During market uncertainty, cautious investors may feel compelled to sell everything while they wait for the dust to settle. But Ross Gerber believes that, to paraphrase Rudyard Kipling, if you can keep your head when everyone else is losing theirs, you’ll reap even bigger rewards.
The Gerber Kawasaki CEO says that while inflation, higher bond yields, oil prices, and Federal Reserve rate hikes can pressure stocks, he does not think investors should abandon equities wholesale. Instead, he advocates for a more defensive approach.
He recommends investors trim holdings with valuations that look stretched relative to their growth, build reserves in cash and short-duration fixed income assets, and keep long-term positions in companies that he believes still have strong earnings support, such as Nvidia.
And for investors trying to navigate an environment where corporate earnings remain strong while macroeconomic risks pressure stock valuations, that distinction matters. Gerber’s framework is less about calling the market’s next move than deciding which risks a portfolio can absorb—and which positions still deserve capital.
Here is a closer look at Gerber’s defensive-focused strategy.
@houseofhighlights This economy has people playing DEFENSE 💀💀 (via bodie/IG) #basketball #prank #family #disneyland
How can inflation pressure both stocks and bonds?
Inflation is Gerber’s main concern. That’s because when inflation rises, bond yields also climb, and investors tend to move into stocks with lower price-to-earnings ratios.
When investors are willing to pay a lower multiple for each dollar of earnings, stock prices fall — even when a company’s business is still growing.
Therefore, a healthy earnings season does not automatically eliminate market risk. Gerber describes corporate earnings and margins as being unusually strong, which he sees as support for stocks. But at the same time, he argues that inflation can limit how much investors are willing to pay for those earnings. The result can be a choppy market: Companies report good results, yet stock prices struggle to move higher because interest-rate pressure restrains valuations.
His warning also challenges a common defensive reflex. Investors sometimes move money from stocks into longer-term bonds after a strong equity run, expecting bonds to provide a buffer. But Gerber argues that inflation and rising rates can hurt both sides of that trade. When yields rise, prices of existing bonds generally decline, with longer-duration bonds typically more sensitive to the change.
“Moving into bonds is not a place of safety. So it’s really about building up your short-term cash balances, like zero- to five-year Treasuries or zero- to five-year corporate bonds, which are more attractive to me, but really staying at the short end of the curve or even staying in cash and gold instead of just rolling stock profits into bonds, which I think is a mistake.”
—Ross Gerber, when asked what a more defensive allocation looks like
Gerber points to 2022 for illustration. He says that period highlights how higher inflation and higher rates can result in lower stock and bond prices. So, investors relying on bonds for near-term safety should distinguish among their short-duration holdings, cash, and longer-maturity bonds rather than treating all fixed income as a single category.
How Ross Gerber decides what to trim
For Gerber, being defensive does not mean making emotional judgments about a company based on its share price fluctuations. He says he starts with valuation, analyzing whether a holding has a very high price-to-earnings ratio relative to its growth rate. If the valuation appears to be unsustainable, then he may trim the position or eliminate it to create cash reserves.
He cites TKO Group Holdings, which owns the Ultimate Fighting Championship (UFC), as a position he has trimmed. He also names Karman Holdings and Axon Enterprise as examples of holdings with high price-to-earnings ratios that have lagged Nvidia or Micron Technology in his comparison.
Gerber’s bigger picture involves the trade-off between valuation risk and opportunity cost. Selling a high-multiple stock can reduce exposure if rates rise and valuation multiples contract. But it could also mean missing further gains if earnings accelerate or if investors remain willing to pay a premium. However, Gerber is willing to accept that trade-off because he wants liquidity available if the market offers a better entry point in any of the names he prefers.
His approach also depends on separating the stock from its underlying business. A company can execute well, grow revenue, and still become less attractive to him if its valuation no longer matches his expectations for growth. Conversely, he’s still interested in a volatile stock if its underlying earnings growth reduces its price-to-earnings ratio.
Why Nvidia remains central to Gerber’s AI strategy
Nvidia is Gerber’s clearest example of a holding he would keep through an increasing rate environment. He said the company’s price-to-earnings ratio has fallen to less than 30 as earnings have increased, even after the stock moved lower and then subsequently recovered. In his view, that combination of rapid earnings growth and a lower valuation multiple supports a long-term bullish case.
Gerber’s thesis rests on his belief that spending on artificial intelligence infrastructure will continue beyond the near term. AI infrastructure includes the chips, memory, computing capacity, and related systems used to develop and run AI tools. He argues that investors are underestimating the duration of this buildout and the value businesses are already getting from the technology.
He also sees a longer timeframe of opportunity for AI companies, with those that provide the infrastructure being the first to benefit. And, if spending on AI infrastructure eventually slows, he does not automatically view that as a failure on AI’s part, either.
Instead, he expects investors will also steer towards non-technology businesses that benefit from using AI, such as financial services and health care companies. That creates a wider range of the technology’s potential winners, which will impact the broader economy as well.
