Recently stocks, particularly the Magnificent Seven stocks, have fallen off a cliff. A recession looks all but imminent at this point. At HighPass, we have been warning investors since 2024 to update their risk tolerance, shift their portfolio away from tech stocks and over to value stocks and to prepare for a downturn. As with all stock market crashes, you can never pinpoint the exact timing of a crash. But you can assess the market conditions and where you are in the business cycle. Knowing the difference between the 2nd inning vs the 8th inning of the game can greatly improve your success as an investor. Staying rich in a downturn is more important than beating the market on the way up.
Obvious Warning Signs
Over the last twelve months there have been numerous warning signs that a recession was lurking around the corner. Investors were fearless, the yield curve was inverted, PE ratios were extremely high, the concentration in the Magnificent Seven was ridiculous and the hype around AI felt like the year 2000 all over again; just to name a few.
A List of Our Warnings Leading Up to the Drop
The rest of this article will be a list of our repeated warnings about a recession and potential stock crash for the Magnificent Seven stocks. Each warning has an associated video. Watching the videos will give you a clear idea of how to spot the signs of a bubble for stocks and the likelihood of a recession.
The Bubble in The Magnificent Seven
August 12 we warned investors that the Magnificent Seven stocks were a bubble. Consider moving away from these bloated names that were ripe for a big drop.
Odds of A Soft Landing
August 16 we warned investors that the odds of a soft landing for the economy were very low. In the last seventy years, the Fed has produced only one soft landing. The Fed has a terrible batting average at producing soft landings. Take note and plan accordingly.
HDV ETF The Time is Now
August 29 we advised investors to consider value stocks over growth stocks and reviewed an excellent value stock ETF, HDV.
Most Concentrated Stock Market in History
November 6 we warned investors of the concentration in the Magnificent Seven stocks. The concentration in those names is unlike anything ever seen before in the history of the United States. The Magnificent Seven concentration is far worse than the concentration seen in 1929 or 2000.
2025 Investment Ideas What to Buy and Avoid
December 12 we warned investors again about the Magnificent Seven stocks. We recommended value stocks, international and small caps over the Magnificent Seven.
2025 Recession Odds
December 18 we put 2025 odds of recession at 60% or higher.
Inverted Yield Curve – Recession Likely
February 27 we warned investors that the yield curve had re-inverted. Odd of recession still very high despite the stock market going up and up.
The Stock Market Sell Off Can Get Worse
March 11 we warned investors that the sell-off in the stock market could get much worse.
Nasdaq 12,000
March 14 we warned investors that if there is a recession, Nasdaq could easily drop to 12,000. A 40% drop in the Nasdaq would be consistent with past recessions and correspond drops in the Nasdaq.
Big Drop Coming for the Stock Market?
March 28 we warned investors that a much larger drop for stocks was likely on the way. It didn’t take long for the drop to show up!
From our perspective, the warning signs of a recession and a drop in the stock market, especially for over-valued technology stocks, were very clear. We are not at all surprised by the recent drop in the stock market. How far this stock market drop will go is anybody’s guess but the average bear market sees a loss of -38% for the S&P 500 and lasts 18 months.
If you have questions about your investments, please give our office a call. We would be happy to give you a free second opinion on your portfolio.
Ethan S. Braid, CFA
President
HighPass Asset Management.