An Ignoble Experiment: Dodging a Lost Decade of Returns Is Easier Than You Think

Dodging a Lost Decade of Returns Is Easier Than You Think

If you only looked at stock prices over the past few days, you'd think the trade war was over and boom times are here again.

But as I'll show you today, you don't want to pop the cork on the champagne just yet – at least when it comes to the stock market…

On April 2, President Trump announced the most sweeping tariff regime in history. The S&P 500 and Nasdaq dropped as much as 16% and 18%, respectively, on the news.

Since then, the administration has softened its tariff policy. And the market has responded positively.

As of publication, the indexes have retraced much of their losses since the trade war started on April 2.

If you've been waiting on the sidelines, I know it's tempting to jump back into the market at these levels.

And why wouldn't it be?

Investors who bought every dip during this 16-year bull run have been richly rewarded. Over the past 10 years, the market is up 218% if you include reinvested dividends.

If history is any guide, then it would be a no-brainer to buy the dip again. But I believe buying stocks at these levels is incredibly risky.

That's because we're about to enter what Daily editor Teeka Tiwari calls a "Lost Decade of Wealth."

During these "lost decades," diminishing stock market returns lag the pace of inflation – or worse, turn negative. And if you aimlessly stroll into this investing wilderness… It could take decades for your portfolio to recover – if it ever does.

So now is the time to get defensive.

I want to be clear: We're not saying the market will crash overnight.

In late 2006, Teeka co-authored a report called You're Being Fattened Up for the Kill. In that report, he wrote about the real estate bubble and the threat it posed to the stock market.

Teeka was 100% correct in his assessment that a crash was coming. But that didn't stop the S&P 500 from roaring to a new high in 2007. It ripped 10% higher before peaking at 1,565. Of course, over the next two years, it would go on to drop as much as 58%.

It's important to realize the same could happen in 2025-26. Just like in 2007, a final spurt of bullish action could lull investors into a false sense of security… before crashing back down.

That doesn't mean you should sell everything and spend the next couple of years on the sidelines. Instead, you should start looking to buy assets that appreciate in value when most stocks go nowhere for years.

And that's the beauty of investing. There's always an opportunity to make life-changing gains somewhere in the market. You just have to know where to look.

Thriving Throughout Lost Decades

The last "lost decade" in the stock market followed the dot-com bubble of the 1990s.

From 1995 to its peak in March 2000, the Nasdaq rocketed 800% higher. But by October 2002, the index had plunged 78%, giving up all its gains from the bubble.

You could've sold everything at the start of 2000… Sat on the sidelines… And avoided a lot of gray hairs while still ending up in the same place 13 years later.

To avoid that lost decade, all you had to do was read the signs. And one of them was blaring red…

During the early 2000s, internet stocks were trading at sky-high valuations. And if any hiccups occurred in the economy, they had no place to go but down.

One way to value the market is by using the price-to-earnings (P/E) ratio. It measures how much investors are willing to pay per dollar of earnings.

If a stock is trading at a P/E ratio of 20, it means investors value the company at $20 per $1 of earnings.

Over the past 20 years, the tech-heavy Nasdaq 100 has traded at an average P/E multiple of 20.

By the time the bubble popped in March 2000, the Nasdaq traded at a multiple of 200. That's insane. It means investors were paying 200x time earnings to own the Nasdaq.

Those who saw the writing on the wall began to reposition their portfolios to prepare for a lost decade of stock market wealth.

They turned to traditional "hard asset" safe havens like gold. As you can see, those who rediscovered the yellow metal in the early 2000s made a fortune.

To find the next most recent "lost decade" in the stock market, we have to travel back to the 1970s.

The high-flying growth stocks of that day were the "Nifty Fifty," a group that included Xerox, IBM, and Polaroid. These companies led the bull market of the 1960s but plunged during the 1973-74 bear market.

At the peak of the bull market in the early 1970s, many stocks in the Nifty Fifty traded with a P/E multiple above 50. By 1972, the Nifty Fifty reached an earnings multiple of 42, more than double the S&P 500's.

But those lofty valuations were slashed as soaring inflation and interest rates combined with high unemployment (stagflation) compressed earnings.

It took 13 years before the market made a new nominal high. It would not make an inflation-adjusted new high until 1994. Meanwhile, widely held stocks like Burroughs, Digital Equipment, and Kmart never regained their old highs.

Just like we saw after the dot-com bubble burst in the 2000s, investors turned to hard assets during the stagflation era of the 1970s. And over the next 10 years, both gold and oil crushed the performance of stocks over the next 10 years.

