In the weekend portfolio and macro update, I shared that after the huge rally, the S&P500 looks overbought here.
The RSI sits at 70 – the last time the S&P500 was this overbought was mid 2024 and 2025, both of which were followed by mild corrections (but no trend break).
Meanwhile AI stocks are going parabolic, with names like Micron going up double digit percentage day after day.
So how would I invest my money in a climate like that?
I wanted to use this article to share some big picture thoughts.
This is an FH Premium article that I am releasing to all readers, in the hopes that it helps you in your decision making. It was written in early May will not be updated going forward.
My latest macro views, as well as my full stock watch and personal portfolio, are shared on FH Premium.
SP500 powers to all time highs – looks overbought on low volume
Since the bottom of the Iran war on March 30, the S&P500 has powered to new all time highs.
Note that this rally comes on very low volume, which is generally not a good sign as for a sustainable bull run you would want to see a rally on high volume.
The RSI sits at 70, the last time the S&P500 was this overbought was mid 2024 and 2025, both of which were followed by mild corrections (but no trend break).
So there is risk of a pullback here, although if the Iran situation holds I would not expect the uptrend to break.
Meanwhile AI stocks are going parabolic
At the same time, AI stocks are going parabolic.
Here’s Micron for example.
Or digital ocean.
The rally in 2026 has been quite narrow
That said, the bulk of the rally in 2026 has been concentrated in 3 categories:
- AI / Semiconductor stocks
- Consumer Defensive
- Oil / Industrials
To put things in perspective, you can see how the STI has been generally flat and participated in none of the Iran war rally:
Meanwhile Hang Seng Tech is still trending down:
Gold and Bitcoin have recovered from the Iran war, but at still a long way from all time highs:
So quite a bit of the market is not doing so great, which you may miss if you just look at the S&P500 as a whole.
How to invest in today’s market – With the S&P500 at all time highs and AI stocks going parabolic?
So… how should investors navigate a market like that?
I broke it down into 3 key pointss:
- AI basket – What goes up will keep going up, until it stops
- Money printing hedges as a medium term play
- Lots of bargains under the surface if you are prepared to catch a falling knife
AI basket – What goes up will keep going up, until it stops
Let’s start with AI.
AI is by far the biggest winner in 2026 so far, no doubt about it.
Love or hate AI, you have to be somewhat invested in an AI basket today, otherwise your portfolio will underperform.
The question of course then, is whether AI is in a “bubble”, and when will the music stop.
Crunching the numbers, my takeaway is that AI is expensively valued, but a lot of this will come down to actual AI capex spend.
If hyperscalers are each going to spend ~$200 billion a year on AI capex, and keep increasing that the next few years, then actually I think AI stocks are fairly priced, even cheap.
But if everybody overinvests in capacity, and 12 months down the road we find that there is too much capacity and not enough demand, that is going to lead to the mother of all crashes for semiconductors – reminiscent of the dot com bubble.
So it is genuinely hard to make the call of whether companies are overinvesting in AI capacity today.
The benefit of technology is clear, and the demand for computing power is massive. The question is whether the demand will continue growing exponentially to meet all that new supply coming online.
Bottom line – as an investor, I cannot not afford to be invested in AI today. So I have to be invested, while keeping a close eye on a reversal.
That being said, I did make the mistake of taking profit in names like Micron and AMD too early.
But I also got it right by adding to positions in Marvell and TSMC, and buying back my Micron position, and letting Digital Ocean run.
Which really just goes to show you how incredibly difficult it is to call the top in a structural bull run like AI is in today.
Based on what I’m seeing today, I think the AI cycle can continue to run for a bit more, but frankly it is genuinely hard to get this call right.
So I continue to hold AI exposure simply because I cannot afford to, but as of today position size is about 10% for semiconductors, 10% for MAG7, and 10% for software, so total exposure to this space is about 30% of my portfolio. And I am keeping a close eye on any potential reversal.
Money printing hedges as a medium term play
As shared in last week’s article, both gold and Bitcoin have been underperforming of late.
I can definitely see the short term pressures for both, with the Iran war ongoing, and interest rate cuts off the table.
Yet everything that is happening in the short term, makes me even more bullish for both in the medium term.
