Investor Warns of Market Correction Amid Record Highs, 21% Nasdaq Surge

Despite the U.S. stock market's recent record highs, Megan Horneman, the Chief Investment Officer of Verdence Capital Advisors, has raised concerns about the potential risks that may be hidden beneath the surface. Horneman believes that investors are overly confident about the August 1 deadline for U.S. trade tariffs, stating that the market is currently pricing in a "perfect scenario." This overconfidence, she argues, could lead to a significant market correction.

Horneman's concerns extend beyond trade tariffs. She also highlights the uncertainty surrounding the Federal Reserve's policy decisions and potential technical issues that could disrupt the market's upward trajectory. The combination of these factors, she warns, could create a volatile environment for investors. She points out that technical indicators suggest that growth stocks, including large-cap tech stocks, are in an overbought state, which could disrupt the current rally.

Despite her short-term caution, Horneman considers herself a long-term bull and views market corrections as investment opportunities. She suggests that international stocks are a prime choice during market weakness. "I must remind you that while their valuation levels are high, they are still cheaper compared to the U.S. stock market. They have been overlooked for too long, and I believe we are now seeing funds start to rotate into them. I think this trend will continue," she said. To navigate the current uncertainty, her core advice to investors is to ensure that their asset allocation is appropriate.

Guy Adami, a trader, also expressed concerns, noting that the recent market rally has been largely driven by retail investors. He stated, "In terms of valuation, the market is a bit bubbly right now."

Horneman's warnings come as the S&P 500 index has been setting new record highs almost daily. Over the past three months, the index has risen by 16%, while the tech-heavy Nasdaq index has surged by 21%.