Should You Buy VOO While the Market Is Near All-Time Highs?

VOO has pulled in about $50 billion in net assets in the past month and $386 billion over the last three years, but the article argues investors should be cautious at current valuations. The S&P 500 Shiller CAPE ratio is 41, the highest since 1999 and above its level before the 2022 bear market, while inflation, rates, and geopolitical risks remain elevated. The piece recommends considering dividend ETFs like DHS, which rose 8% in 2022 and is up 13% year to date, instead of piling more into VOO.

Analysis

The important signal here is not that equities are expensive; it is that passive risk appetite is becoming self-reinforcing at the exact moment macro uncertainty is rising. Massive inflows into broad-cap ETFs tend to compress dispersion and suppress near-term volatility, but that also leaves the market more one-dimensional: if price starts to fall, there is less marginal cash to absorb selling and more forced de-risking from systematic allocators. In other words, the same flow that lifted the index can become the fuel for a sharper air pocket if macro headlines worsen.

The higher-quality implication is that this is a rotation setup, not a market-beta-allocation question. In late-cycle tape, dividend and low-volatility baskets usually outperform not because they are "safe," but because their valuation and cash-return profile becomes more attractive as real rates stay restrictive and earnings breadth narrows. That favors capital-return-heavy sectors over long-duration growth, while megacap index weights become more vulnerable to multiple compression if earnings revisions broaden down.

A key second-order effect is that valuation risk is being underwritten by low volatility and buyback demand, which can persist longer than fundamentals justify. But once the market realizes earnings are doing less of the heavy lifting than flows, the unwind tends to be fast and concentrated in the most crowded index components. The contrarian read is that this is less a call to abandon VOO than to hedge it selectively and use weakness to rotate into higher-yielding defensives rather than chase the index at fresh highs.

Key Decisions for Investors

• Trim 10-20% of fresh VOO additions over the next 1-2 weeks and redeploy into DHS or a similar dividend ETF; the risk/reward favors income and lower downside capture if the index mean-reverts 5-8% from here.
• Initiate a tactical hedge: buy 3-6 month VOO put spreads 3-5% out of the money to protect against a flow-driven air pocket; structure for limited carry bleed while preserving convexity if volatility re-prices.
• Pair trade: long DHS / short VOO for 1-3 months; if defensives outperform in a corrective tape, the spread can work even if equities are flat, with lower beta and better carry than outright shorting the market.
• Reduce exposure to the most crowded index beta expressions in the mega-cap cohort and prefer companies with explicit capital-return support; use any 2-3% pullback as the entry window rather than buying strength after a record inflow streak.
• If macro data deteriorate further over the next 4-8 weeks, add the hedge rather than the index; if rates and sentiment stabilize, unwind hedges only after breadth improves, not just because the index makes a marginal new high.