It all comes back to the fact that everything we are seeing today, will contribute to (a) US needing to “print money” in the medium term, and (b) geopolitical uncertainty will lead to investors mistrust of the USD.
Geopolitical uncertainty will lead to investors mistrust of the USD
Ray Dalio wrote an article a few months back during the heights of the Iran was where he said that the Iran war may go down in history for US as the British Suez crisis.
Back then I thought it was hyperbole.
But the more I see how things are playing out, the more I realise Ray Dalio may be right.
The Iran war is s tactical success but a massive strategic failure.
Yes, US-Israel has bombed Iran to bits.
But the goal of military combat is to get the enemy to bend to your will.
And in that aspect the US has failed miserably because:
- Iran maintains full control of their nuclear capability
- Iran maintains control of the Strait of Hormuz
- Iran maintains control over their missile and drone force, and the ability to attack Middle East infrastructure
At the same time, US military prowess has been exposed as lacking, because:
- US military bases in the middle east have been completely evacuated
- US has failed to protect any of its Middle East allies like Saudi Arabia, UAE etc (only Israel)
- US has failed to reopen the Strait of Hormuz, and as a Superpower is forced into humiliating negotiations with a regional power
Once you see the above, you simply cannot unsee it.
My view is that this is the start of the end of the Petrodollar system.
Saudi Arabia and co sold oil in USD for 4 decades because of American security guarantees.
Yet when push came to shove, the mighty US navy only defended Israel.
Why should they remain loyal to the US after this?
And for Europe, China, Russia, Asia watching – is it not fairly clear the US of today is not the US of the 1980s?
The US is overextended, and its navy can only go toe to toe with a regional power like Iran for 3 weeks before exhausting the majority of its stand-off missile capability.
US needing to “print money” in the medium term
At the same time, the US of today no longer has the finances to back up its military.
Ever since COVID the US has been running a >$1.5 trillion budget deficit a year.
And let’s be real, whether it’s Trump or whoever comes after Trump, no US president will make the tough decision to cut US spending (because it would be political suicide).
They now need to reindustrialize to compete with China, in an era where US fiscal deficit is soaring.
Who is going to foot the bill?
In the past Asia, Europe, Middle East were happy to buy USD assets.
But as we discussed above, going forward that appetite may start to wane.
Long story short, what I see is:
- The US needs to spend a lot of money in the years ahead to compete with China, while meeting their existing spending requirements
- The world is increasingly unwilling to fund that deficit due to decline of American power
That inevitable conclusion is one of money printing and USD depreciation.
Both of which would benefit Gold and Bitcoin.
The problem is that both are USD denominated, so the returns in SGD may be less than stellar.
That being said, even after adjusting for FX I suspect both could deliver decent returns in the years ahead, for investors prepared to look through short term weakness.
That being said, the short term is definitely a question mark, as it is not clear whether both have bottomed.
Lots of bargains under the surface if you are prepared to catch a falling knife
The S&P500 soaring to all time highs actually masks the massive dispersion under the surface.
Software names are getting crushed.
Take for example Sea Ltd:
Salesforce:
China tech generally:
Or even something like S-REITs (Ascendas REIT here):
If you ask me, I think there is opportunity here for investors who are prepared to catch a falling knife, and to hold through the short term volatility for the medium term.
No doubt careful stock picking is required.
And you do need to be aware you are buying into a falling knife so these things can continue trending down for 6 – 12 months.
But I am inclined to think with the current sell-off.
On a 2 – 3 year timeframe we will probably see some of these stocks higher than where they are now, and some perhaps by a lot.
So there is a lot of opportunity here for investors who are prepared to do the work and take the risk.
Of course I have also been guilty of going in too early.
So perhaps the safer play is to wait for the uptrend to resume and then buy in then, but of course with that approach you would be buying after a 10-20% rally from the bottom.
But it does reduce the risk of buying into a falling knife.
Whatever the case, you can see my full personal portfolio and what I am buying, shared on FH Premium.
This is an FH Premium article that I am releasing to all readers, in the hopes that it helps you in your decision making. It was written in early May will not be updated going forward.
My latest macro views, as well as my full stock watch and personal portfolio, are shared on FH Premium.