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Beware of The Parabolic Stock Market Rise

We are seeing something remarkable in the stock market. After being down 7% on the year at the end of March, the S&P 500 is now up nearly 9%. That is a swing of 16 percentage points in just six weeks. But the real story is not the broad index. It is what is happening underneath.

Semiconductor stocks have gone vertical. Some examples: Sandisk up over 4,000% in one year. Intel up roughly 500%. Micron up 777% since last spring. 

The semiconductor sector went from 6% of the S&P 500 to 22% in just over a year. 

Even South Korea's stock market returned 240% in a year, making it larger than the UK market for the first time, driven mostly by Samsung and SK Hynix.

Michael Burry, the famed 'big short' investor, has said several times that the current situation reminds him of the 2000 tech bubble in some striking similar way. 

He circulated the following chart that compares semiconductor index ETF SOXX in early 2000s and now:

The question we keep asking ourselves is: is this sustainable? The bulls will point out that these moves are backed by real earnings growth, not just speculation. As one commentator noted, "Earnings are going higher so stocks are too." And we have not even gotten to the robot phase of the AI buildout yet. The Nasdaq 100 is up roughly 650% over the past 10 years.

But we also have to be careful. When a market goes parabolic like this, the risk of a correction increases. We have seen this movie before. The so called melt-up can be exhilarating for those who are fully invested, but it can also create a false sense of security. 

Investors who are not careful may find themselves buying at the top when sentiment is most euphoric.

 Paul Tudor Jones, another famous trader, warns that when the correction comes, it could be epic, even worse than what happened in 2000s. Just a reminder, Nasdaq 100 came down 83% from its peak in March 2000 to its trough in October 2002.

Our suggestion: stay invested but be aware of the risks. If you have been thinking about rebalancing your portfolio, this might be a good time to take some profits off the table. Not because we can predict the top, we admit we have no ability to do that. 

Having a disciplined approach to risk management is what separates successful long-term investors from those who get caught up in the frenzy.

DYI:  As of 6-7-2026 the U.S. stock market measured by the ever so popular S&P 500 index is and has been for many years at ever growing valuations at nose bleed levels.  S&P 500 Shiller PE is at 41.57 however its cousin the dividend yield is a tiny 1.06% yield (VOO).  This does not even come close to competing with investment grade long term corporate bonds yielding (VCLT) 5.87%!

As rank speculation has been going on for years in the U.S. stock market; valuation players have sat on the sidelines as the crowd has its day.  We’ve been warning for too long that shares or indexes are ownership of companies they are NOT gambling tickets!

There’s a mantra Always Be Buying and there is another lesser known mantra Avoid Big Losses.  Today is not a buyer’s paradise by any means for common stock its avoiding the big losses chewing up an individual’s time to “Put it all together” financially.