The Fed just delivered a "Christmas gift" with a 25bps cut to 3.75% and a surprise $40B monthly balance sheet expansion—essentially "Baby QE." While markets hit record highs, FOMC "group think" may be masking a deteriorating labor market and looming 2026 tariff inflation. With fwd PEs at ~23x, history warns that subsequent 10-yr returns are often near zero.
Goldman Sachs are warning of a 10-20% correction within the next 12-24 months. And whilst saying this would be a healthy outcome - it aligns with stretched valuations seen only during the dot-com bubble, according to the Shiller CAPE Ratio. The market's risk is concentrated: returns are currently driven by a handful of mega-cap tech stocks. As Michael Burry's short of Palantir highlights, the issue isn't business quality, but the extended prices being paid. From mine, better opportunities exist outside the Mag 7.