MLD Market Update June 2026 - A Couple of Laps Ahead

Summary

Chad Larson argues that markets are showing signs of speculative excess despite strong underlying earnings, with retail enthusiasm, record equity issuance, and historically stretched valuations creating an environment where caution is warranted. While remaining constructive on long-term themes such as energy, gold miners, international equities, defense, and private credit, he emphasizes maintaining cash reserves and portfolio flexibility rather than chasing the final stages of a market melt-up.

‍

‍

‍

Highlights

• Barber shop indicator: Chad uses an anecdote about a barber asking about leveraged Nvidia call options as a sign that speculative enthusiasm has reached the retail public.
• Option market dynamics driving markets: Massive call option activity and dealer positioning are suppressing volatility and contributing to a melt-up environment.
• Earnings remain strong: Unlike prior bubbles, major technology companies such as Nvidia and Alphabet are generating substantial revenue and profits.
• Valuation concerns rising: The issue is not earnings quality but extreme valuations, positioning, and supply-demand dynamics.
• Historic equity supply incoming: Alphabet’s $80 billion equity raise and anticipated IPOs from companies like SpaceX and OpenAI could introduce hundreds of billions of dollars of new stock supply.
• Record investor exposure: Household equity ownership and market capitalization relative to GDP remain near historic highs, raising questions about who the next marginal buyer will be.
• Cash viewed as strategic optionality: The MLD Core Fund holds roughly 20% cash to provide flexibility and purchasing power during future volatility.
• Energy thesis remains intact: Despite short-term swings in oil prices, Chad views the sector as entering one of its strongest long-term setups in decades due to energy security concerns and underinvestment.
• Gold miners preferred over gold bullion: Gold producers are generating record cash flow but continue to trade at valuations that imply much lower gold prices.
• International equities gaining momentum: After years of underperformance, non-US markets are benefiting from lower valuations, a weaker US dollar, and increased infrastructure and defense spending.
• Defense spending cycle continues: The long-term defense thesis remains attractive, though Chad cautions that investors should focus on company selection rather than broad sector exposure.
• Private credit opportunity emerging: MLD is exploring additional private credit strategies that may offer more stable returns and lower correlation to public markets.

Key Insights

The market is becoming increasingly dependent on speculation and positioning.

The central warning is not that markets are fundamentally broken, but that investor behaviour is becoming increasingly aggressive. Record call option activity, elevated valuations, and widespread retail participation suggest much of the easy upside may already be priced in, leaving markets vulnerable if sentiment shifts.

Supply and demand may become the next market challenge.

Chad highlights a growing imbalance between new equity issuance and available demand. With households already heavily invested in equities and large IPOs and equity raises approaching, the question becomes whether enough new capital exists to absorb the supply without pressuring valuations.

Being prepared matters more than maximizing exposure.

The F1 “medium grip tire” analogy reflects his portfolio philosophy. Rather than chasing every remaining percentage point of upside, he prefers maintaining liquidity and flexibility. Holding cash is not viewed as bearishness, but as a strategic advantage that allows capital to be deployed when opportunities emerge.

Conclusion

This episode presents a cautiously optimistic outlook that acknowledges both strong corporate fundamentals and growing signs of speculative excess. While Chad remains bullish on long-term themes including energy, gold miners, international markets, defense, and private credit, his primary message is that investors should prioritize discipline, liquidity, and selectivity rather than chasing momentum in an increasingly crowded market.

‍