Stocks Are Approaching Manic Levels, but There's Still Time to Invest

In just a few weeks, the mood in financial markets has gone from deep concern to near euphoria. Back in April, recession fears were widespread, with the odds of an economic downturn estimated at over 50%, and stocks appeared to be in a nosedive.

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But as anxiety around President Donald Trump’s trade policies and economic strategy began to ease, markets rebounded sharply. The S&P 500 returned to record highs in only 57 trading days after dipping into a bear market, igniting renewed investor enthusiasm.

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However, financial advisers warn that despite the recent rally, investors should remain cautious. According to a Bloomberg survey of financial professionals, risks still linger, and while the rebound offers opportunities, thoughtful investment strategies are essential.

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Is it too late to invest now?
The consensus among advisers is that it’s not too late to enter the market — as long as you have a long-term perspective. Those who won’t need access to their invested funds for at least three years may find it wise to buy, even during a market rally.

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Dustin Suttle, co-founder of Suttle Crossland Wealth Advisors, notes that market highs often don’t signal a pullback. Instead, they can be a launchpad for further gains. “All-time highs can feel like a reason to wait,” Suttle explained, “but history shows markets often continue to rise from record levels.”

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Noah Damsky, principal at Marina Wealth Advisors, adds that record highs tend to draw in more investors, boosting momentum. He believes waiting for a correction can be costly over time, especially now that yields on low-risk, cash-like investments are declining with expectations of interest-rate cuts.

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Where are the current investment opportunities?
Given elevated risk levels, Emily Roland, co-chief investment strategist at Manulife John Hancock Investment Management, recommends focusing on high-quality stocks — companies with consistent earnings and strong financials. She favors sectors like healthcare, utilities, and infrastructure — industries offering essentials rather than luxuries.

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Roland is more optimistic about U.S. stocks than European equities, pointing to disappointing earnings in Europe following a short-lived rally earlier this year.

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Scott Helfstein, investment strategist at Global X, sees potential in defense technology and cybersecurity firms, as well as utility and energy companies, especially those involved in nuclear energy and uranium production. These sectors are positioned to benefit from the growing demand for power fueled by artificial intelligence and automation.

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What if I sold earlier this year?
For investors who exited the market during the spring downturn, the first step is to assess why. Robert Jeter, financial adviser at Back Bay Financial Planning & Investments, urges clients to reflect on whether their decision was driven by fear or emotion. If so, it’s an opportunity to learn and build resilience.

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To re-enter the market, Jeter recommends using a dollar-cost averaging strategy — investing gradually over time instead of putting in a large lump sum. This method can reduce psychological stress and foster disciplined investing habits. It also allows flexibility to capitalize on market dips when they occur.

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Samantha Mockford, associate wealth adviser at Citrine Capital, suggests making small behavioral adjustments to avoid panic-driven decisions in the future. One tactic? Disable automatic login credentials for your investment accounts to prevent frequent checking during volatile periods.

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Those who sold at a loss earlier this year may also have a silver lining: tax-loss harvesting. By offsetting capital gains elsewhere in their portfolio, they can potentially reduce their tax burden.

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What might derail the rally?
Despite the renewed optimism, several market strategists warn that significant risks remain. Michael Hartnett of Bank of America and Kate Moore of Citigroup have both flagged concerns. Moore recently expressed unease about investors underestimating the economic effects of Trump’s tariff policies and tensions in the Middle East.

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Although the full impact of tariffs remains unclear, corporate earnings forecasts are already reflecting a cautious outlook. Analysts now project a 7.1% earnings increase for S&P 500 companies in 2025 — a decline from nearly 13% expected at the beginning of the year, according to Bloomberg Intelligence.

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Another concern is the market’s dependence on a handful of major tech firms. Companies like Nvidia, Microsoft, and Meta Platforms have driven much of the recent gains. If any of them were to falter, it could trigger broader declines, especially given stretched valuations.

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Bloomberg Intelligence strategists Gina Martin Adams and Michael Casper say Federal Reserve rate cuts could help support valuations and bridge the gap between prices and fundamentals. But that outcome is not guaranteed. Fed Chair Jerome Powell has emphasized a patient approach, with two cuts planned for this year, though any delays or unexpected developments could weigh on equities.

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Is crypto a good idea now?
Bitcoin has climbed over 15% this year, boosted by expectations that Trump’s pro-crypto stance will benefit the sector. For investors considering crypto, advisers recommend setting firm limits.

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Jeter suggests allocating no more than 10% of your portfolio to digital assets — and only using funds that aren’t needed in the short term. “Crypto’s volatility can be difficult even for seasoned investors,” he said. “Eventually, we all need our money.”

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In conclusion, while markets have rallied impressively, financial advisers recommend balancing optimism with careful planning. Long-term investors still have opportunities, but understanding your goals, risk tolerance, and behavior during downturns will be key to navigating what comes next.

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