The Warning Signs of a Total Market Pullback Coming_ Why Markets Are Nervous

Stocks are at all-time highs. And the stock market, while volatile earlier this year, just kept sailing away and is at new highs and surging. Yet investors suddenly seem uneasy. Michael Burry, who called the 2007-2008 housing crisis correctly, is betting 80% of his multi-billion dollar portfolio against some of the biggest names in AI and technology at this point. Search trends for market crash and recession 2025 are spiking. Volatility is creeping up, and even big-name funds are talking about taking chips off the table. Now, I'm a professor with an academic background, obviously, and so I don't just go off of news articles and all the hype going on there. I actually do real research. The American Association of Individual Investors conducts a weekly survey on investors' view on the financial market for the next six months. What I found there is very scary, and it's confirming why we're seeing all this uneasiness. So what's really going on? Why are markets so nervous? And what can you do before the next pullback hits? Today, I'll be breaking down the three key forces that are driving this negative sentiment, plus practical steps to protect and position your portfolio. My name is Nolan Govea. My students call me Professor G, and I made this channel to make investing simplified. Remember that all investing carries risks, so do your own research. This is not financial advice, and I'm not a financial advisor. So let's start with what we're seeing right now. The S&P 500 and Nasdaq have stalled after a massive run. The VIX, Wall Street's fear gauge, is quietly trending higher. Bond yields remain stubbornly high. That's Wall Street saying, we're not convinced inflation is dead. An online sentiment? Google searches for stock market crash jumped nearly 40% in the last month. Put together, it tells us one thing. Optimism is definitely cooling. Not panic yet, but that easy money mood of the early 2025 is definitely fading. So reason number one that we're seeing this is valuations. Even after earnings season, forward PEs for large cap growth stocks are sitting way above their five-year averages, especially in AI and semiconductors. These are all great companies, yes, but they're priced for perfection. When expectations get that high, even small disappointments trigger huge sell-offs, like Meta's 20% post-earnings drop. And even Palantir had a huge earnings report, but after that, they dropped off big. Reason number two we're seeing this negative sentiment is interest rate fatigue. The Fed might be done hiking those rates, but they're definitely not cutting super aggressively. Rates are higher for longer, and that weighs on valuations, borrowing, and consumer credit. Think about it, a business refinancing their debt at 6% instead of at 3% means slower profit and slower growth. Reason number three right now is fiscal and geopolitical noise. We've got the UK talking about broad tax hikes. As I take my decisions on both tax and spend, I will do what is necessary. US budget debates heating up. The United States has not only become more active on the diplomatic front, they are actively pressuring their main trading partners with tariffs, trying to reduce their trade deficit in this way, while simultaneously seeking to improve the budget deficit situation. And a global election cycle ahead. There's also always something going on with the US and China and the whole tariff situation. And currently, our government is shut down. When governments tighten belts, liquidity drains from the system and markets feel it. The biggest measure of nervousness is quietly becoming bigger and bigger. So let me show you that and give you four easy quick steps that I'm taking in my portfolio and that my clients have started to do as well. But first, I want to thank and introduce the sponsor of this video, Delete.me. Did you know that your personal data is being sold online by data brokers? 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Let's look at a few easy to follow indicators. CNN's fear and greed index recently slid from 75, which is greed, to 23, extreme fear. That's cooling momentum and going the opposite way. People are freaked out. Like I talked about at the beginning of this video, the AAII investor sentiment recently has had bullish responses drop from 48% to 35% in just two weeks. People are flipping like crazy. Third, we have put-to-call ratios. More investors are buying protection, signaling quiet hedging. Michael Burry, who bet on a US housing market crash in the run-up to the 2007 crisis, has wagered $1.1 billion on falls in shares of chipmaker Nvidia and software company Palantir. The moves will intensify concerns about a possible bubble in AI stocks following a surge in values driven by hopes of huge future earnings from the sector. These are classic early warnings. Historically, markets pull back 5-10% within months of sentiment peaks like this. So what can smart investors do right now? I'd highly suggest that you sign up for my free newsletter so you can stay in the know from all the researches. I'll just send out one newsletter per month so I won't spam you. Especially in these times, getting this info will be huge and it'll always be free. Sign up with the link below. Okay, so four steps to pull your portfolio out of harm's way. Step number one, you're going to want to trim that froth. If your portfolio's 40, 50, 60% mega cap tech, consider rebalancing. Lock in some profits. The valuation risk is real. I know it's almost been easy money over the last year or two, especially in the tech market, and it seems crazy to think that that's not going to continue. But if you look back in history, this has happened over and over and over. Be careful. Trim the stuff that's way too risky. And this leads us into step number two, which is something I've been talking about for about a year now. You're going to want to add quality and dividends. ETFs like SCHD or VTV focus on companies with stable cash flow and solid balance sheets. The kind that weather slowdowns. Step number three would be to keep a little bit of dry powder off to the side. Short-term treasuries and money market funds are paying four to five percent. There's no shame in parking cash and waiting for better entry points. SGOV is one of my favorite short-term treasuries ETF, or you could just be holding that in your brokerage accounts, money market, or even a high yield savings account. Keeping dry powder is great for dip buying, but it's also doubling up as keeping you just a little bit more safe. Having a little bit more cash in this situation right now with the volatility, and we don't really know what's going to happen over the next year. It's not necessarily ever going to be a bad thing. Please don't keep all of your money in cash because inflation will eat that up, but a very small percentage, five to 10% in cash. I don't think that's going to hurt anybody. Step number four is to rebalance intentionally. Something like a 60-30-10 mix with 60 in core equities, like the total U.S. stock market or the S&P 500, 30 in defensive or dividend plays like SCHD or VTV or VYM, and then maybe 10% in cash. That keeps you participating while staying protected. For those of you that are a little bit younger and can handle this volatility, you could have a little bit more in the growth ETFs as well. So you can do the three fund portfolio. Just make sure that you're balanced. I just want to make sure everybody's not fully in growth or tech at this point, because here's the bottom line. Markets rarely crash when everybody's ready for it. They do definitely punish complacency. And so if you're thinking, well, I'll move eventually, like once it starts to drop, it could drop very quickly at the drop of a hat, and you'll be left there holding the bag. Use this period of nervousness to strengthen your portfolio, not to fear it. Watch this video on the newest value ETF that I'm adding to my brokerage account. Especially right now with all of this craziness, I'm adding heavy. Or watch this video to keep you going strong in investing. Remember to keep investing simplified.