The main U.S. stock market indices have notched record highs. Investors seem fearless lately, but it’s a fine line between fearless and reckless.

Or as the movie Spinal Tap taught us, it’s such a fine line between stupid and clever.

When investors become overly confident or complacent, it may signal an impending reversal in the market as the “dumb money” moves in. The CBOE Volatility Index (VIX), aka fear gauge, has sharply fallen in recent days and hovers at about 13, a threshold that indicates diminishing worry among investors.

Is this growing confidence a contrarian indicator? I believe the bull case remains strong, for now. To be sure, valuations are high and ripe for a pullback. But several long-term factors are fostering an environment conducive to risk-taking.

Pillars supporting a risk-on sentiment include the decline in inflation, looming interest rate reductions, resilient economic growth, and robust corporate earnings.

U.S. equities have surged to all-time peaks while 10-year yields have slipped, amid the Federal Reserve’s adherence to planned interest rate cuts.

At the forefront of scheduled economic reports this week is the personal consumption expenditures price index (PCE). Despite recent upward blips in consumer and producer prices, deflationary pressures in goods are exerting downward pressure on overall U.S. inflation.

Central bank actions in the U.S. and overseas are providing a vote of confidence for an optimistic outlook over the six- to 12-month tactical horizon.

Inflation is inherently volatile, especially in this post-pandemic era, so you shouldn’t get spooked by unexpected hiccups. Despite signs of “stickiness” in certain segments, inflation is currently on a downward trajectory.

As the second quarter gets underway, we’re seeing upward revisions in earnings expectations, particularly within the technology sector as it leverages artificial intelligence (AI).

The S&P 500 boasts a year-to-date surge of about 10%, with the technology and communication services sectors once again the frontrunners, as they were in 2023.

However, over the past month, we’ve witnessed a notable broadening in equity leadership. Increasing market breadth is one of the strongest technical indicators in support of bullishness. The rising New York Stock Exchange Advance/Decline line (NYAD) tells the story:

A rising NYAD is considered bullish for stocks because it indicates broad market participation, strength in market breadth, confirmation of the uptrend, and potential future market gains.

Read This Story: The Technical and Fundamental Indicators: What Are They Telling Us?

The energy, utilities, and materials sectors have taken center stage as top performers. Concurrently, a discernible shift has occurred between value and growth stocks. While the former have risen 3.8%, growth stocks have notched a more subdued 2.4% gain.

In the coming months, I anticipate greater equilibrium in performance between growth and value stocks. Recalibrate your portfolio accordingly, with an emphasis on value plays that benefit from falling interest rates.

The main U.S. stock market indices closed sharply higher on Wednesday as follows:

• DJIA: +1.22%
• S&P 500: +0.86%
• NASDAQ: +0.51%
• Russell 2000: +2.13%

The S&P 500 closed at a record. Wall Street’s optimism continues.

Crypto’s rocket fuel…

You should also consider alternative investments such as cryptocurrency, for growth and as a hedge.

Cryptocurrency has posted a meteoric rise throughout this year, propelled by a convergence of factors. One significant driver has been increasing institutional acceptance and investment in digital assets.

Major financial institutions, including investment banks and hedge funds, have begun integrating cryptocurrencies into their portfolios, legitimizing their place in the mainstream financial ecosystem.

The emergence this year of Bitcoin (BTC)-linked exchange traded funds (ETFs) has been rocket fuel for the crypto sector. These new ETFs are reporting massive inflows of new capital, a trend that shows no signs of abating.

Moreover, the broader acceptance of cryptocurrencies as a viable store of value and means of exchange has surged, fueled by growing distrust in traditional fiat currencies and concerns about inflationary pressures.

As central banks move markets via monetary policy decisions, investors have sought refuge in decentralized assets such as Bitcoin and Ethereum (ETH), which are perceived as immune to government manipulation and control.

Additionally, advancements in blockchain technology and decentralized finance (DeFi) have expanded the utility and functionality of cryptocurrencies, attracting a broader audience of investors and users.

Every portfolio should have exposure to crypto. But you need to be informed, to make the right choices. The good news is, the experts at Investing Daily have done the homework for you.

Want to tap crypto’s massive money-making opportunities? Start receiving our FREE e-letter, Crypto Investing Daily. Click here now!

John Persinos is the editorial director of Investing Daily.

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