Is the US Bull Market Sustainable?: U.S. markets are at record highs, but risks loom. Megan, CIO of Vernon’s Capital Advisors, discusses in a Recent Interview why investors should stay cautious ahead of the August 1 tariff deadline and uncertain Fed rate cuts. While she remains bullish long-term, she warns that tech and growth stocks may be overvalued. This blog explores her full market outlook, investment strategy, and advice on diversification.
Is the US Bull Market Sustainable? Megan of Vernon’s Capital Weighs In
The S&P 500 and Nasdaq recently closed at record highs, with the S&P crossing 6300 and the Nasdaq briefly topping 21,000. Amid the euphoria, questions are emerging about whether this US bull market is on solid footing. Megan, Chief Investment Officer at Vernon’s Capital Advisors, offered her nuanced view of what lies ahead for investors.
While she remains optimistic about the long-term prospects of the U.S. stock market, Megan highlighted several near-term risks that could disrupt the rally. The biggest concern? Complacency. According to her, markets are pricing in near-perfect outcomes on two major fronts: tariffs and Federal Reserve rate cuts.
The tariff deadline on August 1 is particularly crucial. Megan believes that a failure to extend the deadline could introduce unexpected volatility. Despite the market’s strength, she warns against assuming it will be a smooth ride. “We’re not in a bear market,” she stated. “But we’re concerned about complacency entering the market.”
To manage this environment, Megan recommends ensuring portfolios are rebalanced after the sharp rally since Liberation Day. With valuations in several sectors—especially large-cap technology—appearing stretched, she encourages investors to rotate into areas that aren’t priced for perfection.
She specifically points out that sectors such US Bull market as technology and growth, are heavily priced based on ideal scenarios: multiple Fed rate cuts and no major trade disruptions. With valuations high and technical indicators flashing overbought signals, any disappointment in policy could trigger a correction.
Still, she emphasizes that any such pullback would be a buying opportunity in the long run. “We still would view any pullback in the market as a potential buying opportunity because again, long term, we’re positive,” she said.
On the topic of international diversification, Megan believes it’s a good time to consider adding global exposure. While non-U.S. equities may not be “cheap” by absolute valuation standards, they are inexpensive compared to U.S. equities—especially the overvalued large-cap growth segment. “They’ve been unloved for too long, and I think you’re seeing some of that rotation just begin,” she said.
Regarding the Federal Reserve, Megan now sees less than a 50% chance of a rate cut in September. “Inflation is stuck,” she said, pushing back on the narrative that inflation is clearly trending downward In such a US Bull Market. In her view, the Fed has no urgent reason to cut rates, especially with a relatively stable labor market and a resilient economy. Even if tariffs are reinstated on August 1, their effect on inflation wouldn’t be visible until at least October or November.
“Every president wants lower interest rates,” Megan pointed out, “but the Fed has the flexibility to remain on hold and observe the incoming data.”
Is the US Bull Market Sustainable?: The conversation also turned to technical market signals. The Nasdaq 100 made a fresh relative high against the S&P 500 for the first time since July 10 of last year. Some see this as a bullish sign, indicating new leadership from growth stocks. Megan, however, urges caution.
Is the US Bull Market Sustainable?: She acknowledges that AI-related tech companies are poised to benefit in the long run. But in the short term, valuations may have run ahead of fundamentals. “I think there still is room for a valuation correction,” she stated, particularly as growth stocks are currently pricing in aggressive Fed easing. If those expectations are scaled back, a repricing may occur.
Is the US Bull Market Sustainable?; In summary, Megan’s outlook remains constructive, but she believes investors must navigate near-term risks with caution. Tariffs, Fed policy, and stretched valuations in growth sectors are key areas to watch. A pullback could create long-term opportunities, but the path forward may be bumpier than recent market highs suggest.