Are you ready for the end of the bull market?

The higher the artificial intelligence (AI) bull market goes, the more nervous I get. So I’ve been thinking about whether I’ve protected myself sufficiently for a crash.

- Jeff Sommer

Terrible stock market declines happen with shocking regularity, says the writer. Diversification, or owning a variety of assets, has helped to ease the pain in the past. ILLUSTRATION: ALEX NABAUM/NYTIMES

(ALEX NABAUM/NYTIMES)

This isn’t because I’m predicting an imminent market crisis. Not at all. Despite warnings from prominent bank executives and hedge fund managers that the stock market has become too high, I believe that the frenzy for AI - and for stock riches - is likely to keep the market moving upwards for a while.

Fabulous wealth is being generated in the stock market. Nvidia, at least briefly, reached a US$5 trillion (S$6.5 trillion) total market valuation. Microsoft topped US$4 trillion. So did Apple. The numbers are so big, they are hard to comprehend.

They reflect stock prices that strike me as excessive. Sooner or later, the market will take a serious plunge. Stock markets always do. US President Donald Trump’s deliberately disruptive policies have only heightened that risk.

It may seem perverse to be concerned about potential market losses during a period of remarkable gains. After all, if you have owned an S&P 500 index fund since the start of the current bull market, Oct 12, 2022, you have doubled your money.

But terrible stock market declines happen with shocking regularity. Diversification, or owning a variety of assets, has helped to ease the pain in the past. When the stock market is better than expected, it’s worth remembering how bad it could suddenly become.