Here's why we've been sounding the alarm: We're seeing a similar valuation bubble in the "Magnificent 7."

The Mag 7 are the seven biggest tech companies in the world: Alphabet (Google), Amazon, Apple, Meta (Facebook), Microsoft, Nvidia, and Tesla. They have a combined market cap of nearly $14 trillion and make up 30% of the S&P 500 index's valuation.

Right now, the Mag 7 are trading at a forward earnings multiple of 39.6. Remember, tech stocks (as measured by the Nasdaq) have traded at a historic multiple of 20.

Now, it's no problem paying a premium for growth stocks when the economy is growing, too. But buying the market at a rich premium when the economy is showing signs of slowing down is highly risky…

As Teeka recently wrote…

Unless trade tariffs are completely abandoned (a highly unlikely scenario), it means the cost of doing business will rise. That means corporate profit margins will shrink. Corporations will have to absorb much of these increased costs because the U.S. consumer doesn't have the ability to pay higher prices. That means earnings growth must slow down.

We're already seeing the warning signs appear.

Reciprocal tariffs have disrupted global trade and supply chains. Economists forecast 0.8% GDP (gross domestic product) growth for 2025. That's down from 2.8% growth in 2024. And JPMorgan analysts put the chances of a recession at 60%.

Even worse, consumer confidence has plunged 32% since January. That's the sharpest three-month decline since the U.S. was rocked by a recession in 1990.

The writing is on the wall: An earnings slowdown is on the horizon. And it means the market will get more expensive over time, even if it recovers to its old price levels.

That's why Teeka recently announced he sold his entire position in the S&P 500. And it's why we're repositioning our portfolios here at Tiwari Research Group.

One area we're reallocating to is blue-chip dividend payers.

These companies don't need bull markets to thrive. They pay you real cash, year after year, no matter what the headlines say.

We're also increasing our allocation to "outside" or neutral assets. These are hard assets like bitcoin, which is up almost 12% since the start of reciprocal tariffs on April 2.

What about gold?

While gold has done well during previous lost decades, we believe bitcoin will do even better.

The Old Safe Havens Are Safe No More

For years, global investors have turned to U.S. markets for safety. But right now, that's no longer the case. They're fleeing U.S. assets… U.S. stocks, U.S. bonds, and the U.S. dollar are all down.

The market is telling us it sees gold and bitcoin as neutral, safe haven assets. For gold, that's nothing new. But for bitcoin, this is a historic moment.

The beauty of owning bitcoin is that if the market goes lower or trades sideways, it will outperform gold. But if the trade war issues are resolved and the bull market resumes, bitcoin will outperform stocks.

As Teeka says,

Anything that boosts stocks – such as loose monetary policy or soaring consumer sentiment – gets magnified in the bitcoin market. A 10-20% allocation to bitcoin married to a low-risk blue-chip dividend-paying portfolio will far outpace a 100% allocation to the S&P 500. And it will do it with far less risk.

If we experience another "lost decade" like we did in the 2000s and the 1970s, you want to own companies that aren't dependent upon outrageous earnings growth to power their stock prices.

An allocation to blue-chip dividend stocks protects you with a steady supply of ever-increasing income… fortress-like balance sheets… and the type of historical track records that makes it easy to sleep well at night as tech growth investors watch their hard-earned money get shredded by the market.

The reason we add bitcoin is we still want growth in the portfolio. But we don't want growth that is solely tied to economic growth.

The beauty of bitcoin is that it thrives in high-growth environments AND low-growth environments. That's because bitcoin rises when spirits are high, the economy is booming, and money is flowing.

During the boom times, bitcoin benefits from an abundance of speculative capital looking for a quick profit.

During an economic downturn, bitcoin benefits from the money printing that central banks employ in an effort to restart economic growth.

Head you win, tails you don't lose. That's the beauty of this type of portfolio composition we are now recommending.

It bears repeating: Bitcoin doesn't have trading partners or future profit targets to meet. If governments turn on the money printer to bail out the stock market, bitcoin will benefit. And if chaos and uncertainty reign, bitcoin will benefit from the flight to safety.

Bottom line: There are different playbooks for different types of markets.

Right now, the playbook we're using says to buy bitcoin and blue-chip dividend stocks to protect yourself from potentially sleepwalking into a lost decade of wealth.

It's a bet Teeka and I will make 10 times over.

Keep Stacking Bitcoin!

Houston Molnar