To navigate a late-stage correction, adopt a 'barbell' portfolio. Combine cyclical stocks (financials, industrials) for their strong earnings momentum and lower valuations with quality growth stocks like hyperscalers, which offer superior growth at defensive-sector prices.
Current market stress stems from tighter financial conditions driven by bond volatility and Fed expectations. Ironically, this tightening itself increases the likelihood of a future dovish pivot from the Fed, as it has shown a willingness to respond if conditions become too restrictive.
The current market correction is unusual as it's occurring without a recession or Fed tightening. The S&P 500's significant 18% P/E multiple drop, combined with accelerating earnings, suggests the market has already priced in bad news and the correction is nearing its conclusion.