r/valueinvesting
The market is not just irrational anymore... everyone is now financially incentivized to keep pretending
Market rally is driven by aligned financial incentives of all participants, not fundamentals, creating a dangerous collective delusion.
- Valuations are stretched and concentration is extreme, driven by multiple expansion rather than fundamental improvement.
- Macro data is selectively interpreted or revised to sustain the bullish narrative and ignore weak underlying details.
- All market participants are financially incentivized to maintain the rally, preventing anyone from pointing out the overvaluation.
There was a time when the market was simply the market....
An inflation number came out. A jobs number came out. A GDP print came out. The market reacted. Good data was good, bad data was bad, and institutions were not forced to pretend the story made sense.
Then the game changed.
Administrations started treating the stock market as a scoreboard. Every rally became proof of policy success. Every strong headline number became a victory lap. Every weak detail underneath the surface was ignored, revised away, or buried under “resilient consumer,” “soft landing,” or “AI productivity boom.”
At first AND decades ago... big institutions still pushed back. If the data looked weak, if inflation was sticky, if earnings quality was deteriorating, they sold the market.
Now even that seems to have changed.
The largest market participants are no longer neutral referees. They are deeply incentivized to keep the rally alive.
Asset managers earn fees on AUM. A 20% selloff means lower fee revenue. Hedge funds need performance. Banks need deal activity. CEOs need stock-based compensation. Private equity needs exits (SPACEX BECOMES SCAPE IT). Analysts need bullish narratives. Financial media needs engagement. Politicians need a strong market. Retail needs the rally because most of us are now exposed through stocks, options, 401(k)s, ETFs, and momentum trades.
So the lie becomes collective.
Not necessarily a literal conspiracy. Something more dangerous: aligned incentives.
Everyone knows valuations are stretched. Everyone knows concentration is extreme. Everyone knows the market is rewarding multiple expansion more than fundamental improvement. Everyone knows some of the macro data is revised, selective, or interpreted through the most bullish lens possible.
But nobody wants to be the first one to say the emperor has no clothes.
Because if the market sells off, everyone loses:
- Politicians lose the “strong economy” narrative
- Asset managers lose AUM
- Banks lose fees
- CEOs lose stock comp
- Analysts lose access
- Retail loses gains
- Momentum funds lose performance
- The financial media loses the easy bullish story
So we keep going.
Bad inflation? “Contained.”
Weak consumer? “Selective pressure.”
Bad breadth? “Megacap leadership.”
Ridiculous valuations? “AI supercycle.”
Layoffs? “Efficiency.”
Debt? “Strategic leverage.”
Dilution? “Growth capital.”
Speculation? “Risk appetite.”
The market has become a smoke train, and almost every participant is now standing on the tracks hoping it keeps moving.
I am not saying short everything. I am not saying the market crashes tomorrow. I am saying the incentive structure has changed AND now even retail is massively aligned with the lie.
The rally is not just about fundamentals anymore. It is about how many powerful participants are now financially, politically, and psychologically invested in preventing reality from mattering.
At some point, fundamentals may matter again.
The real question is: does this market still price reality, or has reality become the one thing nobody can afford to acknowledge?
No point posting stuff that what would be deemed negative to the markets anymore either. Comment section will just be flooded with the usual "calls it is","bottom is here", "gay ber" bot type stuff
bot type stuff
What an ironic thing to say under a post like this.
well i am not a bot if you are implying this
hahaha. its ok. i post this for all eyes and opinions. that is what makes a market anyways.
i am long and very worried.
CALLS IT IS
"gay ber"
I can't say I've ever heard that one before, but thanks for sharing.
It’s been this way since the Covid QE/money printing days at the very least imo
Revenue will justify the prices, until they don’t. Right now, a lot of companies are supporting their case.
It doesn’t mean there won’t be a correction. It doesn’t mean that energy bottlenecks won’t awaken the bear.
If you see a lot of frothiness, sell your gains and redeploy defensively. I bought a lot of utilities, natural gas, and consumer staples in 2024 and 2025. Did I think the market was going to collapse? No. Do I still own some high flyers? You betchya!
“I made a fortune selling too soon.” JP Morgan
Times are different now tho, 401ks, everyone on minimum wage. Everyrone just keeps on buying. No one needs money right away cause they got a salary. Money flowing out is less. Gld, Slv everything will be on an indefinite pump until economy and jobs become 2008 levels
It really is this simple. What are revenues doing, what is their guidance? Once revenue and profit margin starts dropping, stock will too.
Its not magic and its not some conspiracy.
