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Business Insider
02-07-2025
- Business
- Business Insider
Stocks are back near all-time highs. Here are 3 investing mistakes to avoid at the top.
Dear US investors, congratulations, you did it. After a first half of 2025 marked by tariff uncertainty, geopolitical turmoil, and a polarizing tax plan, major indexes are back near records. Now comes the hard part: making the right decisions to protect your equity nest egg. It's easier said than done. The assumption can be made that the path higher has been cleared. But the trio of forces that have been a drag on the market this year aren't gone. And for that reason caution is required. Detailed below are three common mistakes investors should avoid going forward. 1. Don't wait for a dip to buy more If you have cash to deploy, it's tempting to wait for a future dip instead of buying now. But investors who subscribe to this line of thinking are committing the classic mistake of trying to time the market. "That dip might never come, or the dip may come from an even higher place than we are right now," Clark Bellin, president and chief investment officer of Bellwether Wealth, told Business Insider. All-time highs aren't a rare occurrence, having happened more than 100 times in the last decade alone. And they're often followed by even more robust gains. For long-term investors, the timing of entry into the market has minimal impact. An analysis by RBC Global Asset Management shows that, since 1950, the S&P 500 has never ended a 10-year period more than 10% below any of its previous all-time highs. Some investors may be concerned about high valuations in the stock market, but that isn't always a bad thing. Richly priced stocks can also have strong underlying earnings and competitive advantages that offer compelling investing opportunities. At this specific moment in time, S&P 500 earnings revisions are on an encouraging upward trend, suggesting the stock market rally is backed by solid fundamentals. "In trying to wait for that perfect dip or moment, you may be waiting forever," Bellin said. 2. Don't buy based on FOMO Another tempting investing tactic is to buy into market hype and chase big winners that have already seen outsized gains. This can backfire. If a bunch of investors collectively pile into a specific stock or sector, it can lead to prices becoming overheated. Jumping in at these moments can leave investors exposed to sudden pullbacks or sharp corrections, especially if fundamentals don't support the elevated valuations. Bellin points to cryptocurrency as an asset class that is especially susceptible to this type of run-up. Investors tend to pile in as prices rise, but cryptocurrencies often experience sell-offs exceeding 50%. Putting in too much money all at once can be just as bad, if not worse, than sitting on the sidelines, especially if you're investing based on hype. Thanks to a psychological effect known as loss aversion, investors feel the pain of losing money far more intensely than the satisfaction of equivalent gains, leading to panic-selling and poor decision-making. The best strategy for investors is to have a regular investing schedule, said Jacqui Smith, portfolio manager at Reynders, McVeigh Capital Management. Dollar-cost averaging can smooth out the overall price you pay and reduce the impact of short-term volatility. Smith also recommends looking into quality companies with strong balance sheets to weather potential tariff concerns going into the future. 3. Don't forget to rebalance periodically Investors should also be mindful of their portfolio allocations, especially when markets are at all-time highs. For example, investors who own Nvidia might have seen a sizable return, meaning that the stock might be a much bigger part of their portfolio than it was a year ago. And with much of the gain in the S&P 500 driven by the Magnificent Seven, investors might not be aware of just how much AI exposure they have. "Investors should be very cognizant of inadvertently doubling down on AI by owning the S&P 500 and then owning Nvidia and other individual stocks on the side," Gary Quinzel, vice president of portfolio consulting at Wealth Enhancement, told Business Insider. He continued: "It could work for a short while and it could lead to outsized returns, but that's a prime example of knowing what you own." A well-diversified portfolio can insulate your money from market fluctuations, and the opposite is true for a more concentrated portfolio. All-time highs can be a good checkpoint to assess your risk tolerance, rebalance your holdings, and trim some names that have been big winners, Bellin said. If you've incurred losses in other areas of your portfolio, Bellin recommends investors look into tax-loss harvesting to help offset the tax effects of taking profits off the table.
Axios
01-07-2025
- Business
- Axios
The market's first half broke from the AI trend
If stocks are up, they tend to keep going up. But the companies that drove the market higher in the first half of 2025 are not typical of bull markets. Why it matters: As investors confronted uncertainty, with a record number of companies mentioning the term on earnings calls, market leadership skewed more defensive than growth-oriented. That could indicate the current market highs are not on the strongest footing as the second half of the year kicks off. By the numbers: The best performing sectors in the first half of the year were industrials, communication services and financials. These are not the growth names that tend to rally in frothy environments. Tech was the fifth-best performing sector year to date, up just over 6.5%. Utilities — a sector that could be seen as defensive since consumers are more likely to pay their utility bills even amid economic slowdowns — outperformed big tech. Investor excitement about artificial intelligence "faded during the midst of the tariff selloff in March and April," according to a note from Clark Bellin, president and chief investment officer at Bellwether Wealth. Between the lines: Remember the Magnificent 7? The basket of tech stocks is up just 1.7% year to date (though it is up over 35% from its April low). Tech has still been outperforming the broader market since the April lows, and those gains are expected to continue, Bellin says. Yes, but: The shift in leadership away from tech could also be viewed as a positive for investors who worry about market breadth. Mark Hackett, chief market strategist at Nationwide, calls the current rally "broad based" in a note that described the first half of the year as "tumultuous but resilient." What we're watching: Consumer discretionary stocks were the worst-performing sector for the first half of the year.
