Greg Boland is chief strategy officer at Tiger Brokers.
ANALYSIS: The rotation out of the popular AI stocks amid tariff uncertainty cost the US equity market more than US$3 trillion in market value in March, with the S&P 500 closing down 5.75%. Nearly US$2 trillion of this loss was attributable to the Magnificent 7 alone, and in the first quarter of the financial year, the 7 lost over US$2.3 trillion (albeit after a gain of US$1.9 trillion in the last two months of 2024).
Overall, the $S&P 500(.SPX)$ fell 4.6%, while the $NASDAQ(.IXIC)$ fell 8.3% in what was the worst quarter since the last quarter of 2022.
The market will now digest President Trump’s reciprocal tariffs, which take effect immediately after his announcement this morning (Wednesday 4pm US ET time) – on what Trump has dubbed “Liberation Day”.
The $USD Index(USDindex.FOREX)$ has traditionally been a safe haven in uncertain times, but as the current uncertainty stems largely from within the US, the value of the greenback has weakened, with the US dollar index down 3.8% year-to-date. A new term, “de-dollarisation”, is even being mooted. The other traditional safe havens have done well, with gold jumping more than 16%, while the Japanese yen is up 4.1% against the US dollar in the quarter.
The rotation out of the popular AI stocks amid tariff uncertainty cost the US equity market more than US$3 trillion in market value in March.SETH WENIG / AP
The story of March is of the US stock market underperforming its global peers. US stocks represented 57% of the total value of the global stock market late last year, and that figure is now 54%. Indeed, the $S&P 500(.SPX)$ has underperformed the MSCI All Country World Index ex-US by approximately 11% for the first quarter.
This is the strongest outperformance by international stocks on record during the first quarter of any year going back to 1987, and if the past is any guide, this trend may continue through 2025. Experience shows that when global stocks outperform US stocks by more than 5%, they will continue to outperform.
According to Federal Reserve data, foreign ownership of US stocks stood at 18% in late 2024, so the combined fall in the index and fall in the US dollar has had a double-whammy negative effect for global investors.
But it’s not all doom and gloom in US stocks. Seven of the 11 sectors are higher this year to date, led by the Energy sector and Basic Materials, up 7.6% and 4.5% respectively. The Utilities and Consumer Defensive sectors are both approximately 5.5% higher.
The problem is that these four sectors represent less than 16% of the index, while the four heavyweight sectors are mixed, with Technology down 11.7%, Financials up 1.5%, Consumer Cyclicals down 12.4%, and Healthcare up 2.1% year to date.
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💰Top SPX & DJI Gainers in Q125 with Q2 Outlook Insights
The TrumpElon stocks
After the election there was debate as to what sectors may do well under the new President, and were collectively called the ‘Trump trades’. With all the tariff noise and volatility, it is time to assess how Trump trade stocks have performed in the nearly five months since the election.
Trump Media, a stock directly related to the US president, has dropped 40% since the election.JOSE LUIS MAGANA / AP
The three directly-related-to-Trump stocks have moved aggressively, with Trump Media and Phunware falling heavily to be down 40% and 53%, while Rumble is up 29%.
The financials were said to benefit from less regulation. However the tariffs and falling US growth prospects are starting to bite and less borrowing may result. Interestingly, $JPMorgan Chase(JPM)$ , $Wells Fargo(WFC)$ , and $Citigroup(C)$ are all up over 10% after five months, which is incidentally about the same as they rallied on election day.
While Trump was trying to protect the automakers, the tariffs and lower consumer demand paired with his nonchalance this week about car price increases have pushed automakers Ford down 6% and GM down 12%.
Energy was also thought to be a beneficiary and indeed $Chevron(CVX)$ is up 10% and Cheniere is up 20%, while Occidental is marginally lower.
The crypto stocks are generally lower after last year's rally, but the underlying $Bitcoin(BTC.USD.HKCC)$ is bucking the trend, up 22%, while Ethereum is down 21%.
Defence stocks and agricultural equipment makers have been mixed with the stand outs being $Boeing(BA)$ up 11% and John Deere rallying 20%.
Boeing is up 11% since the election.LINDSEY WASSON / AP
Economics
Recent US economic data has been less than flattering, with last week’s numbers being Durable Goods Orders that fell to 0.9% for February versus 3.3% for January, and the GDP Growth Rate falling to 2.4% versus 3.1% previously. This week, the March ISM Manufacturing PMI fell to 49 from 50.3 in February, while the JOLTs Job Openings numbers were also soft. Late this week the Non-Farm Payrolls and next week’s Inflation numbers are also expected to be weak compared to prior numbers.
Ups and downs
New listings have been performing well. Astoundingly, Newsmax listed on the NYSE this Monday at a list price of US$10 per share and closed on Tuesday at US$233. CoreWeave listed on the Nasdaq last Friday and was up 42% on Tuesday after a shaky start in the first two days.
Also on Tuesday, all the “Magnificent Seven” stocks closed in the green. While “Liberation Day” may help, more importantly for 2025 the “Magnificent Seven” stocks are expected to post 18% growth versus 10.8% for the S&P 493 (500 - 7), according to Roundhill Investments. This has led to the one-year price target for these stocks being very bullish.
Will Trump’s tariffs to be announced today move the disruption beyond mainly automobiles?MARTIN MEISSNER / AP
For example, according to Wall Street Rank data, in the last 30 days the 20 main US analysts who cover Nvidia have maintained their rating of the stock as a ‘buy’ or ‘outperform’, with an average price target of US$187 being 70% higher than Tuesday’s closing price. The data also shows that, based on 2024 fourth quarter regulatory filings by fund managers with US$100M assets under management or more, 68% of these 7,398 funds hold Nvidia, with 1,750 having it in their Top 10 stock holdings.
In order after $NVIDIA(NVDA)$ , analysts also forecast Broadcom to be 57% higher, Tesla 46% higher, and Amazon 33% higher 12 months from now.
Doing it tough are the quantum stocks that many had picked might rally following the Nvidia GTC (AI conference): Quantum Corp is down 74% so far this year, and Rigetti and Quantum Computing are down 49% and 53% year-to-date respectively.
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