Navigating the Hidden Risks Behind U.S. Stocks’ Performance : Aura Solution Company Limited

Amy Brown
Aug 27
14 min read

Aura Insights: Looking Beyond the Rally in U.S. Equities

As U.S. equities continue to edge higher, investors may be tempted to assume the path forward is clear. The S&P 500 Index has advanced nearly 29% since early April, reversing market sentiment in just a few months—from recession fears to a narrative of resilient growth and disinflation. At Aura, our Global Investment Committee recognizes the rationale behind this optimistic scenario: that tariffs may prove manageable, that generative AI and capital expenditure tailwinds could lift productivity and margins, and that a weaker dollar might provide support for U.S. exporters.However, while the prevailing narrative is compelling, we believe investors should also weigh less favorable signals in the data. In our view, at least three risks are not receiving the attention they deserve.

Three Risks the Market May Be Underestimating

1. Labor Markets Are Losing Momentum

Employment remains one of the most important indicators of economic health, and the latest data suggests that momentum is slowing more than markets acknowledge. July payrolls fell well short of Wall Street’s expectations, and previous months were revised downward. This has pulled the three-month average job creation down to just 35,000 new jobs per month, compared to an earlier average of over 150,000 in the spring.

Beyond the headline numbers, additional indicators paint a cautious picture:

Continuing jobless claims have climbed steadily since April, suggesting that displaced workers are finding it more difficult to secure new positions.
The JOLTS survey shows hiring rates at their lowest level since 2020, during the pandemic recovery period.
The Conference Board’s consumer survey reports that Americans now view finding a job as being as challenging as it was in 2021, a stark reversal from the confidence seen just a year ago.

Taken together, these developments imply that labor market tightness is easing more quickly than expected. For investors, a cooling labor market may weigh on consumer spending—the backbone of U.S. GDP growth—and could eventually pressure corporate revenues, particularly in consumer-driven sectors.

2. Corporate Earnings Appear Uneven

At first glance, corporate earnings look strong: roughly 80% of companies beat consensus estimates in the second quarter, year-over-year earnings growth is running above 9%, and analysts are beginning to revise expectations upward. However, this strength is not as broad-based as the headline numbers suggest.

Earnings concentration: The “Magnificent Seven” mega-cap technology stocks continue to drive the bulk of earnings growth, expanding at an impressive 26% annual pace. In contrast, earnings for the other 493 companies in the S&P 500 are essentially flat.
Sector divergence: Of the 11 GICS sectors, only three—information technology, communication services, and financials—have posted double-digit earnings gains. Other sectors, such as consumer staples, healthcare, and utilities, have struggled to maintain growth.
Market perception risk: With market performance increasingly tied to a narrow group of leaders, any earnings disappointment from these companies could reverberate disproportionately across the broader index.

This uneven backdrop underscores why investors should not view the current earnings season as a universal endorsement of corporate health. Instead, selectivity and active stock-picking are critical in differentiating between sustainable growth stories and companies that are simply riding momentum.

3. Inflation Pressures Are Resurfacing

While inflation had shown signs of moderating earlier this year, recent developments suggest renewed upward pressure. The introduction of a 10% universal tariff, soon effectively raised to 18% through new policy measures, has not yet been fully captured in consumer price data. Historically, tariffs of this scale tend to feed through to consumer costs with a lag, suggesting the inflation impact is more a matter of timing than possibility.

Current indicators already point to firming price pressures:

Core CPI (which excludes volatile food and energy prices) rose at an annualized rate of 2.9% in June, up from 2.8% in May, hinting at a slow but steady upward trend.
Forward-looking market measures, such as one-year inflation swaps, now forecast inflation at 3.3%, higher than earlier expectations and back to levels last seen during last year’s inflation scare.
Consumer sentiment data also shows that households are increasingly concerned about future price increases, which can, in turn, influence actual inflation dynamics through spending and wage demands.

For equity markets, a resurgence of inflation presents a dual challenge: it could pressure corporate profit margins while also influencing Federal Reserve policy, limiting the scope for interest rate cuts.