Yahoo
09-02-2025
- Business
- Yahoo
Market pros tell us why they're not worried about tariff whiplash — and why stocks are poised to keep rallying
Markets were buffeted by tariff fears last week, with more uncertainty looming. Yet, market sources tell BI they're not worried, and see trade jitters creating opportunity. "If you've got a longer-term view, some of these dips taking place are buying opportunities." President Donald Trump sent markets on a rollercoaster this week with his announcement and subsequent delay of tariffs against two of America's top trading partners. However, some in the market see the uncertainty and volatility caused by trade worries as a buying opportunity in a year that will ultimately see the economic growth narrative win out and deliver more stellar stock gains. Investors and economists who spoke to Business Insider said they believed stocks would be propelled by pro-growth tailwinds this year, as well as other ongoing catalysts, like the AI boom. They also expressed doubts that Trump would implement tariffs as severely as he first proposed. Clark Bellin, the chief investment officer at Bellwether Wealth, thinks stocks are on track to end the year strong. He believes the market could return 9%-12% in 2025, thanks largely to the strength of the US economy. The job market and economic growth are on solid footing, with the unemployment rate remaining near a record-low last month and GDP expected to accelerate to 2.9% in the current quarter, according to the Atlanta Fed's latest GDPNow reading. Inflation, meanwhile, has ticked up but remained relatively tame in December, rising 2.9% year-over-year. "Inflation isn't skyrocketing. It's not necessarily plummeting like people would hoped, but I think the Fed kind of analyzing things and being consciously optimistic and actually achieving their soft landing is pretty good," Bellin told BI. He added that his firm had reduced some of its exposure this week to sectors that could be most impacted by tariffs, in order to create "dry powder" on the sidelines. "If you've got a longer-term view, some of these dips taking place are buying opportunities," Bellin said. "We're going to continue to watch some of our proprietary indicators and make a strategic decision when we put some of that money back to work." José Torres, a senior economist at Interactive Brokers, thinks the market could see another 10% gain in 2025, thanks largely to Trump's pro-growth policies. That makes each sell-off fueled by Trump's political moves a possible buy-the-dip moment for investors, he told BI. "We think stocks are going to go higher," Torres said, pointing to the president's plan to slash taxes, loosen regulation, and boost domestic manufacturing. Don't think that tariff risks are going to derail the really positive domestic momentum that's likely to occur this year." Trump's proposed tax cuts could boost earnings in the S&P 500 by as much as 20% over the next two years, according to an estimate from Goldman Sachs. Meanwhile, reshoring could add as much as $10 trillion in value to the US economy, given the long-running stagnation in the industrial sector, Morgan Stanley predicted last year. "I thought it was a good buying opportunity," Torres added of the volatility this week. Mark Malek, the chief investment officer of Siebert Financial, also sees more upside in stocks with the AI boom underway. Big tech firms, for instance, doubled down on their resolve to spend more on artificial intelligence this year. Alphabet said it planned to spend $75 billion on capital expenditures in 2025. Meta has pledged to spend as much as $65 billion on capital expenditures, while Microsoft has earmarked $80 billion for its 2025 fiscal year. Malek said he believed the market could be propped again up by big gains in the tech sector this year, continuing the streak of tech-driven outperformance since 2023. "I think from a long-term perspective, I think that the market has room," he added. "If we look past all the noise we had last week, I think you're going to see those companies come through." Investors have been worried that Trump's tariffs could stoke inflation and cause interest rates to stay higher for longer, two factors that could weigh on the overall market. But Bellin, Torres, and Malek, each mostly brushed off inflation concerns, as they think it's unlikely Trump will follow through with tariffs as severe as initially proposed. The president said he would levy a 25% tariff on goods from Mexico and Canada before delaying the plans by a month. "I kept thinking as I was looking at these numbers, there's no way the president is going to go through with these things," Malek said, speculating the tariffs could be a negotiating tool as Trump defines his trade policy. "There is a huge challenge to the US economy, and why would a president do something that would affect markets so negatively and the US economy so negatively?" They know that they're probably not going to, don't want to have to, implement the tariffs," Bellin added. "They want to be able to get some leverage points elsewhere." Read the original article on Business Insider Sign in to access your portfolio
