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Passive Investors Are Getting Crushed in 2025

Posted May 23, 2025

Greg Guenthner

By Greg Guenthner

Passive Investors Are Getting Crushed in 2025

Meet Kenny. He’s your typical retail investor, and he’s a MESS!

A total, utter, hysterical mess.

And frankly, if you’re still tuned into the cable news lunatics, you might be feeling that familiar knot of dread, too.

Kenny’s been glued to the screen for months, twitching with every pundit’s wild-eyed prediction, desperate to get ahead of the next big story.

One day, he’s practically giddy about a fresh trade deal, dreaming of his 401(k) soaring.

The next, he’s a ghost, staring at that shriveling balance like it’s a death certificate.

Why?

Because the world is screaming panic! Pundits and Wall Street analysts are lobbing conflicting numbers like grenades, management teams are yanking earnings guidance faster than a magician pulls a rabbit from a hat, and Trump trade war rumors are swirling like a tornado.

On the surface, “mess” doesn’t quite cover what we’re talking about here. It’s a bloodbath of confusion.

It’s easy to see why so many investors are frustrated. Beyond the insane news cycle, even the household name mega-caps are flatlining.

The Roundhill Magnificent Seven ETF (MAGS)? Down almost 5% year-to-date.

And the major averages? They’ve gone everywhere and nowhere at the same time. We had the Liberation Day meltdown that felt like the financial apocalypse, followed by a furious recovery that made you question reality. Still, the S&P 500 and Nasdaq Composite are barely in the red, almost five months into 2025.

It’s enough to make you want to punch a hole in the wall.

But here’s the brutal, unvarnished truth: This isn’t an investor’s market anymore. This is a TRADER’S market.

And if you’re smart enough to rip yourself away from the mainstream investing propaganda, you can make an absolute killing while stocks are whipsawing from one extreme to the next.

You don’t need special knowledge or some mystical ability. You don’t have to shackle yourself to a wall of monitors for 10 hours a day.

You simply have to finally understand how the market has fundamentally changed, and then react to the clear, powerful signals firing every single week.

While others are bleeding cash and tearing their hair out, you can quickly pull ahead of the averages and generate significant profits while the market is in flux — no matter how long these insane conditions last.

Here’s how to stop feeling like you’re taking punches and start landing them.

Kiss the “Easy Bull” Goodbye

The past two years were an incredible gift to investors.

The death of the post-COVID bear market gave birth to a fresh bull run in early 2023. Throwing darts worked in this market. Buy a big, popular stock and sit on your hands. How easy is that? Even buying an index fund would have made you a happy camper. Sitting tight in SPY in 2023 would have netted you an annual return of more than 24%.

2024 was equally impressive, netting similar annual returns at the index level. But the first half of the year was especially bullish for the average armchair investor. Buying any of the hot household names, especially Nvidia Corp. (NVDA), offered incredible returns. The big boys ruled the roost, dragging the Nasdaq Composite and S&P higher most of the year. Then, the post-election melt-up surpassed all expectations.

This 24-month period helped passive investors take home gains approaching 50%, erasing their bear market losses from 2022.

Unfortunately, it also lulled many investors to sleep.

That made this year’s volatility especially hard to handle. Even the world-beating NVDA is essentially flat over the past 12 months.

It’s a Trader’s Market

With added volatility comes the need for more action.

But many investors are slow to switch gears. They let their emotions and worries influence their actions, paralyzing their decision-making.

Ask anyone you know who doesn’t trade stocks what they think of this market. I guarantee you they hate it. At best, they believe the tide is turning in favor of an extended downside move. They think the world is falling apart in front of their very eyes.

That’s not to say we won’t see lower prices at some point this year. Or, some extended periods of chop and volatility.

But right now, this market is ripe for active traders.

I’m not saying it’s easy. But this action is the best type of market for pulling in consistent gains week after week.

For starters, there's no shortage of action. If you are nimble and can get in and out of the hottest stocks that are defying gravity, you generate incredible returns — even as the averages are flat year-to-date.

Here’s what you should be doing:

First, you can't just hold NVDA or some other mega-cap name and expect to outperform. You have to seek out the theme stocks that are running under the surface of the averages. This week, it’s the quantum stocks like IonQ Inc. (IONQ) and D-Wave Quantum Inc. (QBTS). Next week, it might be flying cars, alternative energy, or space stocks. The week after, crypto names might catch fire again.

There is a consistent bid under these rotating themes, sending select stocks parabolic every single week. The name of the game is rotation. Catch the hot names, get what you can out of them, then sell into strength and wait for the next group to set up and break out. These stocks usually don’t care what the averages are doing, so choppier action at the index level is less of a concern when searching for fresh thematic plays.

Next, you can bet against the popular large-cap momentum names as they run out of steam following the trade war snapback. As the averages become even more stretched this week, many of the “favorites” are starting to stall.

Stocks like Palantir Technologies Inc. (PLTR) and Robinhood Markets Inc. (HOOD), while solid long-term bets, are ripe for bigger pullbacks. They could quickly begin to look like Reddit Inc. (RDDT) as they begin to lose key levels and buying dries up, offering a great chance at downside gains — especially if the indexes stay choppy or corrective into the summer.

Buying the strong, under-the-radar breakouts and selling the overextended winners is an excellent formula for success in this tape.

Your golf buddies will tell you it’s a difficult market. But it’s a heck of a lot more interesting than 2024, flush with opportunities for anyone with an open mind willing to open their eyes and trade what’s happening on their screen.

I’ve done just fine trading the first two years of the new bull market. But year three is starting off even better.

It’s a trader’s market. Time to get down to business and pile on the gains while we can.

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