Aura’s Guidance:These three developments—slowing labor markets, uneven earnings, and rising inflationary pressures—remind us that the current equity rally may be underpinned by optimism more than fundamentals. For long-term investors, this environment calls for balance: maintaining exposure to growth while diversifying into real assets, high-quality fixed income, and international opportunities.

Investment Moves to Consider

When economic data sends mixed signals, it is often prudent to seek balance—participating in market opportunities while also building protection against potential downside. At Aura, we encourage investors to consider the following strategies:

1. Diversify Into Real Assets

Why it matters: Real assets tend to behave differently than equities and fixed income, making them valuable hedges when traditional markets are under stress. Inflation, tariffs, and geopolitical risks can erode the real value of cash and bonds, while real assets often preserve or even enhance purchasing power.

Gold remains a proven store of value, particularly during periods of elevated inflation expectations or geopolitical uncertainty. Its historical low correlation with equities makes it an effective portfolio diversifier.
Real Estate Investment Trusts (REITs) can provide both income and inflation protection, as real estate values and rental income often rise alongside prices. Selectivity is key—focusing on sectors such as logistics, healthcare, and residential property rather than overly cyclical commercial segments.
Energy infrastructure—such as pipelines and storage facilities—benefits from long-term contracts and steady cash flows, offering resilience even when commodity prices fluctuate.
Agricultural commodities can serve as a hedge against supply chain shocks, extreme weather events, or tariff-related disruptions that drive food prices higher.

2. Adopt an Active Stock-Selection Approach in U.S. Equities

Why it matters: With U.S. equity market gains concentrated in a narrow set of companies, a passive, index-heavy approach may carry hidden risks. An active strategy allows investors to focus on quality companies capable of sustaining growth through economic cycles.

We favor large-cap quality stocks—firms with strong balance sheets, resilient cash flows, and durable competitive advantages. These companies are better positioned to weather higher borrowing costs, wage pressures, and fluctuating demand.
Active selection also helps mitigate concentration risk, by balancing exposure between dominant mega-cap names and undervalued opportunities across sectors such as industrials, healthcare, and financials.
By emphasizing companies with pricing power, investors can better protect portfolios from margin erosion during periods of rising input costs.

3. Maintain Exposure to Intermediate-Duration Investment-Grade Fixed Income

Why it matters: Fixed income serves as an anchor during equity market volatility, while also providing a steady income stream. With the Federal Reserve policy path still uncertain, intermediate-duration bonds strike a balance between yield and interest-rate sensitivity.

Investment-grade corporate bonds offer attractive yields relative to history, with lower credit risk than high-yield alternatives.
Municipal bonds provide tax-advantaged income for investors in higher brackets, while typically exhibiting lower default rates than corporate debt.
Maintaining intermediate duration (typically 5–7 years) helps capture higher yields available today while avoiding excessive sensitivity to long-term rate movements.

4. Broaden Diversification Through International Equities and Alternatives

Why it matters: Relying too heavily on U.S. equities can expose portfolios to domestic policy, valuation, and concentration risks. Broader diversification helps smooth returns and capture growth opportunities elsewhere.

International equities: Developed markets such as Europe and Japan may offer more attractive valuations than U.S. stocks, while emerging markets present long-term growth potential fueled by rising consumption, infrastructure spending, and digital adoption.
Hedge funds: Well-selected managers can provide strategies uncorrelated with traditional markets, such as long/short equity, macro, or arbitrage, which may add resilience during drawdowns.
Private secondaries: These investments allow access to private markets at potentially attractive discounts, often providing exposure to later-stage companies with more predictable cash flows compared to early-stage private equity.

Aura Insights: Seeing Beyond the Rally in U.S. Equities

At Aura, we believe U.S. equities remain a cornerstone of long-term wealth creation. Over decades, they have rewarded patient investors with resilience and compounding growth. Yet even strong markets can conceal vulnerabilities, and history reminds us that the greatest risks often emerge when confidence feels most secure.

Our role as your advisor is to help you look beyond the headlines, understand where risks may be underestimated, and manage your portfolio with foresight and discipline. Below, we outline ten key risks currently shaping the U.S. equity landscape, together with Aura’s perspective on how to position portfolios to navigate them.

