As another US earnings season looms, it is easy to feel like markets are caught in a constant state of contradiction. One day, the headlines warn of doomsday scenarios; the next, they celebrate a new golden age. One could be forgiven for feeling that we are trading through one of the most complex and confounding periods in market history.
In moments like this, perspective matters. So I’ve taken a step back to write a note I wish I’d received earlier in my trading journey - a guide for navigating the volatility, narratives and noise of the next 12 months.
Experts talk; markets move
Markets possess an uncanny ability to price in realities far more effectively than any single expert. Be aware of market sages, there aren’t any! And yet, when markets begin to rise, many of us remain stubbornly sceptical, perpetually waiting for the next crisis to justify our pessimism.
Since the bottom during the tariff-induced downturn and the swift V-shaped recovery, I've watched seasoned strategists talk against the prevailing trend. Fear was sown at every peak, even as markets marched to record highs.
Why do we do this? Perhaps as humans, we are uncomfortable with outcomes that seem too good to be true. We struggle with simplicity and, worse still, with success. The most complex challenge for any trader — myself included, even after 25 years in the markets — is the willingness to pivot quickly from biases and confront our egos. Recognising when we're wrong is difficult; acting on it is even harder.
Forget the noise
One theme I noticed — perhaps more acutely than in previous cycles — was the persistent narrative ridiculing so-called "dumb money". In early April, as high-quality names like Nvidia traded at what now look like fire-sale prices (sub-$90 per share), retail traders were mocked for "chasing the rally".
Yet just a few months later, that same "dumb money" is sitting on significant gains, while institutional traders scramble to catch up, underweight and underperforming relative to their mandates and benchmarks. We call it FOMO, but let’s be honest: this is institutional underperformance, plain and simple, as they chase peak boom before the bust.
As a retail trader, your greatest edge is time — an advantage most institutions do not have. Today, with an abundance of real-time information and analytical tools at your fingertips, you are well-equipped to make informed trading decisions. Don’t let legacy voices tell you otherwise. The advent of active ETFs has widened the scope of easily accessible and liquid vehicles of global investment experts, offering a fantastic overlay to self-directed portfolios.
The machines are in control
Since the Global Financial Crisis, markets have increasingly become the domain of mechanics and liquidity, not fundamentals. Central banks, in their quest to avoid recessions at all costs, have engineered smoother cycles and compressed volatility. In doing so, they have handed over the reins to a new set of rulers: the market makers behind options, structured products, and passive flows. The rise of yield-generating ETFs has been the new play of the last few years led by funds such as JEPI.NYSE which has USD $41.08 billion in assets under management as of 24 July 2025. This is an impressive rise since it’s 20 May 2020 launch.
Today, price action is often dictated less by economic narratives and more by positioning — the supply and demand dynamics of derivatives, structured products and fund flows. Fundamentals still matter, but they operate on a lag. In the short- to medium-term, they're frequently overpowered by the gravitational pull of volatility hedges, unwinds, and systematic rebalancing.
Take the Commonwealth Bank of Australia (CBA) as an example, trading well above consensus valuation models. Traditional frameworks struggle to explain such moves, leaving strategists perplexed. The uncomfortable truth is that many daily market swings are driven by technical flows, such as options market makers adjusting hedges. These are difficult to articulate to clients or in the press, but they are increasingly the most accurate explanation for sudden dislocations.
Most large selloffs in recent years have coincided with options expiry events. The COVID crash in early 2020 is a textbook example, commencing after the weekend of a large options expiry.
Next stop: uncertainty
The market’s reaction to geopolitical turmoil is often far more muted than headlines and images would suggest. Unless the event directly affects oil supply, inflation expectations, or interest rate policy, markets tend to price in geopolitical shocks swiftly and move on. Tariffs are a prime example — what once seemed like seismic risk was priced, as markets learned to interpret the cadence of U.S. political posturing.
We now find ourselves in the late stages of the current business cycle — a phase I’ve often found to be the most difficult to navigate. The final leg arguably began after the 2022 equity correction. As in prior cycles, we're inching toward a peak, not with a crash, but with a slow, euphoric stretch of valuations to their limits and a slow grind down. Not the crash scenario that bearish analysts seek. In hindsight, this often reveals itself as the “blow-off top” — a familiar signal in technical analysis.
This is a time for vigilance. Sentiment can push markets well beyond what’s rational. When optimism becomes the prevailing mood and narratives turn one-directional, that’s the moment to begin de-risking gradually and purposefully.
Yet this cycle presents a unique wrinkle: fiscal dominance over monetary support. In a typical cycle, central banks would now be stepping in, providing liquidity to counter weakening GDP and PMI prints. Instead, they’re holding back, waiting for the US administration to finalise its multi-legged bilateral tariff agreements and for lagging indicators to confirm what markets have already priced. This timing mismatch — where markets look six months ahead, and central banks act on six-month-old data — creates opportunities and frustrations for traders.
Final reflections
Markets speak in many tones - sometimes in whispers, sometimes in screams. Right now, some signals are hard to ignore. The rally feels one-sided. Price action is accelerating. And one of the more telling indicators is flashing amber: the VIX is edging higher, even as equities push upward. That’s not typical. These are the moments that make me uneasy. As the saying goes, “I get scared when everyone else is greedy.”
Yes, buying the dip worked in April, but one day, it won’t. And when that day comes, it is unlikely to be a sudden crash. It will be a slow, grinding decline that wears investors down through fatigue, not fear.
One of my most valuable lessons from markets is how the most successful investors protect their wealth: they stay calm, keep a buy list ready, and hold capital reserves for when everyone else is panicking. Every major sell-off feels existential in the moment. And yet, history shows that these moments reward those who act with calm conviction.
Right now, AI-driven investment enthusiasm is pushing valuations into uncharted territory. The momentum may persist, fuelled by global tech giants and the corporate arms race to keep up. But we’re likely in the final leg of this cycle - one that could stretch further than logic allows, before it inevitably gives way.
Warm regards,
Michael Bogoevski
Head of Institutional, CMC Connect ANZ
