On some level, we all saw it coming…
For more than two years now, mega-cap “Magnificent Seven” tech stocks have soared beyond all expectations.
Take Nvidia Corp. (NVDA) for example. It’s up 90% in the last 12 months alone … virtually doubling the market capitalization of a company that was already worth well over a trillion dollars.
That kind of meteoric growth doesn’t come without a price, though.
The higher NVDA’s shares go, the more investors expect out of the company. Everyone wants to get what they pay for, after all.
But NVDA’s shares rose so far, so fast, and for so long that when investors see even one piece of news suggesting a threat to NVDA’s dominance, whiplash was all but inevitable.
Unfortunately, Mag 7 companies like NVDA make up a disproportionately large percentage of the overall S&P 500 index (due in large part to their success).
So a bad day for NVDA … is a bad day for the index. This latest snap crash has been especially bad, with Nvidia losing almost $600 billion in market cap over two trading days. In total, the Nasdaq’s biggest tech companies lost more than $1 trillion in market cap following the DeepSeek AI bombshell.
And there will be more bad days for NVDA in the future. It’s the nature of business.
But don’t forget — we’ve been here before.
I launched my first publication, Max Profit Alert (then called Cycle 9 Alert), back in 2012. And in the first decade of publication, we saw 14 different pullbacks of 5% or more in the S&P 500. And after that, we weathered 2022’s bear market, 2023’s regional banking crisis and more. And we’ve done the same thing in my other research services throughout the years.
We not only survived each of those pullbacks … we thrived by sticking to our strategy and zeroing in on the market’s top stocks.
And we’ll be doing the same thing this time.
Think Beyond the S&P 500 After a Tech Sell-Off
It’s important to remember that a bad day for the S&P 500 index doesn’t have to be a bad day for your portfolio…
As far as my Green Zone Fortunes readers are concerned, the world’s most-watched and benchmarked stock index is of modest importance to us.
Sure, there’s a “rising tides lifts all boats” aspect to investing.
Typically, when a majority of stock indexes are chugging higher, and all is well … favorable conditions provide a tailwind to quality individual stocks like the ones we recommend and hold.
Likewise, when a wave of selling hits the broader markets, these unfavorable conditions can weigh heavily on the individual stocks we hold. It’s tough to escape a broad market sell-off!
But we need to remember that we invest in specific individual stocks … in some of the most promising mega trends of the coming decade.
And while no portfolio is immune to broader sell-offs, by focusing on stocks that boast strong fundamental metrics, we have a much better chance to bounce back.
I’ve warned in recent years about the dangers of going overboard with index investing. ETFs can make it easy to set a portion of your portfolio on “autopilot.”
But the benefit of our Green Zone Power Ratings system is knowing exactly which stocks you should own (and which you shouldn’t).
In short, we must be willing to ride the minor ups and downs in the broader stock market … for the chance to make lucrative, longer-term profits on these mega trends.
What Should You Do Now?
In a word: nothing.
Stay disciplined with your risk management and exercise stop-losses if any of your positions fall far enough. Sit tight, stay calm and follow your plan. That’s all you need to do.
Of course, if you don’t have a plan, that’s a problem.
Initiating a trade without an exit strategy — for both the upside and downside of a stock’s moves — builds unnecessary uncertainty into that investment. The investors who panic during a correction or bear market are those who go into it unprepared.
If you’d like to see how we’re navigating tech sell-offs in this market, check out Green Zone Fortunes.
I’ve mentioned mega trends a few times throughout this story, and it’s for good reason.
These mega trends that we’re tracking through our highest-conviction stock recommendations have the potential to create life-changing wealth for investors in the coming years.
To good profits,
Adam O’Dell, CMT
Chief Investment Strategist, Money & Markets