Fund Manager Expects 2-Year Bull Market To Resume After Tariff Dust Settles Down But Retail Is Bracing For Steeper Downturn
Munster said tariffs don’t change the reality that the race to general intelligence is the most significant tech, economic and geopolitical shift in 25 years.
President Donald Trump’s sweeping tariff announcements sent the financial markets crashing on Thursday, with sell-off broad-based nearly broad-based. But a fund manager expressed optimism that sanity will return when the dust settles down.
Trump imposed a baseline tariff of 10% on most nations, with some nations bracketed as ‘bad operators’ hit with a higher level. The U.S. dollar Index, which measures the performance of the greenback against a basket of major currencies, ended Thursday’s session at a six-month low, underlining recession fears.
Latest Videos
Techs, Small-Caps Wither
The SPDR S&P 500 ETF Trust (SPY), an exchange-traded fund (ETF) that tracks the broader S&P 500 Index, fell 4.93% to $536.70, the lowest closing level since mid-August.
The sell-off in the tech space was steeper, with the Invesco QQQ Trust (QQQ) - an ETF tracking the Nasdaq 100 Index, plunging 5.35% to $450.66, marking a seven-month low.
The former recorded its biggest one-day decline since June 2020 and the latter fell by the most since Sept. 2022, just before the current bull market began, according to Koyfin data.
The Roundhill Magnificent Seven ETF (MAGS), which tracks performances of the Magnificent Seven stocks, closed at its lowest since September 2024. The ETF shed 6.87% to $43.94 on Thursday. The ETF, which began trading in April 2023, recorded its worst one-day performance.
Small-caps underperformed their large-cap counterparts, with the iShares Russell 2000 Index (IWM) slumping 6.42% to $189.65. The IWM tracks the Russell 2000 small-cap index. Thursday's drop marked the steepest since June 2020.
Light End Of Tunnel?
The weakness may prove short-lived, according to Deepwater Asset Management co-founder and Managing Partner Gene Munster. In a post on Elon Musk-owned platform X, the fund manager said, the artificial intelligence trade isn’t yet over and that it is merely paused.
After the inflation-induced bear market bottomed in late-October 2022, the stock market has been on a bull run. The artificial intelligence (AI) technology’s rise to prominence primarily stoked the nearly 2-½-year bull run.
Munster said, “Once the fog of tariffs closes, we’ll resume a two-year bull market, powered by AI.”
According to the analyst, tariffs don’t change the reality that the race to general intelligence is the most significant tech, economic and geopolitical shift in 25 years.
He expects the tariff-induced vortex to pass, likely starting with the earnings season later this month.
When Magnificent Seven companies Meta Platforms, Inc. (META), Microsoft Corp. (MSFT), Alphabet, Inc. (GOOGL) (GOOG) and Amazon, Inc. (AMZN) report earnings, they will likely signal that “scaling laws” still hold, justifying their massive AI investments.
Munster said, “The real race is to build the compute required for general intelligence—still a few years out, but one that will multiply AI’s utility far beyond where it is today.”
Retail Is Skittish
The calming reassurance of sell-side analysts have not resonated well with retailers as they stubbornly hold onto to their bearish stance.
On Stocktwits, retail sentiment toward SPY ETF turned to ‘extremely bearish' (24/100) by late Thursday, from the ‘bearish’ view seen a day ago. The message volume stayed ‘high.’
Sentiment toward the tech space was a tad better, although remaining depressed. Retail held a ‘bearish’ view (31/100) toward the QQQ ETF.
Among the pure-play techs in the Magnificent Seven category, sentiment toward Meta, Alphabet and Amazon remained ‘bullish,’ while retail is ‘bearish’ on Microsoft stock and ‘extremely bearish’ on Apple, Inc. (AAPL) stock. Nvidia stock has elicited a ‘neutral’ sentiment from among retailers.
A bearish retail watcher was bracing for the worst. They warned of imminent earnings per share downward revisions, deterioration in macroeconomic conditions and a plunge in GDP.
Another user said the sell-off isn’t done yet.
Following Thursday’s market mayhem, the U.S. index futures pointed to a moderately lower opening in the final trading session of the week. The sentiment potentially reflects caution among traders ahead of the non-farm payrolls report for March due ahead of the market open.
For updates and corrections, email newsroom[at]stocktwits[dot]com.
subscribe to Asianet Newsable WhatsApp channel by clicking here.