A LOT of Risk
Risk Isn’t Just Downside
I’m tired.
Tired of people not contextualizing risk.
Yes, concentration is a risk in the market.
I’ve broken it down before and ran the numbers again today on the flight back to the States.
The top 10 stocks now make up over a third of the market.
The top 20 make up about half.
And the top 100 represent more than three-fourths of the S&P 500.
So yes… it’s a risk.
But not just to the downside.
People tend to frame risk as something that only hurts us.
But in a Bull Market, risk often lives on the upside.
When we spend all our energy preparing for what could go wrong, we miss what could go right.
And if we don’t take risk in a Bull Market then when the hell should we?
It always sounds smart to talk about risk.
It signals discipline, prudence, and wisdom.
But ignoring the potential for leaders to keep leading is just as flawed as ignoring downside exposure.
When the biggest names are breaking out, that’s not something to fear.
Knowledge cures fear.
I used to be terrified of spiders.
Every one of them looked like a threat until I learned that 99% are harmless.
The fear didn’t go away by avoiding them. It went away by learning.
Markets work the same way.
When you understand the structure, the breadth, and the flow of leadership, you stop fearing what you see.
Technical analysis gives us that logic.
It helps us interpret price action, identify risk, and most importantly put it in context.
So the real question isn’t only “what happens if the leaders falter?”
It’s also “what happens if they break out and keep leading?”
In a Bull Market, that’s the risk we want to take.
And it looks like that’s what’s happening.
Anyway, that’s my two cents.
Cheers,
Larry Thompson, CMT CPA
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