AI Bubble and Rate Hikes Squeeze Stocks: Two Ways to Handle a Pullback

蔡蔡欣怡 理財線記者2026-11-01 14:30

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The S&P 500 has gained about 100% since 2023, driven mainly by NVIDIA, Micron and Microsoft, as AI euphoria, interest rates and high valuation concerns heat up. Foreign media advise holding long-term for five years to ride out volatility, and cautiously buying financially sound companies on sharp declines.

AI Stocks Lead Gains as Market Fears Profit Miss

Since early 2023, the S&P 500 has gained about 100%, with AI-related stocks such as NVIDIA, Micron and Microsoft as key drivers of the rally. As tech giants keep expanding investment in AI infrastructure, the market is focusing on related risks. If future earnings disappoint, related company shares could face sharp corrections, dragging the broader market and leaving investors cautious about the outlook.

Rates on Hold, but Hike and Valuation Pressures Remain

Interest rate moves are also in focus. The Federal Reserve left rates unchanged at its latest meeting, but inflation remains elevated. According to the latest CME Group FedWatch Tool, the probability of a December rate hike is 70%. The market believes that if rates rise further, it would not only increase corporate borrowing costs but could also push funds toward the bond market. Meanwhile, the S&P 500's Shiller P/E ratio is at a historical high, indicating stretched overall valuations and deepening fears of an overheated market.

Strategy 1: Extend Your Time Horizon and Wait for a Rebound

The report notes that even if long-term bullish on stocks, investors should face crash risks squarely. The first strategy is to invest with a long-term view, aiming to hold stocks for at least 5 years when buying, avoiding frequent trading on short-term swings. History shows the S&P 500 has always rebounded after downturns, so choosing companies with solid fundamentals and holding long-term offers a better chance to wait for a recovery and reduces the impact of short-term volatility.

Strategy 2: Cautiously Buy Quality Names on Sharp Declines

The second strategy is to look for opportunities to buy quality stocks when the market plunges. When a crash hits, shares of many otherwise competitive companies may fall to reasonable or even relatively cheap levels. Although most investors dare not enter when sentiment is weak, that can be the time to reassess targets and look for entry opportunities. The report also cautions, however, that prices may keep falling after buying, so investors need not panic excessively, provided the chosen companies are worth holding long-term, and investors should judge independently and carefully assess investment risks.

FAQ

Why is the market worried about a stock market crash?

Main reasons include massive AI infrastructure spending that could hit share prices if earnings disappoint, plus rising inflation, a 70% chance of a December rate hike, and a historically high Shiller P/E ratio indicating stretched valuations.

What are the two strategies suggested by foreign media?

One is to invest with a long-term view, aiming to hold for at least 5 years when buying; the other is to cautiously buy financially sound, quality companies on dips when the market falls sharply.

What should investors watch for when buying the dip?

Choose companies with solid fundamentals worth holding long-term, and note that prices may continue to fall after buying, so do not panic excessively; investors should judge independently and bear their own investment risks.