MW As stocks stumble, investors should take a lesson from the Cuban Missile Crisis, says this bull

By Jamie Chisholm

Markets are able to rally even before periods of intense angst end, notes Tom Lee

Futures early Friday show the S&P 500 on the front foot after it fell into correction territory. But traders will be wary. Many times of late they have bought the dip only to find it quickly got dippier.

Still, so swift has been the stock market sell-off - as concerns about tariff turmoil have pulsed through the market - that inevitably those of a more bullish persuasion are arguing a recovery is due.

Tom Lee, the seemingly perennially stock-optimistic head of research at Fundstrat Global Advisors, this week noted that equities had fallen 10% in the fifth shortest time on record - a savage retreat that implies equities were oversold in the short term.

In a new bulletin Lee accepts that equity markets currently are being roiled by tariff headlines. And with Trump's reciprocal tariff deadline still three weeks away it may prove difficult for investors to cope with the angst.

"In short, many are arguing that going to cash is the only 'sane' strategy," he notes.

However, he argues there are "multiple reasons to expect markets to find their footing before the April 2 tariff deadline."

The first thing to note is that it's not set in stone that reciprocal tariffs begin after April Fools' Day. Lee suggests the tariff negotiations could see a breakthrough before then. Furthermore, he welcomes the fact that there's been relatively little trade "bashing" of China and Mexico of late.

It's perhaps informative, he notes, that the stock markets of the countries that may suffer most economically from tariffs - China, Europe, Mexico and Canada -have continued to outperform the U.S. in recent weeks.

And besides, he says, in 2018, U.S. stocks bottomed well before the July tariff deadlines.

Indeed, he extends the narrative that the market will start to look beyond the uncertainty before it actually ends by presenting what happened during the Cuban Missile Crisis in 1962.

The showdown between the U.S., Cuba and the Soviet Union lasted 12 days, from Oct. 16 to Oct. 28. Initially, stocks fell 5% during the first seven days but then rose for the next five days by 4%, recovering two-thirds of the losses.

"At that time, it was a World War that was threatened, between Russia and USA. The tariff wars are far less risky (in terms of lives) but the stock market has fallen a larger -10%.," says Lee.

Another factor that may support investor sentiment is next week's Federal Reserve policy decision. No interest rate cut is expected and so the focus will be on how Chair Jerome Powell views policy as signs grow of tariff uncertainty damaging household and corporate confidence.

"Overall, it would be a surprise to see a hawkish Fed given the relatively tamer inflation data and the growing signs of economic weakness," says Lee

For all his positivity, Lee says he would like to see evidence that investors have sufficiently deleveraged so that equity markets are near a sustained bottom. Yet his colleague, technical strategist Mark Newton, sees signs of a low emerging.

"It's expected that lows to this sell-off could be achieved within the next two weeks from a timing perspective, and prices are nearing possible support...Overall, we're growing closer," says Newton.

Markets

U.S. stock-index futures (ES00) (YM00) (NQ00) are higher as benchmark Treasury yields BX:TMUBMUSD10Y rise. The dollar index DXY is up, while oil prices (CL.1) climb.

   Key asset performance                                                Last       5d      1m       YTD      1y 
   S&P 500                                                              5521.52    -3.78%  -9.71%   -6.12%   7.20% 
   Nasdaq Composite                                                     17,303.01  -4.24%  -13.25%  -10.40%  7.28% 
   10-year Treasury                                                     4.294      -0.70   -18.60   -28.20   -2.40 
   Gold                                                                 2998       2.75%   3.60%    13.59%   38.83% 
   Oil                                                                  67.25      0.30%   -4.70%   -6.43%   -16.99% 
   Data: MarketWatch. Treasury yields change expressed in basis points 

The buzz

U.S. economic data due Friday include the final reading of March consumer sentiment, released at 10 a.m. Eastern.

Senate Democratic leader Chuck Schumer said he now will consider a Republican-led funding bill that will avert a government shutdown.

DocuSign shares $(DOCU)$ are up 12% in premarket action and Ulta Beauty stock $(ULTA)$ is gaining more than 6% after both companies delivered well-received earnings late Thursday.

Gold (GC00) has breached $3,000 an ounce for the first time.

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The chart

U.S. investors have been accused in the past of being too parochial. But why wouldn't you keep investments in-country when the U.S. has so many exciting and dominant companies? Besides, judging from the chart below from Vanda Research, U.S. retail investors in particular are perfectly happy to move funds abroad if the narrative - in this case an undervalued region potentially about to undergo a Germany-led fiscal boost - becomes more attractive.

However, Vanda warns: "One interesting observation here is that whenever U.S. mom-and-pop traders finally seem to chase the international diversification story it is almost always too late...should these new investments perform poorly, we wouldn't be surprised to see individuals quickly revert to their favorite blue-chip, large-cap domestic tech stocks."

Top tickers

Here were the most active stock-market tickers on MarketWatch as of 6 a.m. Eastern.

   Ticker  Security name 
   TSLA    Tesla 
   NVDA    Nvidia 
   PLTR    Palantir Technologies 
   GME     GameStop 
   TSM     Taiwan Semiconductor Manufacturing 
   AAPL    Apple 
   INTC    Intel 
   NIO     NIO 
   AMZN    Amazon.com 
   SMCI    Super Micro Computer 

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-Jamie Chisholm

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March 14, 2025 06:29 ET (10:29 GMT)

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