Almost 40 years ago Warren Buffett said that wise investors should “be fearful when others are greedy and to be greedy only when others are fearful.”
Buffett made several famous contrarian investments, such as buying shares of Goldman Sachs in 2008 and Bank of America in 2011, capitalizing on undervalued opportunities during the prevailing panic.
Now, we’re heading for a correction.
On March 10 the Nasdaq Composite dropped 4%, its steepest single-day decline since September 2022. Big-Tech names dropped significantly: Tesla (TSLA) down 15%, Palantir (PLTR) down 10% and Nvidia (NVDA) down 5%.
The S&P 500 index closed at 5572.07, off 0.76%, on March 11. That puts it down 9.3% from its record 6,144.15, set Feb. 19. A correction generally is defined as a 10% drop. The benchmark is down 5.3% year-to-date.
The selloff started in late February, fueled partly by less confidence in AI stocks after disappointing Nvidia results. President Donald Trump’s tariffs added economic uncertainty.
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On March 11 Trump doubled Canadian steel and aluminum duties to 50% from 25%, after Ontario placed a tariff on electricity sent to the U.S. Trump then agreed to reconsider the doubling after Ontario backed off its tariff.
The White House said the 25% tariff would go into effect on March 12, Bloomberg News reported. The two sides reportedly have agreed to further talks.
Meanwhile, the White House has hinted at the possibility of an economic downturn. Trump has declined to say that a recession won’t occur as he attempts to restructure the government.
The U.S. job market fell short of expectations in February, with employers adding fewer jobs than anticipated, while the unemployment rate edged up to 4.1% from 4% in the previous month.
Tom Lee and his team have steadily sounded the bullish drum throughout. He said in December that the S&P 500 would reach 7,000 in 2025.
Credit: Abby Nicolas
What should investors do in the market dip?
Many people did not foresee the market rally in 2023 and 2024, when stocks had been mired in a brutal bear market at the end of 2022.
Conventional wisdom at the time was that stocks would continue to spiral downward, forced lower by an unfriendly Fed and slower economic growth. Few were willing to be bullish, given the drubbing that the S&P 500 took — down 24% between the end of 2021 and the end of September 2022.
Yet, Wall Street veteran analyst Tom Lee was among the most bullish before the stock market’s impressive gains back then.
Lee is the co-founder and head of research for Fundstrat Global Advisors. He has been navigating the stock market since the early 1990s.
Now, amid the market selloff and bearish sentiments, Lee remains bullish and continues to urge investors to maintain fortitude and to “stay on target.”
“I think it’s very possible that March, April, May could actually be one of these huge rally months where we’re rallying 10-15%,” he said on CNBC.
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“Don’t miss ’10 best days,'” Lee noted, emphasizing how crucial these key trading sessions can be.
He explained that last year the S&P 500 gained 20 percentage points from just its 10 best days. Without them, the index would have risen only 4%.
S&P 500 could reach 7,000: Analyst Tom Lee
Lee and his team have steadily banged the bullish drum throughout. He said in December that the S&P 500 would reach 7,000 sometime in 2025. The benchmark’s record close was 6144.15 on Feb. 19.
Mark Newton, Fundstrat’s head of technical strategy, also held an optimistic view.
“When you strip out the effects of technology, the breadth has actually been quite a lot more positive than we saw back in the middle part of January,” Newton said.
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“So yes, we have done a little bit of damage in the last few weeks, but the broader trends arguably are still intact. Honestly, we’re heading into a level where, in my view, we’re going to find pretty good support and start to turn higher.”
“Nine times out of 10 when [investors get this fearful], it’s really getting close to a time you want to buy the market,” Newton added.
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