Adapt or Die: Five Buys We're Making Today
Out with the old, in with the new...
Is anyone else tired of living in unprecedented times?
First, we had a pandemic that shutdown the global economy. Then we had the first hot war in Europe since World War II during the highest inflation in 40 years.
Now we face another "unprecedented" possibility: a third S&P 500 bear market (a -20% decline from the peak) in just five years. We're not there yet—after last week's rally, the S&P 500 is "only" down about -10% from its recent high. And while everyone around me seems busy trying to time the market bottom, that's not my style.
I never try to time exact tops or bottoms. Instead, I ride the trend until it breaks. Because even if we do bottom soon, there's always plenty of time to jump back on and ride the new trend higher.
But right now—with Trump and Bessent openly signaling they don't care about stock market performance and are instead laser-focused on driving down Treasury yields—both the fundamental and technical uptrends for key U.S. markets look broken.
Thankfully, there’s always a bull market somewhere. We'll cover a few of these promising opportunities in today’s update.
Core Portfolio (SPY, QQQ, etc.)
In our last portfolio update, I wrote how I expected another leg upwards in the bull market now that earnings-related volatility had waned.
This turned out to be wrong—but to be fair, I didn't anticipate such a drastic shift in President Trump's economic strategy. Many analysts (myself included) believed the incoming administration would focus on growth-friendly policies like tax cuts, deregulation, and cutting government waste. The market clearly agreed, pushing the S&P 500 and Nasdaq to new all-time highs, up 8% and 11%, respectively.
Since stocks are priced based on what investors expect to happen in the future, the major indexes priced in these favorable policies even before they happened. That included an 8% and 11% rally to all-time highs for the S&P 500 and Nasdaq, respectively.
But now these favorable policies are being “priced-out” in addition to pricing-in unfavorable near-term policies while I have dubbed the "controlled demolition" of the US economy (you can read more about that here). And this "pricing-out" has caused significant technical damage to the uptrends in both indices, which were some of the longest in history.
As you can see, the S&P 500...
...and the Nasdaq...
...are now trading well below their 200-day MAs. As the old saying goes, "nothing good happens below the 200-day MA." Fortunately, these two positions are long-term retirement trades in our portfolio. So even if there's more near-term weakness, we'll treat it as an opportunity, because I'm confident both indexes will be significantly higher over the next several years.
However, keep in mind "buying the dip" in the current environment is fundamentally different from doing so during the strong technical uptrend we've enjoyed over the last two years. Back then, every dip occurred within the context of an intact long-term uptrend. Now that the primary uptrend is broken, we have to adjust our strategy accordingly—and that's exactly what we've been doing.
For that reason, I'll be less aggressive in adding to these retirement positions in the short term, opting instead to hold our existing positions and wait for clearer signals.
New Members: Allocate 1% of your portfolio to the SPDR S&P 500 ETF (SPY and 1% to the Invesco QQQ Trust (QQQ).
Mega Cap Tech Holdings (GOOGL, AAPL, etc.)
We began scaling out of our Magnificent 7 exposure back in early February, starting with a 50% reduction in our Microsoft (MSFT) position.
Today we're continuing that process with other mega-cap tech stocks that have dropped decisively below their 200-day moving averages and are now technically vulnerable. These companies thrived during two decades of globalization, but the Trump administration is now aggressively reversing those policies.
As I've emphasized recently, I have no interest in "buying the dip" in former market leaders like Nvidia (NVDA). Its technical picture is completely broken...
...and the stock looks headed for a Stage 4 downtrend:
This same weakening market structure can be seen in the following stocks as well: