Oracle (ORCL) added more than $200 billion in market cap in one day after its earnings report last week. That is not normal.

Lastly, Valuation has gotten out of hand in many cases. Palantir (PLTR) is the most obvious case trading at more than 100x their revenue guidance for 2025. But there are plenty of other examples: ORCL, Walmart (WMT), Costco (COST), Autozone (AZO), etc… Great companies but the valuation no longer makes sense.

This won’t end well. It never does. But it’s impossible to say when exactly it will end – though my sense is that we’re close. The best you can do is to keep your head, stay invested, trim where appropriate and don’t get sucked in by FOMO.

More By This Author:

The Big Day Is Here: Understanding What The Markets Wants From The Fed
Investing In Stocks Outside The Circle Of Competence
Wild Days: ORCL +$200 Billion, 911,000 Disappearing Jobs, Thin Leadership = 9th Inning