The market's pulled off a feat that's nothing short of remarkable—soaring 44% from its lows while barely taking a breath with a modest 4.9% pullback. It's like watching someone run a marathon without breaking a sweat. Impressive? Yes. Natural? I'm not so sure.
I've been covering financial markets for over a decade, and this pattern breaks all the normal rules. Markets typically need to reset. They need to breathe.
"This isn't normal," a veteran hedge fund manager told me last week over coffee (which he nervously kept refilling). "We're all waiting for the other shoe to drop."
The historical patterns are clear as day. Look at any market textbook—or just look at the data. We should be seeing 5% pullbacks about every three to four months. That's roughly 3.4 times a year. The more substantial 10% corrections? They typically visit us annually. And those gut-wrenching 15% declines make an appearance every couple years or so.
Yet here we are. Defying gravity.
What's actually happening reminds me of something my first market mentor called "postponed reckoning" – the longer we go without a correction, the more dramatic it might be when it finally arrives. It's like holding your breath underwater; eventually, you're coming up for air, and the longer you wait, the more desperate that gasp will be.
The psychology at work is fascinating. When investors go months without experiencing a proper pullback, they develop a form of market amnesia. They forget what red screens look like. So when those inevitable down days finally arrive, the reaction isn't measured—it's panic.
(I witnessed this firsthand during a trading floor visit in 2018 when a routine pullback triggered reactions you'd expect from a full-blown crash.)
There's also an interesting asymmetry in how we perceive market moves. A 5% gain spread over weeks feels like smooth sailing. A 5% drop in days feels like the world's ending. Our brains just aren't wired to process these movements symmetrically.
The speculative froth is showing up in some interesting places. Sonder Holdings and BigBear.ai have attracted renewed interest from the risk-on crowd, while NVIDIA continues its seemingly unstoppable run as the market's favorite AI play. Palantir, meanwhile, offers a slightly more controversial way to play the same theme.
What strikes me about these stocks isn't just their performance—it's that they're capturing mindshare alongside growing correction concerns. It's like investors are simultaneously terrified of a pullback while still chasing returns.
I spoke with several retail investors at a conference in Dallas last month, and almost all expressed this peculiar contradiction. "I know a correction is coming," one told me, "but I just bought more tech stocks yesterday."
This "cautious FOMO" might actually be helping prevent the very correction everyone's worried about. When everyone's positioned for both scenarios, market movements become muted.
So what's an investor to do? History suggests patience pays. Markets don't typically establish new patterns—they eventually revert to old ones, sometimes dramatically.
The smartest investors I know aren't trying to time exactly when normalcy returns. That's a fool's errand. Instead, they're positioning for its eventuality while respecting the momentum that's kept corrections at bay.
In the meantime, watch those speculative names closely. When (not if) the correction comes, they'll be the canaries in the coal mine.
After all—and I've seen this play out dozens of times covering market cycles—when the party finally ends, it's always the last guests to arrive who are the first ones asked to leave.
