The US stock market is at a historical high, but warning signs are emerging 250925

$Microsoft(MSFT.US) 
In the current market environment, investors face multiple challenges and opportunities. As the Nasdaq index hits new highs, market focus is gradually shifting to corporate earnings and the policy direction of the U.S. Federal Reserve. Although investors seem optimistic about the impact of trade tariffs, the long-term effects of these tariffs remain unclear and could lead to rising inflation or slowing economic growth. According to the latest labor market report, while the job market remains resilient, hiring activity in many industries shows signs of weakness, which could be a warning signal of an economic slowdown.

Consumer spending grew by only 0.5% in the first quarter, while growth in the past two quarters was -0.3% and 0.1%, respectively. These data suggest that the momentum of economic growth may be weakening, and investors need to proceed with caution, adhering to their long-term asset allocation strategies. The valuation of small-cap stocks relative to large-cap stocks is at a historically low level, providing investors with potential opportunities. As international stock markets show signs of recovery, investors should consider diversifying their funds into these markets. Entering the earnings season, corporate forward guidance will be key, and investors need to pay attention to how companies assess the impact of tariffs on their businesses. Although high market valuations may trigger a pullback, long-term investors should remain patient, as historical data shows that markets usually recover after short-term fluctuations.

For more aggressive investors, it is recommended to add options to the portfolio to hedge against potential market pullbacks or rallies. Overall, investors should return to fundamentals, focusing on valuations and macroeconomic changes, to seize opportunities in future markets.

Source: "XQ Global Winner" Terminal