Stephen’s bear market warning

“We’re in a bear market for US big tech stocks.”

That was the headliner from our RiskHedge Reserve call, reserved for lifetime members.

These stocks—Amazon (AMZN)... Meta Platforms (META)... Microsoft (MSFT)... Apple (AAPL)... and Alphabet (GOOG)—have dominated for 15 years. Investors have been handsomely rewarded for buying them on every dip.

That’s now over, says Stephen McBride. And tariffs are not the reason. Rather, a fundamental shift in tech’s balance of power has taken place. This shift has completely changed—and in some ways reversed—which stocks are going up and which are going down.

I (Chris Reilly) can’t share our whole call because these quarterly meetings are strictly for RiskHedge Reserve members. But because this is such an important thing to understand, I can share an extended excerpt from Stephen’s part below.

***

We’re in a bear market for US big tech stocks

Stephen McBride, transcribed from the RiskHedge Reserve Quarterly Call

There’s now a bear market in US big tech stocks. That’s a huge change from the past 15+ years, where those big stocks have been the drivers of the market. And of course, they then went to historically high valuations, especially compared to the rest of the market.

We saw around $10 trillion worth of foreign money from Europe, Asia, and elsewhere pour into mostly these stocks since 2019, just before COVID. So foreign investors now own double the percentage of US stocks that they did in 2010.

I know a lot of guys who manage Asian and European funds.

Anecdotally, they’ll tell you even the funds that are meant to be invested in foreign stocks... their largest holdings were in Apple, Amazon, Alphabet, and Meta. Just because, as a money manager, if you didn’t own those stocks, it was career suicide. Now, I think that trend is going to go into reverse.

What that means for you is that billions or even trillions of dollars are going to be reallocated from these big stocks into other markets. We already see stuff like Poland—iShares MSCI Poland ETF (EPOL)—up 30% year to date.

We lived through a weird market where the top 25 companies in the S&P 500 were as big as the rest of the index combined. It was also unusual that the largest companies had the highest valuations, which isn’t normally the case.

I think nature is now healing. Apple is down 21% year to date… Microsoft, down 13%... Nvidia, down 24%... Alphabet, down 19%... Amazon, down 21%... Meta, down 14%.

Most big tech stocks peaked in late January, the day Chinese artificial intelligence (AI) startup DeepSeek shocked the world. DeepSeek built a ChatGPT alternative that rivaled Silicon Valley’s finest. And, in classic Chinese fashion, it cost about 90% less to run.

More important, as I explained in a recent Jolt, it showed the world that the US no longer has a monopoly on innovation.

I think more DeepSeek moments will happen. And given how large a percentage of the S&P 500 these big tech stocks were, I would not be surprised if they dragged down the index for years… just as they dragged it up in previous years.

I could see the S&P 500 being flat through 2030. Of course, there are lots of ways to profit in the meantime because the money’s going to come out of these stocks and into other sectors of the market, which is where the opportunities are.

I think you want to look at international stocks. At home, I think mid and small caps are presenting a great opportunity. Even certain large caps should perform great, because unlike the mega-cap stocks, those weren’t trading at insane valuations relative to history.

***

Chris Reilly again.

As Stephen said, there are many opportunities to profit today—they’re simply different from the “buy the dip in big tech stocks” habit investors have developed over the last 15 years.

Right now, he and Chris Wood like solar, cybersecurity, and space stocks... and “next stage” AI names. In their upcoming issue of Disruption_X, which will publish this Thursday, they’re recommending a small, foreign 3D-printing stock.

Chris Reilly
Executive Editor, RiskHedge

PS: Stephen will continue to track this rotation and update readers on the best ways to invest as money moves into other sectors of the market. To stay a step ahead, sign up for his free investment letter here.