When and how to adjust positioning in rising markets
As markets continue to push higher, I’ve been asking myself: what are the strategic questions investors should be considering right now?
When portfolios are performing well, the natural instinct is either to lock in gains or chase what’s working even harder. In our experience, acting on these impulses without a broader plan can sometimes create long-term challenges.
Here’s how we’re approaching these decisions with clients right now.
The Economic Engine Running Hot
Before we talk strategy, let me what I believe may be helping to push markets higher.
We’re seeing four types of economic support working together, as noted in our Halftime Report:
- Monetary stimulus – Central banks have been cutting rates, and recent data suggests money has been growing around 5% year-over-year
- Currency effects – The dollar weakened by roughly 11% in the first half, which can benefit overseas earnings when American companies translate foreign profits back to dollars
- Fiscal stimulus – Recent tax legislation has been estimated at around $3.5 trillion, including roughly $1 trillion in new spending beyond extending previous tax cuts
- Capital expenditure surge – Companies have been increasing their spending on artificial intelligence infrastructure, approaching $500 billion annually
Altogether, that represents roughly $4.5 trillion in potential stimulus flowing through our $30 trillion economy. In my view, that could provide meaningful support for corporate earnings and broader economic activity.
In my experience, this much coordinated stimulus overlaps, it can create real opportunities for investors – but it can also lead to “market giddiness.” And that’s where things get interesting.
When Markets Start Acting “Giddy”
Here’s what has my attention right now.
I believe we’re seeing signs of speculative behavior return. SPACs are back, these are essentially blank check companies that raise money to buy other businesses later. Many investors faced losses in 2021 when SPAC enthusiasm faded, but renewed sentiment appears to be driving their resurgence.
So-called meme stocks are rallying again. Companies like Krispy Kreme, GoPro, and Kohl’s are trading up substantially based on social media momentum rather than business improvements.
Cryptocurrency markets continue pushing higher despite regulatory uncertainty. Bitcoin, Ethereum, Solana, they’re all rallying on speculation rather than fundamental adoption.
Most notably, the largest technology companies (what market watchers call the “Magnificent 7”) now trade at 30 times their annual earnings. That’s actually higher than comparable technology stocks traded at the peak of the internet bubble in 2000.
I find this concerning because markets tend to get less forgiving when speculation runs this high.
Our Framework for Smart Positioning
Here’s how I’m thinking through portfolio decisions with clients today.
We want to participate in legitimate economic growth. With this much stimulus support, staying completely defensive would likely be a costly mistake.
But we don’t need to chase speculative areas to benefit from the expansion.
Our research shows mid-sized company stocks trading at about 17.5 times earnings and smaller company stocks at 17.1 times earnings. Those are reasonable valuations compared to the broader market’s current 24 times earnings, which sits near 2000 peak levels.
We’re also finding opportunities in sectors positioned to benefit from infrastructure spending. Industrial companies, materials producers, and utilities should see increased demand from the massive data center construction required for artificial intelligence, without the speculative premiums attached to the technology giants themselves.
The Real Decisions You’re Facing
When markets hit new highs, emotion can override strategy. I see this with even the most sophisticated investors.
The questions I’m working through with clients right now center on managing success without getting complacent.
- Concentration concerns
How much of your portfolio should remain in the stocks that got you here? Many clients have significant exposure to large technology companies through various holdings. We’re reviewing whether that concentration still makes sense given current valuations.
- The rebalancing discipline
Should you be taking profits from areas that have performed exceptionally well? This feels counterintuitive when things are working, but systematic rebalancing often captures gains from speculative areas and redeploys them into more reasonable opportunities.
- Growth without speculation
Where do you find growth opportunities without paying bubble-level prices? We can model different approaches and stress-test them against various market scenarios.
- Timeline reality
How does your need for portfolio liquidity affect these decisions? If you’re planning major expenses or lifestyle changes in the next 2-3 years, that changes how we think about current positioning.
What the Market Is Actually Telling Us
The behavioral patterns I’m tracking suggest markets are becoming more discriminating.
During this earnings season, companies beating expectations are getting smaller positive reactions than usual. Companies missing expectations are getting punished about 2% more severely than the 10-year average.
This shift toward selectivity typically happens when valuations stretch, and investors become more careful about where they place bets. It’s a warning sign that the easy money phase of this cycle may be ending.
We’re also seeing that while the economic fundamentals remain strong, unemployment at 4.1% and more job openings than workers to fill them, the psychology of investing is shifting toward caution.
How We Navigate This Together
Rather than making dramatic changes based on where markets sit today, I’m helping clients fine-tune positions based on their complete financial picture.
For some clients, that means reducing concentration in the largest technology names while maintaining growth exposure through mid-sized company positions. For others, it means adding some defensive positioning without abandoning growth entirely.
The key is making these adjustments systematically rather than emotionally.
We can review your current allocation and discuss whether modifications make sense given your specific goals and timeline. We can also model how different positioning approaches might perform across various market scenarios, including what happens if speculation cools or if stimulus drives markets even higher.
Staying Smart When Markets Get Exciting
I often tell clients to “party on, but stay sober.” Markets with this much stimulus support tend to continue higher over 12-24 month periods. But they also tend to be more volatile along the way.
The question isn’t whether to stay invested. The question is how to stay invested intelligently.
If you’re feeling the urge to make changes, either to lock in gains or chase what’s working, that’s normal. We can channel that energy into strategic portfolio improvements rather than emotional reactions.
The stimulus environment creates real opportunities. We can help you capture them without taking unnecessary risks.
If you want the complete analysis behind this strategic thinking, you can watch our full 2025 Halftime Report on our website. And if you’d like to discuss how these market dynamics affect your specific portfolio, please reach out to your W&A wealth strategist to schedule a conversation.
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