There's some fundamental truths to what you said, but I think broad market multiples only look expensive right now because of some select companies warping the indices. I'm seeing a lot of opportunities in individual stocks right now, so I feel a fundamental disconnect between how I value stocks and how stocks are behaving right now. I don't think we're in a broad bubble. I'm not buying unprofitable companies, pre-revenue companies, or wildly expensive companies. Semiconductor stocks as a sector MIGHT be in a bubble if their pricing power doesn't hold or demand plummets. Elon-bet stocks (TSLA and soon SpaceX) also MIGHT be in a bubble. Tesla has literally gotten worse as a company over the past 6 years, but still trades at like 200x earnings. If it came out tomorrow that Elon's companies were using accounting shenanigans like WorldCom or Enron, would that really shock anyone? I don't trust the dude. MSFT and AMZN are trading at their lowest multiples in a decade. I'm buying software stocks at their lowest multiples in history while their fundamentals remain relatively unchanged (for now, that could change later). Look at Nike, Lululemon, Elf Beauty. A lot of REITs are still attractively valued after getting killed when rates went up. Healthcare is also cheap. I just see too many stocks that look like buys right now.
Your post screams AI. The signs are everywhere.
did you mean supply constrained? demand constrained means customer lack interest in your product...
A market with participants who are incentivized to be price insensitive sounds like a great opportunity.
what is reality anyway? reality is what people believe.
if there is a fire... people stampede out and crush people to death. if there is no fire... and they believe it... they still stampede out and crush people to death.
everyone
u do realize the majority of people do not give a singular fuck about the stock market right
Why are you confusing macro indicators with how the market is doing? The market has been behaving like this forever. It is notnsome recent phenomenon.
Earnings are increasing. End of story. You can argue the multiple on those earnings are stretched, but everything else you said is just market noise.
i see now more than ever that absolutely everyone is complicit on it now. even presidents and high ranking officials. i have only been in the market since 2010 and very involved since 2016 so my observation is, of course, limited to my experience.
This is why I just throw as much money as I can into the market.
It's too big to fail.
The whole of society is built around the market now,, and the wealthiest are the most invested.
There's simply no way the market can be allowed to go down and stay down.
I mean... Macro trading will always be a thing, last I checked Druck's family office is doing just fine with what, still 30%+ CAGR over the last 5-10 years?
I'm just saying, the reason it works for them is not because of a magical data point, but because they do a bottom up macro analysis, i.e actually looking at conditions in companies/industries primarily as well as other factors to then get an idea of the macro picture, and where it makes most sense to express one's views. This is extremely different from the stereotype people imagine of some economist just looking at lagging indicators which I can promise you is never how any of them made profits.
On the retail side of things, is it possible? Sure, but frankly, it makes little sense because there are much easier ways to scale a small account (<$100m let's say) because, well, liquidity is not a concern, that's why global macro is so good for the big boys, they're not just restricted to equities, they can also use futures and such which can easily absorb their millions but for those of us who have a somewhat regular net worth? Too much effort.
the stocks gonna crash by 50%
TLDR
My stocks have performed exceptionally well.
Why do I care whether the rally is "not just about fundamentals anymore?"
Only the price of my stocks matters.
If there aren’t ultimately cash flows from outside the market system, then it’s all inherently and mathematically a negative-sum Ponzi scheme. Negative after transaction costs and negative-NPV primary capital raises.
This
Again, unless/until it affects the price of my stocks, it doesn't matter.
The price is meaningless until money is taken out. Overall, the money going in vs going out has to mathematically equal the cash from (or worse to) outside the system.
Because you can't control the price of the stocks in the short term. It might go up or down. What you can control is the price you buy it for and it if it was worth it. If you have no concept of what brings actual value to a stock, then you are leaving yourself open to huge unrecoverable losses.
No, I do not ever leave myself open to "huge unrecoverable losses."
My broker has a SELL button. I always use stop losses to manage risk if I'm wrong about an investment or the timing of my purchase.
You're right, we cannot control the market, but we can observe it. Trends tend to continue, not reverse. We can assess whether a stock is in an uptrend or downtrend. I do not buy stocks in downtrends.
Pretty much bought all the basic SAAS companies that everyone knows. Over the past 6 months I've bought ADBE, INTU, CRM, NOW, CNSWF (CSU on the Canadian exchange). I'm also buying foreign e-commerce - MELI and SE. On my watchlist for potential additions are MSFT, VEEV, HUBS, TOST, TEAM. I think hyperscalers could benefit if compute gets cheaper, but they also need to make sure they can monetize appropriately and get a return from all the capex spend. Basically, AI allows you to make more effective and faster decision making. I watched an interview from someone who is extremely bullish on AMZN and basically just said that AMZN stands to benefit at every level of AI. They are making their own chips, they own the cloud infrastructure that everyone is using, and they have the world's largest logistics system that will benefit from the incremental margin improvements that AI brings.
yes sir. MSFT and META are away from 200DMA and very profitable. looking at AMZN as well although it is always rich in PE. NOW has been my headache since i didnt pull the trigger at 80-85 level
Despite the selective bad economic data and wars etc US sharemarket EPS is going through the roof on the back of the massive ai capex boom. Perfectly rational response, but most people can’t see the forest for the trees.
That said the if the US can’t get its inflation under control there will be issues down the track.
Matthew McConaughey "Time to Kill" voice: now imagine the president was a Democrat.
shocked silence
The show must go on - Hugh Jackman, the greatest showman
Market is a reflection of humans.
Currently human emotions trump any reality around them. What someone feels is real.
Hence, this weirdness.