Remember: It’s a market of stocks

In last week’s Insider, I wrote about how the tech sector looked dangerously bubbly, and that the party was about to end.

But I left out an important nuance, which I think is worth discussing. This nuance could end up saving or making you a lot of money.

The gist of it is a simple one: You’re investing in a market of stocks, not a stock market.

Yet we tend to always think of it as a ‘stock market’. Is it going to go up or down?

And at apparent market extremes, we tend to worry about it going down and therefore can become too risk-averse.

As I wrote to my members last week:

At market extremes, everyone looks for historical parallels.

Some people think we’re heading into a 2008-style meltdown. Others see a strong resemblance to the tech boom-and-bust of the late 1990s/early 2000s. And still others think we’re entering a 1970s-style malaise.

This desire to comfort ourselves with historical analogues is our way of dealing with uncertainty.

But the truth is that we simply don’t know what the future holds. We know that history repeats (bubbles go bust), but it repeats in ways that we can’t predict.

All the great investors I’ve studied over the years tell us not to waste time trying to predict what ‘the market’ will do. They know that the aim of the game is to buy good companies at attractive prices, no matter what the broader market is doing. Focusing too much on ‘the market’ takes our eye off the ball.

Instead, we need to accept that we don’t know and just focus on the risk/reward characteristics of individual companies.

If you’re a genuinely long-term investor, your journey will inevitably involve both bull and bear markets. Having a consistent strategy that deals with both environments is a lower-stress way to invest.

Yes, semiconductor stocks in the US are in a bubble, but tech stocks in Australia certainly aren’t.

The ASX All Technology Index is down 33% from its all-time high in September 2025. I’m not saying it’s a buy now (although some stocks in it may be), but it’s not a bubble.

The point is, when you only view the stock market as a homogeneous thing, it can get you into trouble.

The truth is that capital is always shifting around, more so than ever in this day and age. Some stocks are cheap, some are expensive. Some are trending higher, some are trending lower.

As I always say, the key is to have a process that works for your investing personality.

Right now, the Aussie market is going through such a shift. Over the past few weeks, you’ve seen profit-taking in the resources sector, with formerly unloved sectors seeing inflows.

For example, the ASX200 Resources Index is down around 10% since its 4 June high.

The ASX Gold Index is down 11% in just the past week or so (and a more substantial 30% from its early March high).

The ASX200 Energy Index is down 11% in two weeks thanks to the market’s acceptance that Iran and the US can go to war after the market closes on Friday, and resolve their issues by market open on Monday. Let’s see how long that lasts…

Meanwhile, capital has been moving back into ‘unloved’ sectors.

The ASX200 Consumer Discretionary Index is up a whopping 20% since the budget. Wesfarmers [ASX:WES], the largest constituent in the index, is up 27% from its 12 May low. It’s now trading at 34.5 times earnings!

Fund managers are willing to pay a big price for short-term earnings certainty as we head into reporting season. After so many blue-chip blow-ups over the past 12 months, there’s a bit of PTSD buying going on right now.

They’re taking short-term gain for long-term pain. By that I mean WES is almost mathematically guaranteed to deliver below average returns on a long-term time frame based on the current price.

The interest-rate-sensitive ASX200 Property Trust Index is up 17% since its late March low. The All Technology Index bottomed at the same time and is up 16% since then.

The ASX200 Industrials Index bottomed on 23 March and is up 10.5% since then.

Meanwhile, the biggest index of all, the ASX200 Banks Index, is up just 2.5% since its budget-night bottom. But it’s down 14.7% since the February peak.

With capital-city auction clearance rates having another shocker over the weekend, it’s clear that the residential housing boom is over. That means the banks will struggle for some time to come.

As you know, I like to put the boot into this government. They are the worst we’ve had for a long time. But putting a halt to the property boom is a good thing for the long-term health of our country.

You don’t grow lasting wealth from land speculation. You grow debt, which must be serviced long after the boom ends. The banks hold that debt, and not all of it will be serviced. This is why I’d continue to avoid the banks.

The point of all this is to show you that capital is constantly moving around ‘the market’. Resources have had a great run this year, and profit-taking is underway.

Many other sectors have underperformed based on fear of rising interest rates. But thanks to contained energy prices and the prospects of a weaker economy, the short-term ‘trade’ has been to move into interest-rate-sensitive sectors like property trusts, tech and consumer discretionary.

If you’re a trader, you want to try to take advantage of these short-term moves. If you’re an investor, you can largely ignore them.

But what I do suggest, as either a trader or investor, is not to get too caught up in the narrative that a ‘bubble’ in US tech stocks means everything must blow up. The ‘market’ never makes it as easy as that.