Goodbye to the Easy Tech Trade
Editor's note: For the past several years, the AI build-out has driven tech stocks higher and higher. Investors could pile up solid gains by owning a single sector. But now, these companies are facing a major test...
In today's Weekend Edition, we're taking a break from our usual fare to share an essay from Joel Litman, chief investment officer of our corporate affiliate Altimetry. As he explains, current events – including a reshuffled Congress – are stoking volatility. Now, winning isn't as simple as "just buy tech."
That's why, on November 19, our own Brett Eversole is joining Joel in a free online event to discuss how to best navigate the market's suddenly choppy waters. Sign up to watch right here.
Pete Hegseth is hanging on for now...
On Tuesday night, the House of Representatives shut down an attempt to impeach the defense secretary. He scraped by with a margin of just seven votes.
Rep. Thomas Massie, a Kentucky Republican who lost his primary earlier this year, introduced the articles of impeachment. His main focus was the war in Iran.
Hegseth isn't out of the woods yet. Come January, the Democratic Party will take control of both chambers of Congress. If he's impeached next year, he'll be just the third Cabinet secretary in U.S. history to face that charge.
We're not here to give our opinions on Hegseth or the impeachment, though. We're here to discuss what this means for investors.
And the fact is, with the midterms behind us, the folks who decide everything from impeachment charges to defense budgets to tech-industry rules are changing... and the market will change, too.
Hegseth's potential impeachment is all part of a larger picture that's shaping today's topsy-turvy environment. Investors are trying to figure out what these new political tides mean for stocks.
And as I'll explain today, whether you agree with it or not, the shake-up in Washington will be a major turning point for your portfolio...
Congress May Threaten the AI Trade
For years, just owning tech stocks has been enough...
The Nasdaq 100 Index, which holds the 100 biggest nonfinancial companies on the Nasdaq exchange, more than doubled in the three years through mid-October.
That's compound annual growth of about 26% per year, compared with the overall stock market's long-term average of roughly 10%.
Folks didn't need to pick "winners." It was enough to own tech and wait.
But that dynamic is starting to wobble...
Stocks rallied the day after the midterms. Then, the day after that, the Nasdaq 100 plunged 6.4% on worries that the new Congress could slow the AI data-center build-out. It was the market's worst day in more than a year.
Wall Street's "fear gauge" – the CBOE Volatility Index ("VIX") – told the same story. It uses options prices to measure how much investors expect stocks to swing over the next month.
It jumped to 28 on November 5... well above its three-year median of 16. That was its highest reading in more than seven months.
Take a look...
The spike in fear didn't last long. The VIX is back down below 20. And by this past Tuesday, the Nasdaq 100 had won back more than half of its loss from last Thursday.
Uncertainty makes stocks jumpy...
Remember, a stock price is a bet on a company's future profits. The rules that shape those earnings are now up in the air. Investors aren't sure what's coming next... so stocks are swinging harder in both directions.
And that means the end of a market that paid you just for owning tech.
Washington's choices are moving prices overnight. With a new Congress arriving in January, we don't expect the volatility to settle down anytime soon.
One trend alone cannot carry your portfolio. It's clear that a mood shift is taking place. Folks are starting to question the underpinnings of the tech boom.
That's why I've teamed up with Brett Eversole to sound the alarm...
I haven't seen a market like this in 25 years. It's signaling a major turning point for U.S. stocks. So, Brett and I have combined our system-based investment approaches – for the first time.
To help you prepare, Brett and I are hosting a "Financial Survival Summit" on Thursday, November 19. We'll share a critical warning for investors... and tell you which stocks to avoid as this all plays out. Reserve your spot for free right here.
Washington isn't waiting for anyone. Your survival plan shouldn't, either.
Regards,
Joel Litman
Editor's note: Joel has called almost every market crash of the past 20 years, including the financial crisis in 2008 and the COVID-19 collapse in 2020. Today, he's warning that the post-midterms sell-off was just a warmup act.
That's why he and Brett are joining forces to expose the true nature of this critical economic turning point. On November 19, they'll reveal what's coming next for U.S. stocks... and the one move you need to make immediately to protect your portfolio. Reserve your spot for their free presentation now.