Is the stock market ready for a crash in 2025?

Is the stock market ready for a crash in 2025?

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Historically, the stock market has been a good place for investors to put money. But in recent years, it’s been a select few stocks that have done much of the heavy lifting.

As a result, approximately 33% of S&P500 consists of seven shares. And I think this is a risk that investors should take seriously heading into 2025.

Concentration risk

Optimists about U.S. stocks point out that the companies that dominate the S&P 500 are among the best in the world. And they are absolutely right.

I don’t think there’s anything inherently wrong with seven stocks taking up 33% of a portfolio. But with the US index, many of them could be vulnerable to the same risk.

The problem is antitrust. They have come to dominate several industries such as Amazon, AppleAnd Metaplatforms are beginning to attract the attention of regulators.

Investors tend to ignore this because (i) the companies won’t be broken up and (ii) investors will actually be better off if they do. We will test this in 2025.

Alphabet

The US ruled this earlier this year Alphabet (NSADAQ:GOOG) was an illegal monopoly. And while investors may have hoped that things could be resolved with a fine, things are looking a little more serious.

The Justice Department has recommended three things, which together amount to breaking up the company. It concerns the sale of Google Chrome and possibly Android.

This would be a big problem for Google, especially for its plans in artificial intelligence. And because this appears to be a key area in the battle for future search dominance, the risk is significant.

Alphabet plans to appeal the recommendation and an final outcome could be years away. But this seems like a reminder to investors that antitrust risk needs to be taken seriously.

Apple

In light of recent developments at Google I guess Apple (NASDAQ:AAPL) is worth another look. Like Alphabet, it has been under antitrust pressure lately.

The Justice Department alleges that Apple unfairly maintains its competitive position by restricting third-party apps, including digital wallets, messaging systems and smartphones.

I’m not sure of the substantive merits of the case, but I feel like shareholders should take this seriously, especially in light of the latest developments in the Alphabet situation.

At one price-earnings ratio (P/E). of 38, Apple shares are priced for growth. And I think competitiveness is a big part of what justifies this valuation.

Buy shares

Antitrust concerns are now too real to ignore and are impacting some of the world’s largest companies. The effect on the overall stock market should therefore not be underestimated.

In recent years, investors have seen big tech as a source of security. In challenging macroeconomic conditions, companies such as Alphabet and Apple have held up well.

If that changes in 2025, I guess the risk of a stock market crash increases. And that’s something else investors should keep in mind next year and beyond.