“If the S&P 500 drops 10%, I’m a buyer. I’m a buyer. So that’s why I have cash.“
—Ross Gerber, when asked for his first move if the S&P 500 falls 10%
Based on his assessment of their positions in AI, Gerber believes Nvidia and Micron Technology would be his first purchases during a pullback. His cash reserve is, therefore, not simply a retreat from risk. It is capital he intends to deploy toward specific companies if a broad market decline creates prices he considers more attractive.
This approach carries limitations, however. A market decline can continue after an investor starts buying, and a company that looks inexpensive on a price-to-earnings basis can still suffer if its earnings expectations weaken.
Who is Gerber’s defensive framework for? Traders vs. Long-term investors
Gerber repeatedly categorizes his decisions as “portfolio management” rather than a universal forecast. He says that Gerber Kawasaki considers allocations that make sense for each client, and that’s a takeaway for a general investment audience as well: A retiree drawing from a portfolio, a younger investor saving regularly, and an active investor with a concentrated technology position can all experience the same market conditions very differently, so keep your goals in mind when deciding your next move.
For long-term, buy-and-hold investors, however, Gerber’s biggest takeaway may be his views on dollar-cost averaging. Unsurprisingly, he’s a big-time believer in it. Dollar-cost averaging involves investing a set amount at regular intervals rather than committing all available money at once, reducing timing risk and maintaining a lower average cost basis. When a stock’s price is down, each dollar buys more of it. When it’s price is higher, each dollar buys less of it.
But for investors with concentrated holdings or a shorter timeframe, Gerber suggests reviewing how much of their portfolio depends on falling interest rates, continued multiple expansions, or a single investment theme. That’s because a portfolio that has become heavily dependent on high-valuation growth stocks may have more sensitivity to an inflation surprise than its owner realizes.
For investors who need money in the near term, the issue is less about finding the next AI winner than it is about preserving flexibility. Gerber favors cash and fixed-income securities with maturities of up to five years rather than extending far out on the yield curve. But before they buy, every investor should ask themselves when this money will be needed, and how much price fluctuation their portfolio can tolerate before then.
What could change Ross Gerber’s opinion?
Gerber’s cautious stance is not permanent. If the War in Iran ends, oil prices fall, rates follow lower, and political conditions become less damaging to the economy, he says, markets could rise 10% over the next six months, and the technology industry could do even better. However, he makes it clear that this is not the likely scenario.
Gerber’s biggest concern is actually an extended conflict in Iran. He believes a broader conflict would be harmful to global economic growth and stock markets. He also describes a Federal Reserve rate hike as a signal that would prompt him to cut risk, particularly in the speculative portion of his portfolio.
His rapid-fire answer on the 10-year Treasury yield was similarly direct: At a yield above 5%, he says he would sell stocks and consider buying 10-year bonds, as he believes higher yields can offer investors more income from safer assets while also raising the hurdle that stocks must clear to justify expensive valuations.
Gerber said he would not exit stocks completely even if the Federal Reserve continues to raise rates. He described himself as a long-term investor and said he would simply reduce the speculative part of his portfolio while retaining core AI holdings.
The takeaway for investors in an inflation-sensitive market
Gerber’s decision-making entertains an uncomfortable possibility: Neither stocks nor bonds are guaranteed to protect a portfolio from inflation shocks. He considers whether each holding’s valuation is justified by its growth, whether the portfolio has adequate cash or short-duration reserves, and whether any selloff would create an opportunity to add to companies he wants to own for years.
Long-term, buy-and-hold investors do not need to adopt Gerber’s preferences to utilize that framework. They can review their time horizon, their concentration in high-valuation stocks, their need for near-term cash, and the role bonds are expected to play in their portfolio. Investors adding new money can consider using dollar-cost averaging instead of trying to identify the exact bottom on any particular stock or sector.
The larger lesson is that a defensive posture need not be an all-or-nothing market call. In Gerber’s version, playing defense means maintaining enough flexibility to withstand an inflation-driven repricing while keeping a disciplined path to invest when the prices of favored businesses become more compelling.
Best Moments
Gerber’s views reflect his assessment of market conditions and the holdings he favors at Gerber Kawasaki. Investors should weigh any allocation decision against their own objectives, time horizon, and risk tolerance.
This article is based on an interview with Ross Gerber on Street Talk · Watch the full segment
Cited segments:
- Gerber says inflation can lift bond yields and lower stock valuation multiples. (0:51–1:44)
- Gerber favors cash and fixed-income securities with maturities of up to five years over simply moving stock profits into bonds. (4:11–5:11)
- Gerber says he trims positions with high price-to-earnings ratios relative to their growth rates. (5:12–7:14)
- Gerber says NVIDIA was trading at less than 30 times earnings in the period discussed and remains one of his top holdings. (7:15–8:27)
- Gerber says he would buy NVIDIA and Micron Technology after a 10% S&P 500 decline. (22:58–23:32)
- Gerber says a 10-year Treasury yield above 5% would lead him to sell stocks and consider buying 10-year bonds. (19:39–19:56)
