From Ai Fears to Market Exuberance: 3 Reasons to Be Thankful This Holiday Season
A quick tour of this year’s gains along with market history on exuberance and excess
This holiday week is an excellent time to slow down and recognize what went right and give thanks from family to wall street. Investors often fixate on the next crisis instead of the progress right in front of them. With Thanksgiving one day away and markets in far better shape than the ominous headlines suggest, it helps to step back and take stock.
You hear plenty of noise about recessions, wars, bubbles, and tariffs. You see fear in the news cycle every morning. The data tells a different story. This has been a year worth appreciating. Markets delivered. Portfolios held up. Volatility stayed manageable. Most investors are ending the year in stronger shape than they expected.
The S&P 500 is up more than 15% with dividends. Core bonds returned about 7%. International stocks finally beat the U.S. for the first time in years by a landslide. A balanced portfolio did its job and returned nearly 12% year to date ( ). It compounded steadily while most people worried about the wrong risks or noise from the White House to the Fed.
This is a good moment to remind yourself why discipline pays. The past twelve months show that staying invested in a diversified portfolio beats chasing headlines or guessing the next hot trade. Your behavior matters as much as the market itself. Many investors do more damage to their long-term returns through short term market timing than through any actual downturn.
This Time Is Different
People love the famous Templeton maxim, “this time is different.” It remains one of the costliest beliefs in investing. Crises look unique. Headlines change. The storylines shift. Yet investor behavior barely moves. National studies show that people of all ages react emotionally at the wrong moments and end up trailing both the markets and their own goals. Over time every crisis and crash is different like a snowflake but investor behavior never seems to change.
If a scary headline makes you want to sell everything, it is almost always too late or the wrong move. The COVID 2020 and the recent April 2025 Liberation Day flash crashes prove that again. Both swings looked severe, but diversified portfolios held up. The real damage came from concentrated tech or overall stock positions and mistimed exits. Discipline worked like a seatbelt on a roller coaster when everything felt unsteady.
Exuberance Returns
Alan Greenspan once warned about irrational exuberance. Investors sometimes push prices higher because they want the rise to continue, not because the fundamentals support it. We are not at that melt-up level, but we are close. Valuations are stretched. Market concentration is heavy. Confidence sometimes looks more like belief than analysis.
That does not mean the rally ends tomorrow after we just celebrated the bull markets third birthday. It means the discipline gap is widening. Markets do not need a major crisis to correct. They only need a reason. For now, investors are still willing to believe the story. Cautious optimism is the smarter stance. Appreciate the gains. Stay diversified. Keep your guard up.
Trifecta of Market Crashes Due to Excess
History does not repeat with precision, but it does rhyme. Bull markets have tended to run far longer than bear markets. Many stretch five to nine years on average. Staying disciplined through the noise has rewarded patient investors across every cycle.
Jon here. In our quarterly client review meetings, we often explain that bull markets don’t end because of old age. They end because of excess. Excess valuations, excess exuberance, and excess leverage.
1. The 1987 bear market was fueled by stretched excess valuations and unrealistic price momentum. Stocks had run up more than 40% in the ten months before the crash. Price to earnings ratios were elevated. Investors assumed the surge could continue unchecked. When sentiment shifted, the overvaluation snapped and the market dropped more than 20% in a single day, known as Black Monday in the history books. This was the original “flash crash,”- still the worst one-day decline in market history.
2. The bear market that started because of excess exuberance was the dot-com collapse in 2000. Investors chased anything with a “.com” in the name. Valuations stretched far beyond earnings or logic. IPOs with no revenue doubled on day one. It was classic speculative fever. When expectations cracked, the bubble deflated fast and the bear market followed.
3. The 2008 credit crisis and Great Recession was fueled by excess leverage. Banks and investors loaded up on mortgage-backed securities and complex debt products. The housing market was bloated with easy credit and little oversight. When home prices stopped rising, the leverage unwound. The financial system buckled under its own weight, and the market plunged. This was perfectly documented in the movie The Big Short.
Three Reasons for Investors to be Thankful
First, investors can be thankful for a strong year on wall street. But this is not unusual Bull markets have delivered strong cumulative returns across the past six decades, often far exceeding what we’ve seen so far in the current cycle. Yes, there are real concerns today around valuations and market concentration, but long-term investing means living through every type of market environment, not just the comfortable ones.
The chart below of the S&P 500 history shows every bull and bear market going back to the 1960s. What stands out is how dominant the bull cycles are. The peaks tower over the declines. Most selloffs lasted only a few months to a year, while the expansions ran much longer and created most of the wealth.
