The stock market has been booming with astounding consistency since the day that President Trump won the Presidency in 2016. There’s certainly been plenty of volatility, but even this year, when the markets have been a bit rougher than in some other years, still, the Dow Jones Industrial Average is by 10% since the start of the year, and we’re not even halfway through.
In short: the bull market rages on.
But there is a headwind resisting the markets which will only get stronger… and frankly, this one may just be the thing to motivate SOME OF YOU — and you know who you are — to begin diversifying some of your assets AWAY from Wall Street and into alternatives like real estate or private companies or nearly anything but Wall Street assets.
If you guessed that the headwinds have something to do with the ongoing trade wars with China, which now seems to be engulfing Mexico as well, you would not be unreasonable to make that guess, but you’d be mistaken, my friends.
Rather, the big issue is the intense regulatory scrutiny of the big tech companies that is coming from both the Department of Justice and from Congress. Just when the word “bipartisan” seems an impossibility, it appears there’s support from both sides of the aisle to limit the power of Big Tech, albeit for entirely different reasons.
The companies most at risk in here are Facebook, Amazon and Google. I suspect there might be some saber rattling towards Twitter as well, but the truth is that Twitter is not relevant in the grand scheme of things. But Facebook, Amazon and Google? They will feel real heat, and with good reason.
While I certainly have an opinion on whether regulator scrutiny is called for, that’s not relevant to the bigger point today, which is this:
Anti-trust actions — which appears to be the path that Google will face, and maybe Amazon and Facebook too — can be utterly devastating and require decades for recovery. You have to look no further than Microsoft. Under the command of Bill Gates back in the 90’s, Microsoft became the most valuable company in the world and was the envy of the world. Gates was practically a cult figure, and Microsoft was so profitable it could do almost literally anything it wanted…
…until the FTC took an interest in a serious way. When Microsoft’s anti-trust trial was done, restrictions so severe were placed on the software giant that its stock would flounder for year after year. It would take until 2016 for Microsoft’s share prices to again reach the previous high point it had achieved in 1999, nearly 17 years earlier.
Seventeen years is a long time for a stock to be flat, but that’s exactly what happened. Now at that time, Microsoft was the clear market leader. No doubt about it. And guess what happened to the market as a whole when it’s leader went flat for years on end?
You guessed it: The broader market did the same thing. At basically the same time as all of the air went out of the tires of Microsoft’s stock in 1999 and 2000, the broader market just tread water for several years.
As the market leader went, so went the market.
And now, it’s like déjà vu… only the names have changed. This time, the cross hairs are focused on Facebook, Amazon and Google. If your last name is Zuckerberg, Bezos or Pinchai, you should be sweating right now.
And if your portfolio depends on those companies, you should be sweating too. But not just on those companies. The Microsoft lesson from the 90’s and early 2000’s is clear: When the Department of Justice gets involved, that can change the market as a whole. And not only is that happening right now, but Congress is apparently launching its own investigation of Facebook, Amazon, Google and… APPLE.
Why do I share this with you?
It’s simple: I don’t want you to lose your money, and history tells us this could be a risky time for the market.
What should you do? That’s up to you, but strategically I think it would make some sense to put yourself in a position to be able to very easily diversify OUT of stocks and into some other asset class whenever you decide to do that.
You could, after all, simply transfer your IRA or 401(k) into a self-directed IRA or 401(k) without even cashing in your stocks. Simply leave your money invested as is, but go ahead and get your money into a self-directed account so that when the time is right for YOU to cut bait and move on to greener pastures, you’ll be ready to do that at a moment’s notice.
Don’t wait for the market to bleed before you give yourself the option of diversifying away from Wall Street. A bit of forethought now will position you to take advantage of the tremendous opportunities that stock market declines inevitably bring to investors smart enough to stay on the hunt for assets that live far from Wall Street.
Originally published at https://sditalk.com.