In 2025, the bull market faced major risks but also potential for new highs. The Invesco Nasdaq 100 ETF (QQQ) saw significant gains, outperforming the S&P 500. However, the market’s hyper-focus on AI stocks like QQQ raised concerns about future performance. The market may soon enter a phase where QQQ continues to rise, while other stocks falter.

Despite the AI trade’s potential, stock market gains may be limited by current lofty expectations. Concentration among big stocks has increased, leaving smaller stocks in decline. Inverse ETFs like the Pro Shares Short Russell 2000 ETF (RWM) offer a hedge in anticipation of market shifts. Put options on the Russell 2000 iShares ETF (IWM) provide another strategy for profit-taking.

As the market resembles an athlete playing on one good leg, focusing on QQQ for profits is key. The AI trade remains strong, but the ability to play defense, not just offense, is crucial. It may be time to prepare for a shift in the market cycle, favoring those who can adapt to changing conditions.

Read more at Yahoo Finance: The QQQ ETF Could Gain 30% From Here, But It’s Also Waving a Giant, Dot-Com Era Red Flag