World's Smartest Banker Sees 30% Chance of Stock Market Correction but Here Is What He Is Not Telling You

Author: The Arora Report | October 10, 2025 10:59am

To gain an edge, this is what you need to know today.

Correction Trigger

Please click here for a chart of SPDR S&P 500 ETF Trust (NYSE:SPY) which represents the benchmark stock market index S&P 500 (SPX).

Note the following:

• The chart shows the stock market is way above the 200 day moving average (shown in yellow).
• The chart shows zone 1 will act as support on any pullback.
• Jamie Dimon, CEO of JPMorgan Chase & Co (NYSE:JPM), is the smartest banker in the world.  Here are the key points from what Dimon is saying:
  • Dimon thinks the chance of a correction is much higher than what is generally believed.
  • Dimon says that if others think the chance of a correction is 10%, he thinks the chance of correction is 30%.
  • Dimon thinks most people will lose money on AI.
  • Dimon thinks that instead of accumulating cryptos, "we should be stockpiling bullets, guns, and bombs."
• You already know that our analysis agrees with what Dimon is saying.
• In our analysis, here is what is very important that Dimon is not saying: 
  • Dimon represents smart money, but the stock market is controlled by the momo crowd.  The momo crowd does not do any analysis and does not take risk into account.  They simply buy stocks on the belief that stocks are going to the moon. 
  • The retail investor component of the momo crowd has now become totally reckless.  The retail buying of stocks last month was the largest on record, coming at $105B.  Year-to-date, retail investors have bought $630B worth of stock.  The previous record was $590B in 2021.  
  • Retail investors are not buying blue chips stocks.  They are buying stocks like Bitmine Immersion Technologies Inc (NYSEAMERICAN:BMNR), Strategy Inc Class A (NASDAQ:MSTR), Rocket Lab Corp (NASDAQ:RKLB), Nebius Group NV (NASDAQ:NBIS), IREN Ltd (NASDAQ:IREN), Rigetti Computing Inc (NASDAQ:RGTI), and IONQ Inc (NYSE:IONQ).  
• After record retail buying in 2021 when retail investors were buying highly speculative stocks and SPACs, 2022 saw a bear market with Nasdaq losing 33%.  Most momo crowd portfolios lost 70% – 95%.
• For the reckless momo crowd behavior to stop, there has to be a trigger.  The trigger in 2022 was the Fed raising interest rates.
• In contrast, in 2025 and going into 2026, the Fed is cutting interest rates even though the data does not justify it.  The Fed is simply spiking the punch bowl.
• In our analysis, here is the most important point for prudent investors – momo crowd insanity can go on for a long time, driving the stock market much higher in the absence of a trigger to stop it.  To complicate the situation further, history teaches a trigger often comes from nowhere and in a manner no one has foreseen. 
• In yesterday's Morning Capsule, we shared with you that China was restricting the export of rare earths to gain leverage in talks with the U.S.  President Trump is considering responding.  As a result, money is flowing into rare earth stocks in the early trade, including three in our portfolio: USA Rare Earth Inc (NASDAQ:USAR), MP Materials Corp (NYSE:MP), and Critical Metals Corp (NASDAQ:CRML).
• To put further pressure on the U.S., China is opening an anti-trust probe into Qualcomm Inc (NASDAQ:QCOM) Autotalks deal.

Magnificent Seven Money Flows

Most portfolios are now heavily concentrated in the Mag 7 stocks.  For this reason, to get ahead and get an edge, investors need to dig below the surface of the Mag 7 stocks.  It is equally important to rise above the noise of daily news on the Mag 7 stocks.  The best way to get an edge, dig below the surface, and rise above the noise of the daily news is to pay attention to early money flows in the Mag 7 stocks on a daily basis.  When there is significant news in the Mag 7 stocks that rises above the threshold of noise and impacts your entire portfolio, it is covered in the main section above.

In the early trade, money flows are positive in NVIDIA Corp (NASDAQ:NVDA) and Tesla Inc (NASDAQ:TSLA).

In the early trade, money flows are neutral in Alphabet Inc Class C (NASDAQ:GOOG), Meta Platforms Inc (NASDAQ:META), and Microsoft Corp (NASDAQ:MSFT).

In the early trade, money flows are negative in Apple Inc (NASDAQ:AAPL) and Amazon.com, Inc. (NASDAQ:AMZN).

In the early trade, money flows are positive in SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust Series 1 (NASDAQ:QQQ).

Momo Crowd And Smart Money In Stocks

Investors can gain an edge by knowing money flows in SPY and QQQ.  Investors can get a bigger edge by knowing when smart money is buying stocks, gold, and oil.  The most popular ETF for gold is SPDR Gold Trust (GLD).  The most popular ETF for silver is iShares Silver Trust (SLV).  The most popular ETF for oil is United States Oil ETF (USO).

Bitcoin

Bitcoin (CRYPTO: BTC) is range bound.

What To Do Now

Consider continuing to hold good, very long term, existing positions. Based on individual risk preference, consider a protection band consisting of cash or Treasury bills or short-term tactical trades as well as short to medium term hedges and short term hedges. This is a good way to protect yourself and participate in the upside at the same time.

You can determine your protection bands by adding cash to hedges.  The high band of the protection is appropriate for those who are older or conservative. The low band of the protection is appropriate for those who are younger or aggressive.  If you do not hedge, the total cash level should be more than stated above but significantly less than cash plus hedges.

A protection band of 0% would be very bullish and would indicate full investment with 0% in cash.  A protection band of 100% would be very bearish and would indicate a need for aggressive protection with cash and hedges or aggressive short selling.

It is worth reminding that you cannot take advantage of new upcoming opportunities if you are not holding enough cash.  When adjusting hedge levels, consider adjusting partial stop quantities for stock positions (non ETF); consider using wider stops on remaining quantities and also allowing more room for high beta stocks.  High beta stocks are the ones that move more than the market.

Traditional 60/40 Portfolio

Probability based risk reward adjusted for inflation does not favor long duration strategic bond allocation at this time.

Those who want to stick to traditional 60% allocation to stocks and 40% to bonds may consider focusing on only high quality bonds and bonds of five year duration or less.  Those willing to bring sophistication to their investing may consider using bond ETFs as tactical positions and not strategic positions at this time.

The Arora Report is known for its accurate calls. The Arora Report correctly called the big artificial intelligence rally before anyone else, the new bull market of 2023, the bear market of 2022, new stock market highs right after the virus low in 2020, the virus drop in 2020, the DJIA rally to 30,000 when it was trading at 16,000, the start of a mega bull market in 2009, and the financial crash of 2008. Please click here to sign up for a free forever Generate Wealth Newsletter.

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Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.

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