As semiconductor mania faces a reality check, investors should consider how to counter market excess and shift toward a more resilient asset mix.

By Steve Brice

There are growing signs of investor euphoria around the world, most notably in semiconductors and especially in South Korea and Taiwan. In these two markets in particular, many investors have seemed to believe that stocks can only rise. As a seasoned investor, I worry we may be approaching the peak of that sentiment. At the same time, euphoria can last longer than expected. So what should investors do?

The answer is balance. No one knows when a bull market will suffer a major correction or move into a more prolonged bear market, but investors should actively prepare for that possibility.

The risks of overheated speculation

Fear of missing out is powerful, as is the temptation of quick and easy gains. Still, Warren Buffett’s well-known advice remains useful: "be greedy when people are fearful and fearful when people are greedy." Right now, there are many signs of greed, ranging from anecdotal conversations with investors to hard market data. One example is the record exposure to leveraged, single-stock exchange-traded funds, which are designed to deliver twice the daily return of a specific stock.

Recently, South Korean regulators expressed regret over allowing such products to be sold to retail customers, and the Kospi fell 10 percent the next day. At the time of writing, the market was up more than 75 percent for the year but down 20 percent from its peak about three weeks earlier, placing it in bear-market territory. Investors remain positioned greedily, but fear is starting to emerge. They had thought the market could only go up, but it is now falling quickly.

Beyond the buzz: from euphoria to reality

How should investors translate these forces into action, especially when the underlying fundamental outlook remains fairly positive?

The first step is to question the assumptions that may be shaping our current view of the world. One of my favorite sayings is that a lot of money can be made when things move from "really, really terrible" to just "really terrible." The reverse is also true. When markets are richly valued, even a modest slowdown in growth expectations or an earnings miss can be very damaging in the short term. Could demand for a company’s product fall short of expectations? Could margins come under pressure? Could competitors suddenly become more aggressive? These risks are related, but they matter most when investors are greedy.

So where do I stand? I view the pockets of extreme greed as quite narrow. As a result, I remain optimistic about the 6- to 12-month outlook for global equities, supported by accelerating earnings growth. At the beginning of 2026, consensus expectations for global earnings growth were 14 percent; today they are above 26 percent. That change suggests the equity rally is broadening, which matters because a narrower rally is generally more vulnerable to abrupt reversals in sentiment. Importantly, this is far from a dot-com-style bubble and indicates that the optimists may well remain in control for some time.

That said, the quality of US earnings is weakening. For example, the "other income" revenue line for the three largest tech companies accounted for about 8 percent of S&P 500 pre-tax income in the first quarter, up from 2.5 percent a year earlier. This jump was likely driven by a revaluation of private equity stakes in companies, which US accounting rules require to flow through the income line. The latest initial public offerings will likely support strong gains in this line in the near term. And although many are concerned about record IPO volumes in US dollar terms, those figures remain well below the 2000 and 2007 peaks when measured as a share of market capitalization.

The longer-term risk from these IPOs may not be their drain on liquidity, but rather the possible removal of a source of "other income" in coming years, which would temporarily weigh on earnings.

By now, readers may feel pulled in different directions by these conflicting signals, and that is precisely the point. No one knows what the future holds, so investors need to weigh all of these factors before deciding on a strategy. Doing nothing, however, is likely to be a losing approach in a world where inflation remains elevated.

Building a ballast against fear and greed

We remain overweight global equities, but we are also focused on diversifying equity exposure across both regions and sectors. This is not the time to go all in on one market, let alone one sector or industry. We expect gains to broaden, making equal-weighted indices — which increase diversification across sectors — a sensible choice.

We favor global high-dividend stocks, the US healthcare sector and Japanese banks, which provide a defensive balance to our still-bullish view on US technology and communication services.

We are also overweight Asia ex-Japan. Within Asia, we prefer China and India, alongside Taiwan. That positioning gives investors exposure to domestic demand growth and the re-engineering of global supply chains, rather than leaving them fully dependent on the semiconductor industry that dominated first-half 2026 performance.

The bottom line is that the world is complex. Investors need to think about what the current fear-of-missing-out-driven trends are built on, as well as what could go right or wrong. Once they do, it becomes clear that accurate forecasting is impossible. My hope is that, rather than leading to hopelessness or analysis paralysis, this realization encourages investors to plan for different scenarios. A natural result of that approach would be a more diversified portfolio, which should help smooth the investment journey and reduce the tendency to swing between fear and greed.

Steve Brice is global chief investment officer at Standard Chartered Bank’s wealth solutions unit. The views in this column are his own. — Ed.