Every few years the market gives us one of those moments when the crowd psychology completely flips.
Right now, almost everyone I talk to is convinced we’re in the mother of all bubbles. They point to sky-high valuations, political chaos, and geopolitical risks. And honestly? I get it. On paper it looks terrifying.
But sometimes the market doesn’t care about “on paper.” Sometimes the setup is so overwhelmingly bullish that the path of least resistance is straight up – and violently so. I’m starting to think we’re on the cusp of exactly that kind of move.
The Macro Backdrop Nobody Wants to Admit
Let’s strip away the noise for a second and look at the raw ingredients currently cooking in the economic kitchen.
First, the economy isn’t just “not in recession.” It’s legitimately strong. Recent estimates put annualized GDP growth near 4%. That’s not limp-along, post-pandemic recovery growth. That’s hot.
Second, the consumer – especially the upper-income cohort that actually drives discretionary spending – is still opening the wallet wide. Same-store sales numbers are running north of 7% year-over-year. Try finding that kind of momentum in any prior late-cycle environment.
Third, fiscal policy under the new administration is basically “pedal to the metal.” We’re looking at deficits around 5% of GDP even with significantly higher tariff revenue coming in. Translation: Washington has zero intention of cooling anything down. If anything, they want the economy running hotter.
And then there’s the Federal Reserve.
A Fed That’s About to Become Extremely Friendly
People keep talking about “higher for longer,” but the reality on the ground is shifting fast.
The central bank has already pivoted to rate cuts, ended quantitative tightening, and is widely expected to restart balance-sheet expansion sometime in 2026. That’s effectively QE by stealth.
More importantly, the composition of the Fed itself is about to change dramatically. By mid-2026, the majority of voting members will be appointees of the current administration – an administration that has never hidden its love for rising stock prices.
History shows that when the White House and the Fed are reading from the same playbook, bad things happen to bears.
When fiscal and monetary policy both scream “go,” risk assets usually listen.
What the Price Action Is Already Telling Us
Forget the narratives for a moment and just look at what the market is actually doing.
Gold has broken out to all-time highs and keeps grinding higher with almost no pullbacks. Silver is finally waking up too. That’s classic “inflation trade” behavior.
The Russell 2000 – the purest proxy for domestic risk appetite – just escaped a five-year consolidation range on the upside. Small caps tend to lead in the final, euphoric stage of bull markets.
Perhaps most telling of all: the U.S. dollar index is teetering on the edge of a breakdown below its 15-year uptrend line. A weaker dollar is rocket fuel for commodities, foreign earnings, and emerging markets – basically everything that’s been dead money for years.
- Strong economy ✓
- Spending like crazy ✓
- Massive deficits ✓
- Dovish Fed ✓
- Pro-stock leadership ✓
- Technical breakouts across risk assets ✓
When you stack all of these together, being bearish starts to feel like standing in front of a freight train.
Why This Time Really Is Different (Sorry)
I know, I know – “this time is different” are the four most dangerous words in investing. But hear me out.
Most melt-ups happen when monetary conditions are easing against a backdrop of fiscal restraint. Think 2020–2021: the Fed was printing like mad, but Congress eventually turned off the stimulus spigot.
This time, both taps are wide open at the same time – and likely to stay that way for years. That combination is almost unprecedented outside of major wartime spending periods.
Add in the political incentive structure (nobody ever got re-elected telling voters the economy needs to cool off), and you have a recipe for policy makers to keep the party going long after most people think it should end.
Where the Real Money Will Be Made
If this scenario plays out, the biggest winners probably won’t be the usual mega-cap tech darlings (though they’ll do fine).
The real torque will come from the beat-up, forgotten corners of the market:
- Small-cap stocks (especially cyclical and financials)
- Energy and materials companies
- Emerging market equities
- Precious metals and miners (the most leveraged play on a weaker dollar and hotter inflation)
- Even certain crypto assets once the dollar really rolls over
We’re already seeing rotation into many of these areas. The moves feel tentative now, but they have the look of early-stage leadership changes that precede major trend shifts.
Yes, There Are Risks (But Timing Matters)
Look, I’m not wearing rose-colored glasses. A deflationary accident is always possible – policy mistakes, black-swan events, you name it.
But the base case has to be what’s directly in front of us. And right now, the combination of growth, liquidity, and political will is about as bullish as it gets.
The market can stay overvalued longer than most people can stay solvent betting against it. We saw that in the late 1990s. We’re seeing the same setup again – only this time with even more monetary and fiscal firepower.
In my experience, the moves that blindside the majority are the ones that extend far beyond what feels “reasonable.” That’s exactly what a true melt-up does.
The market can remain irrational longer than you can remain solvent.
– Not Keynes, but still true
So while everyone is busy waiting for the crash, the real risk might be missing the ride higher.
Something to think about.
