Veteran Investor Warns of Complacency as US Equities Soar

A seasoned investor is cautioning that while the US equity market has continued to rally, there may be a concerning "degree of complacency" in the market. The firm had been warning about US equity valuations being too high since March 2024, and these concerns were reiterated throughout the year.

The investor explains that by mid-2024, they had noticed the US market's relative advantages, which had driven its outperformance for over a decade, were beginning to fade more than the valuations were reflecting. This presented an opportunity to broaden out and diversify, as most investors had congregated in the US market. The invasion of Ukraine and its impact on Europe's energy prices and exposure to China further reinforced the firm's conviction to spread its investments geographically and across styles, factors, and sectors.

Despite the US market's continued rally after the 2024 election, the investor's firm remained steadfast in its analysis, relying on frameworks and models to maintain conviction in its calls. The investor believes that while the financial instruments available have evolved, the underlying psychology of investing, driven by greed, fear, and crowd behavior, remains largely unchanged across generations.