Speculation Surge: How to Navigate U.S. Equity Euphoria Post-Tariffs

GMO’s August 2025 asset allocation report dissects the dramatic rally in U.S. equities following April’s market bottom, emphasizing risks posed by surging retail-driven speculation and distorted valuations.

• Since April 8, the S&P 500 rebounded 27%, while speculative segments like meme stocks and unprofitable tech soared over 100%, fueled by aggressive retail buying.

• Momentum and low-quality stocks led the rally, suggesting rising fragility as valuations stretch well beyond fundamentals.

• GMO proposes equity dislocation and quality-based long/short strategies to exploit mispricings or protect portfolios against correction risk.

Curious how to rebalance amid extreme sentiment? Review the full paper for actionable positioning strategies.