1. Valuation Stretch

Risk: Valuations in U.S. equities, particularly in the technology sector, remain elevated relative to historical averages. When multiples are high, markets leave little room for disappointment, and even modest earnings misses can trigger outsized corrections.

Aura’s Advice: We recommend balancing growth exposure with diversification into value-oriented sectors—such as healthcare, financials, and industrials—as well as selectively adding to international markets where valuations are more compelling. This approach helps anchor portfolios against the risks of overpaying for growth.

2. Concentration Risk

Risk: A disproportionate share of U.S. equity market gains has been driven by a small group of mega-cap companies, often referred to as the “Magnificent Seven.” This narrow leadership means that broad indices are unusually vulnerable to shocks in just a handful of names.

Aura’s Advice: We believe broad equity exposure remains critical. Our strategies focus on ensuring no single company or sector dominates your portfolio. By blending large-cap growth with mid- and small-cap opportunities, we create balance and reduce dependency on a few dominant names.

3. Corporate Earnings Pressure

Risk: While headline earnings appear resilient, companies are facing rising wage costs, higher borrowing expenses, and persistent input price pressures. These dynamics are squeezing profit margins, particularly in sectors with less pricing flexibility.

Aura’s Advice: We emphasize companies with resilient cash flows, robust balance sheets, and demonstrated pricing power. Such firms are better positioned to weather cost pressures while sustaining dividends, buybacks, and long-term reinvestment.

4. Federal Reserve Policy Uncertainty

Risk: Inflation remains uneven across sectors, and the Federal Reserve retains flexibility to shift its policy stance if conditions warrant. Unexpected moves—whether in the form of renewed tightening or a delayed easing—could impact both valuations and liquidity.

Aura’s Advice: We incorporate flexible fixed income strategies into portfolios, including intermediate-duration investment-grade credit and municipals. These instruments act as stabilizers and provide ballast during periods of monetary policy uncertainty.

5. Geopolitical Flashpoints

Risk: Tensions in Ukraine, the Taiwan Strait, and the Middle East represent potential shocks to trade, energy prices, and investor sentiment. Markets often underestimate how quickly geopolitical events can ripple through asset classes.

Aura’s Advice: Geographic and asset-class diversification remains key. We reduce reliance on any single region while selectively allocating to safe-haven assets such as gold, U.S. Treasuries, and defensive alternatives that can help cushion portfolios during global stress events.

6. Debt and Fiscal Sustainability

Risk: The U.S. is running historically high fiscal deficits, and overall government debt has reached record levels. Over time, fiscal sustainability concerns may weigh on Treasury markets, push yields higher, and challenge equity multiples.

Aura’s Advice: We actively manage duration and incorporate exposure to high-quality global bonds. By looking beyond U.S. debt, we reduce concentration risk and create flexibility in case domestic fiscal challenges intensify.

7. Credit Market Fragility

Risk: Corporate leverage remains elevated, and higher interest rates increase the refinancing burden for lower-rated borrowers. Credit market fragility could surface in the form of rising defaults, with potential spillover into equities.

Aura’s Advice: We remain highly selective in credit allocation, emphasizing quality issuers and limiting exposure to speculative-grade debt. This discipline helps ensure credit plays a stabilizing role in portfolios, rather than amplifying risk.

8. Consumer Weakness

Risk: U.S. households are facing headwinds from shrinking savings buffers, higher borrowing costs, and rising credit card delinquencies. A slowing consumer—who drives nearly 70% of U.S. GDP—could weigh heavily on corporate revenues.

Aura’s Advice: We look to balance equity risk with defensive income strategies, while seeking opportunities in sectors less dependent on discretionary spending. Healthcare, utilities, and select staples can provide more stable cash flows even during consumer slowdowns.

9. AI & Tech Bubble Risk

Risk: Enthusiasm for artificial intelligence has fueled a surge in valuations, with investor expectations often racing ahead of realistic adoption timelines. If earnings growth fails to meet these high expectations, valuations could correct sharply.

Aura’s Advice: We believe in the long-term transformative potential of AI, but advocate disciplined, measured exposure. Our approach balances growth themes with traditional sectors, ensuring clients participate in innovation without overcommitting to speculative trends.

