10 Areas Of The Market I'd Avoid Right Now
Rather than chasing yield or speculative stories, I’m focused on what to avoid.
Markets are pretending everything is fine again, but they’re not.
As I wrote yesterday in the subscriber chat, daily swings of around ±1% in major stock indexes — a level of volatility that had been largely absent in the preceding months — can be an early warning sign of market instability.
Such fluctuations are like earthquakes below the surface that are barely felt above ground - they can reflect growing uncertainty, shifting sentiment, or stress beneath the surface of the market. Historically, renewed volatility following an extended period of calm has sometimes preceded larger downward moves as investors reassess risk and liquidity tightens.
Meanwhile, after Jerome Powell’s latest round of dovish sounding commentary about the Fed’s balance sheet and restarting QE yesterday while speaking at some bullshit conference while receiving some bullshit Central Banker award, the S&P 500 keeps grinding higher.
To me, it feels like this is the part of the cycle where investors mistake calm for safety.
The reality is that no matter what the “scoreboard” looks like, large parts of the market are built on fragile assumptions that may not hold true anymore. We’re already seeing early tremors in consumer credit, commercial real estate, and the leveraged lending complex. I believe those cracks will widen before they close.
So rather than chasing yield or speculative stories, I’m focused on what to avoid. Below are ten areas of the market that I personally want no long exposure to right now—sectors and themes that look stable on the surface but are sitting on fault lines that could shift without warning.
1. Subprime Auto: Cracks May Be Widening
In my view, the subprime auto space could be where the next wave of credit stress is quietly building. Names like Carvana (CVNA), Credit Acceptance (CACC), Santander Consumer (SC), and Ally Financial (ALLY) appear tied to a borrower base that may be running out of room to maneuver.
Delinquencies in subprime auto seem to have risen to levels reminiscent of the pre-pandemic period, and the math looks challenging when funding costs stay elevated and recovery values soften. The recent collapse of Tricolor Holdings—a large used-car and subprime lender, is an obvious warning sign.
That was followed by First Brands Group, an automotive parts supplier that filed for bankruptcy and rattled credit markets.
To me, these don’t look like isolated events but rather potential symptoms of a broader credit issue. Historically, when the auto credit cycle turns, it tends to move quickly. The combination of stretched consumers, higher financing rates, and waning liquidity in auto ABS markets could create a setup for contagion.