Market Volatility 2025: Why Strategic Bond Investment Can Protect Your Retirement | Dupree Financial

Market Volatility and Strategic Bond Positioning: Why We’re Preparing for What’s Next

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Market Selloff Signals Valuation Concerns

This week brought a stark reminder that what goes up doesn’t always continue in a straight line. The major indices experienced significant selling pressure, with the NASDAQ leading the decline. While some investors may be surprised by this volatility, it’s exactly the kind of environment we’ve been preparing for at Dupree Financial Group.

In this episode of The Financial Hour, Tom Dupree and Mike Johnson discuss the recent market selloff, why elevated valuations have been a flashing warning sign, and, most importantly, why our strategic bond positioning is designed to protect and create opportunities for our clients.

The Week That Was: Tech Takes a Hit

The selloff began Tuesday with the NASDAQ down approximately 2%, while the S&P 500 fell 1.2%. Thursday brought another 1% decline in the S&P, and Friday continued the downward pressure with the S&P down about 1.1% and the NASDAQ falling another 1.5%.

While some media attention focused on Michael Burry announcing short positions, the real story is much simpler and more fundamental: valuations have been stretched for quite some time.

“We’ve been hollering it from the rooftop for a while now. The market eventually realizes that maybe these things aren’t gonna grow 20% in perpetuity forever.” – Tom Dupree

Classic Top-Sounding Talk

In recent meetings with companies building data centers and manufacturing components for AI infrastructure, the conversation has taken on a familiar tone. These are excellent companies with impressive technology, but the projections for future demand sound almost too good to be true.

“The amount of demand that they talk about having out into the future—classic top sounding stuff. It just sounds way too good to be true. And the valuations of these companies are as if this whole thing they’re talking about happening has already taken place.” – Tom Dupree

The challenge isn’t whether data centers are important or whether AI will continue to grow. The challenge is that current stock prices already reflect perfection, leaving little room for anything less than extraordinary outcomes.

Valuation Metrics Flash Warning Signals

Current market valuations tell a concerning story:

• S&P 500 weighted P/E ratio: 28 (elevated)
• NASDAQ weighted P/E ratio: 34+ (expensive)
• Shiller PE (CAPE ratio): 39.63

To put that last number in perspective, at the peak of the tech bubble, the CAPE ratio reached about 44-45. We’re now at valuation levels similar to where the market stood in 1999.

“The level we are now is about where the market was from a valuation standpoint in 1999.” – Mike Johnson

While valuations don’t provide precise timing for market corrections, they absolutely serve as warning signals that should influence how you position your portfolio—especially if you’re in or approaching retirement.

Historical Market Melt-Ups: A Sobering Comparison

Looking at past market melt-ups that preceded significant declines reveals striking similarities:

• 1920s (1920-1929): 489% rally
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