10. Liquidity & Market Structure Risks

Risk: The dominance of passive investing, exchange-traded funds, and algorithmic trading can magnify volatility during sell-offs. In stressed markets, liquidity often vanishes when it is most needed, amplifying downside risks.

Aura’s Advice: We design portfolios with liquidity in mind, maintaining active oversight and tactical flexibility. This ensures that we can adapt during volatile periods and take advantage of opportunities when others are forced to sell.

Aura’s Guidance

The message is clear: U.S. equities remain powerful wealth creators, but hidden risks call for discipline, diversification, and active risk management.

At Aura, we focus on constructing globally resilient portfolios—ones that are designed not merely to capture upside in good times, but to endure through uncertainty. For our high-net-worth clients across the world, that means preserving and compounding wealth across cycles, across geographies, and across generations.

Aura’s Perspective: Building Resilience in a World of Mixed Signals

For high-net-worth investors, the challenge in today’s environment is not simply identifying opportunity, but doing so while preserving resilience. Markets may be climbing, but beneath the surface we see uneven fundamentals—slowing labor dynamics, concentrated corporate earnings, and inflationary pressures that have yet to be fully priced in. In our view, the most effective portfolios are those that balance optimism with protection, enabling clients to participate in growth while maintaining the flexibility to withstand volatility.

Real Assets as Inflation Shields

Real assets remain a cornerstone of resilience. In a world where inflation is proving more persistent than many anticipated, allocations to assets such as gold, real estate, energy infrastructure, and agricultural commodities can serve as reliable hedges. Unlike financial assets, real assets often retain value during currency debasement and policy shifts. For high-net-worth clients, we see particular value in selectively accessing institutional-grade opportunities in private real estate and infrastructure, where returns are supported by long-term contracts and inflation-linked cash flows.

Active Equity Selection for Sustainable Growth

Equities remain critical to long-term wealth creation, but passive exposure increasingly carries hidden risks. Market gains are dominated by a narrow group of technology leaders, creating concentration risk at the index level. At Aura, we believe active stock selection—with a focus on companies demonstrating resilient cash flows, disciplined capital allocation, and pricing power—offers a more durable way to capture equity upside. We see opportunities in sectors aligned with secular growth themes such as healthcare innovation, industrial modernization, and financial services digitization.

Fixed Income as a Stabilizing Core

For global high-net-worth investors, fixed income plays a dual role: capital preservation and income generation. With yields at levels not seen in over a decade, intermediate-duration, investment-grade fixed income offers a compelling balance between return and risk. Municipal bonds remain attractive for U.S.-based investors seeking tax efficiency, while global high-quality credit can enhance diversification for international portfolios. Importantly, bonds provide liquidity—an often undervalued feature during periods of market stress.

Global and Alternative Diversification

Resilience also comes from broadening the investment universe beyond U.S. public markets. International equities provide access to differentiated cycles, valuation advantages, and emerging middle-class growth in Asia, Latin America, and Africa. Meanwhile, alternative strategies—including hedge funds and private secondaries—offer uncorrelated return streams and unique access points to growth opportunities not available in public markets. For sophisticated investors, alternatives can enhance both the risk-return profile and the longevity of wealth across generations.

The Aura Approach

At Aura, our philosophy is clear: resilience comes from balance, and balance comes from discipline. We do not advocate retreating from opportunity, nor do we encourage complacency in the face of risk. Instead, we construct globally diversified portfolios that combine growth potential with stability—anchored in rigorous research, active risk management, and a long-term perspective.

For our global high-net-worth clients, this means portfolios designed not just to capture today’s gains, but to protect and grow capital across cycles, across regions, and across generations.

Interview: Navigating Market Uncertainty — Aura’s CFO on Resilience, Tariffs, and Global Strategy

Location: Aura Headquarters, PhuketParticipants:

Auranusa Jeeranont (AJ), Chief Financial Officer, Aura
Edward Collins (EC), Senior Trader, London Stock Exchange

EC: Auranusa, thank you for welcoming me here in Phuket. The global financial environment feels fragile—volatility is climbing, U.S. equities are masking underlying weakness, and tariffs are becoming the word of the day. How is Aura reading this landscape?

