To The Moon

🌟🌟🌟The US market saw 3 days of red, 1 day of green.    It has just danced through a week of emotional whiplash, rising Friday after a cooler inflation print but still closing the week lower.  The S&P500, Nasdaq and the Dow Jones Indexes all gave back their post Fed September meeting gains.  Jerome Powell's words linger like a warning bell: "Stocks are fairly highly valued".  Suddenly, the exuberance that defined 2025 feels fragile.

Strong economic data, once a source of comfort, now casts doubt on the Fed's rate cut path.  Tech Giants - those symbols of innovation and comfort are stumbling.  Nvidia, Oracle and even Tesla have lost their shine. 

Is this a healthy pullback?  Or is it the market's way of asking - Can earnings justify the hype?

The Emotional Pulse of the Market:

This isn't a panic.  It is a pause.  A moment where investors, especially those new to the game, must confront the tension between conviction and caution.  The AI boom, the Magnificent 7, the Trillion Dollar valuations - they have fueled a rally that defied gravity.  But gravity always returns.

Powell's caution was not misplaced.  Sticky inflation, rising bond yields and a hawkish tone have reminded us that liquidity isn't infinite.  The upcoming earnings season will be the market's truth serum.  If the margins hold and growth persists, the lofty valuations may stand.  But if guidance falters, the correction could deepen.

How to Hedge :

For new investors, hedging might sound intimidating.  But hedging is simply this: protecting your portfolio from potential losses.  Think of it like buying insurance - not because you expect disaster, but because you respect uncertainty and volatility in the markets.

There are several ways to hedge :

1.Set up Stop Loss orders: 

What it does is that it automatically sells if price drops to a set level.  For example :  Sell Nvidia if it falls 10%.

2.  Use Inverse ETFs :

Inverse ETFs rise when the market falls.  For example : SQQQ $ProShares UltraPro Short QQQ(SQQQ)$  goes up when the Nasdaq goes down.  But a note of caution - Inverse ETFs are more suitable for daily trades and not meant to be held long term due to their compounding effect.

3.  Put Options :

Put Options gives you the right to sell at a set price.  For example : Buy a Put Option on Apple if you own the stock in order to protect your gains.

4.  Diversification :

Spreads risk across different sectors and asset classes.  For example : Mix tech stocks with Reits, Gold and Bonds.

Hedging your portfolio isn't fear.  It is foresight.  It is saying that you believe in the investment but that you also honour the market's unpredictability.

Concluding Thoughts 

The rally has not stopped.   But it has paused.  In that pause, the market is asking :  Do you believe in your portfolio's long term horizon?  If the answer is Yes, then it isn't the end but a prelude to the next chapter.

So take profits if it gives you peace of mind.  Hedge if it brings clarity.  But above all, stay true to your conviction.  Because in every pullback lies a question and in every answer, a chance to grow. 

As the late Great Charlie Munger likes to say :  "The Big Money is not in the Buying and Selling but in the Waiting. "

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