You’ve probably seen the headlines about hidden risks in the market. But what does that actually mean for investors? One of the biggest concerns is that most investor interest is concentrated in AI technology and the Magnificent Seven. Together, these seven tech companies account for nearly 35% of the S&P 500. That means if their stocks were to fall sharply, they could pull the broader market down with them. 

That concentration matters because major index funds rely on the performance of mega-cap stocks to survive. If tech stocks take a big hit, both the S&P 500 and the Nasdaq could decline. Portfolio values could drop and rising volatility could lead to a bear market. When that happens, nervous investors often start selling stocks at the same time. 

Another hidden risk in the market involves the spending spikes of cloud service providers like Amazon, Microsoft, and Google. Collectively they’re spending hundreds of billions of dollars on artificial intelligence and physical infrastructure. Experts are predicting that figure will exceed $1 trillion annually from 2027 through 2030 – threatening corporate profit margins and putting investors at risk. 

After taking the market risks into consideration, the first thing you should do is contact your investment advisor to schedule a portfolio review. They may recommend rebalancing your portfolio to reduce your exposure to tech and AI stocks. As long as you remain focused on long-term plans and don’t panic, you will survive a bear market. You have in the past. Contact Alloy Investment Management at 800-689-3935 to schedule an appointment.