I am not a perma bear. I believe in equities, innovation, and long-term wealth creation. Markets rise more often than they fall, and betting against human progress is usually a mistake.
But sometimes risk becomes too obvious to ignore. For me, that happened in March 2026. I sold all my stocks because I believed the market had moved from expensive to irrational. Since then, the market has gone parabolic, and missing that rally has been painful.
Even so, I cannot buy back in.
The first problem is valuation. The Shiller CAPE ratio compares the market’s price with ten years of inflation-adjusted earnings. Right now, it suggests the S&P 500 is one of the most expensive markets in modern history. Valuations can stay high for a while, but eventually earnings must justify prices. I do not believe they currently do.
The second problem is AI. I believe AI is real and transformative, but real technologies can still create bubbles. The internet was real in 1999, yet investors still paid absurd prices for future profits that often never arrived.
Today, AI is priced as if massive profits are inevitable. But the costs are enormous: chips, energy, data centers, talent, infrastructure, and constant model training. AI may change the world, but that does not mean investors will earn good returns at today’s valuations.
The third problem is inflation. Markets still assume inflation will fall, rates will come down, and liquidity will support asset prices. But if oil prices rise because of the Iran conflict or broader energy disruptions, inflation may stay stubbornly high. That would limit rate cuts and put pressure on equity valuations, especially high-growth and AI stocks.
The fourth problem is speculation and weaker regulation. Crypto is the clearest warning sign. Much of it looks driven by insider incentives, political influence, and hype rather than real economic utility. When protection weakens, ordinary investors often pay the price.
Then comes the IPO wave. SpaceX, OpenAI, and Anthropic are impressive names, but they are also capital-intensive and valued on extremely optimistic assumptions. If they are fast-tracked into major indexes, passive investors and pension funds may be forced to buy them regardless of valuation.
That is often how bubbles end: insiders seek liquidity while the public buys the story.
Maybe I am wrong. Maybe AI profits explode, inflation falls, and the market keeps climbing. But I cannot justify buying at these prices.
Missing the rally hurts. But I would rather miss the final stage of a bubble than buy into a market priced for perfection.
I am not rooting for a crash. I am simply waiting for valuations and expectations to reconnect with reality.
If this is a late-stage bubble, a 35% decline is not impossible.