AJ: Thank you, Edward. You’re right—the current environment is layered with contradictions. On one hand, U.S. equities are still generating returns, but beneath the surface, we’re seeing slowing labor momentum, concentration in mega-cap earnings, and now this new layer of tariff-induced uncertainty. Our role at Aura is to remind clients that resilience isn’t about chasing what’s working today—it’s about preparing portfolios for what may surprise tomorrow.

EC: Tariffs are back in focus, particularly after the universal tariff announcement. Many market participants assumed globalization risks had peaked. What does Aura see as the immediate impact?

AJ: The key impact is inflationary. Tariffs, effectively, are a tax on consumers and businesses. We’ve already observed core inflation ticking higher, and forward inflation swaps are pricing in further pressure. The risk isn’t just price levels; it’s corporate margins. Import-heavy industries—from retail to manufacturing—are facing higher input costs. For investors, this means we need to be very selective. Companies with pricing power and diversified supply chains will navigate this better than those exposed to single-market dependency.

EC: Some traders I speak with in London believe tariffs may also accelerate deglobalization. Does Aura see opportunity there, or only risk?

AJ: Both. Deglobalization introduces friction, but also creates winners. For example, supply chain reconfiguration benefits regions like Southeast Asia, where we sit today. We’re already seeing capital flows into Vietnam, Thailand, and Indonesia as firms diversify away from China. Aura is advising clients to take a global lens—because while tariffs hurt some companies, they create opportunity for others better positioned in this shifting order.

EC: If we widen the lens, markets are also facing fragile credit conditions, high sovereign debt, and stretched valuations. Many investors feel caught between fear of missing out and fear of being exposed. How do you advise high-net-worth clients to balance this?

AJ: Balance is the keyword. At Aura, we advocate four layers of resilience:

Real Assets — Gold, energy infrastructure, and agriculture to hedge against inflation.
Active Equities — Focusing on companies with durable cash flows, not just market darlings.
Fixed Income — Taking advantage of attractive yields in investment-grade credit and municipals.
Global Diversification — Spreading risk across geographies and into alternatives like hedge funds and private secondaries.

The message we give our clients is this: you don’t need to retreat from risk, but you must be disciplined in how you carry it.

EC: Let’s touch on liquidity. Many traders worry that passive flows and algorithmic trading are distorting price discovery. If volatility spikes, could liquidity vanish?

AJ: That’s a very real concern. Market structure today is fragile in ways it wasn’t a decade ago. Passive strategies dominate inflows, and when the tide turns, liquidity can disappear quickly. Aura keeps liquidity front of mind in portfolio construction—we ensure clients can adjust without being forced sellers. In fact, periods of market stress often create our best entry points, but only if you have cash or liquid assets available to deploy.

EC: Finally, for your global clients, what is Aura’s message today?

AJ: Stay invested, but stay balanced. We are not in an environment where all risks are rewarded equally. Tariffs, geopolitical shocks, and fiscal strains are not temporary headlines—they’re structural features of this cycle. But discipline, diversification, and foresight allow us to navigate them. For our clients, wealth preservation and compounding across generations remain the goal. Everything we do at Aura ties back to that principle.

EC: Thank you, Auranusa. That’s a thoughtful perspective at a time when markets are craving clarity.

AJ: Thank you, Edward. Clarity may be rare, but discipline is always within reach.

About Aura

Aura is a global asset management and advisory firm headquartered in Phuket, Thailand, serving high-net-worth individuals, family offices, and institutional clients across the world. Our mission is clear: to build resilient portfolios that balance opportunity with protection—helping clients preserve and grow wealth across generations.

At Aura, we combine disciplined research, active risk management, and global market insight to deliver strategies that adapt to changing conditions. From equities and fixed income to real assets and alternatives, we guide our clients with foresight, precision, and integrity.

Our expertise spans:

Global Asset Allocation — Balanced portfolios across equities, bonds, real assets, and alternatives.
Wealth Preservation — Long-term strategies designed for resilience in uncertain markets.
Sustainable Investing — Opportunities aligned with innovation, responsibility, and impact.
Global Perspective — Insights on risks and opportunities from Asia to Europe to the Americas.

For us, wealth management is more than investment returns—it’s about safeguarding legacies, enabling growth, and empowering clients to thrive in an ever-changing world.