Market Risks Are Building — How To Prepare For The Next Pullback

• Cyclical economic slowdown and a deceleration in AI growth are expected to create headwinds for the market into 2027.
• The shift from actively managed funds to passive index funds, along with increased use of stock options and leveraged ETFs, is magnifying market volatility, leading to sharp downturns.
• Investors should prepare for potential pullbacks by diversifying into real assets like gold and employing systematic trend-following approaches to minimize downside risk exposure.
• The 60/40 portfolio is considered outdated; a tactical allocation fund like PRTO, which dynamically adjusts exposure to asset classes like small caps, bonds, and gold based on trends, is suggested.

As stocks reach record highs, RCN Wealth Advisors President Nick Lumpp warns investors to prepare for increased risk and volatility, anticipating a potential market pullback in 2027. He highlights structural changes in market dynamics, such as the shift to passive investing and the rise of leveraged products, which could exacerbate downturns. Lumpp recommends rebalancing portfolios towards non-correlated assets like gold and utilizing systematic trend-following strategies to manage downside risk.