The market is positive roughly 85% of the time when you look at rolling months, quarters, and years. That’s the real story. Staying invested captures the long, powerful stretches of growth that matter far more than the painful downturn.
Bond returns matter as well for diversified investors, especially after the interest rate and inflation roller coaster of recent years. With the Fed easing off the brakes and rates stabilizing, bonds have bounced back for the first time in five years. That’s a reminder: having both stocks and bonds in your portfolio is about balance and income. It’s not about guessing the next headline.
The big picture is simple: timing the market on short-term news is a losing game. We saw that back in April. Markets flirted with bear territory when new tariffs hit the headlines. Then they shot up to new highs. Investors who stayed the course were rewarded. Those who jumped at every headline might still be sitting on the sidelines. Keep your strategy steady, and let the market do its work.
Inflation has improved and the Fed is cutting rates
Second, investors can be grateful that inflation has improved, even if progress has been slower than many would prefer. Prices have risen about 3% over the past year (see chart below), which continues to be a challenge for households and policymakers. However, from an investment standpoint, inflation has been much more stable, and there are fewer fears of runaway inflation compared to prior years.
This has allowed the Fed to begin cutting interest rates after keeping them at restrictive levels for most of the year. This is also to support the job market, which has been weakening since the summer. Historically, lower rates benefit both stocks and bonds by reducing borrowing costs for businesses and consumers while making existing bonds with higher interest rates more valuable. So, even though inflation and interest rates will remain important factors for markets, fears of ever-rising inflation and interest rates appear to be behind us.
Asset Class Performance
Third, let’s not forget the core lesson: risk management and asset allocation matter as much as returns. Every year brings its own uncertainty. Next year won’t be any different. You’ll hear recession worries, bear market fears, and chatter that the cycle is ending. We can also be thankful for having different asset classes to balance risk and return.
The chart below illustrates that international and emerging markets sectors easily surpassed the S&P 500 while other sectors held their own from gold and financials to industrials and healthcare. Even with the dip over the past few weeks a balanced 60/40 portfolio returned over 10% year to date and for the third year in a row for 30% gross returns per Vanguard balanced benchmarks.
Lesson learned: after a three-year rally, risk management is still key. The S&P 500’s P/E ratio is above average at around 22.6x and inching closer to dot-com peaks. That doesn’t mean the market can’t keep rising, but it does mean future returns could be more modest. It’s smart to hold parts of the market with more reasonable valuations.
Questions around artificial intelligence and the billions in spending by the big mega-tech leaders will keep coming in addition to the fact that major indices like the S&P 500 are still greatly weighted down by tech. Political volatility will stick around. The point is, reacting to every new headline can derail your plan. Stay balanced, stay disciplined, and let your strategy do the heavy lifting.
The bottom line? As the holiday season kicks in, it’s the perfect time to reflect on what went right and reassess your allocations. From Ai Fears to Market Exuberance: Regardless of the bull market tailwinds or bear market triggers, A well-constructed portfolio blends different asset classes and keeps you on track toward your goals. That’s the key to handling whatever the next year throws at you. Thanks for reading, and enjoy the holiday.
For more information on our firm or to request a complimentary investment and retirement check-up, call (561) 210-7887 or email jon.ulin@ulinwealth.com.
Author: Jon Ulin, CFP® is the founder and Managing Principal of Ulin & Co. Wealth Management, an independent advisory firm based in South Florida for over 20 years. As a fiduciary wealth advisor, Jon helps successful individuals, families, and business owners nationwide with multi-generational planning, investment management, and retirement strategies. Learn more about Jon and our team at About/CV.
Note: Diversification does not ensure a profit or guarantee against loss. You cannot invest directly in an index.
Information provided on tax and estate planning is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.
You cannot invest directly in an index. Past performance is no guarantee of future returns. Diversification does not ensure a profit or guarantee against loss. All examples and charts shown are hypothetical used for illustrative purposes only and do not represent any actual investment. The information given herein is taken from sources that are believed to be reliable, but it is not guaranteed by us as to accuracy or completeness. This is for informational purposes only and in no event should be construed as an offer to sell or solicitation of an offer to buy any securities or products. Please consult your tax and/or legal advisor before implementing any tax and/or legal related strategies mentioned in this publication as NewEdge Advisors, LLC does not provide tax and/or legal advice. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation, or needs of individual investors.
