In past incidents like this, markets sell off initially but then recover once conflict begins; standing pat has been the right move.
speaker1
Tom Lee
Geopolitical headlines cause risk premiums to jump, but they don't change US fundamentals. Markets sell off into the buildup and tend to do better once the battle begins.
We need to watch gold, the yield curve, and oil. Oil won't affect the US economy immediately, but could down the road.
speaker1
Tom Lee
The worst of the sell-off is going to happen this week. I expect March to be an up month for the stock market.
Lower oil prices have been a huge benefit. If prices rise, it could hurt China and be exported to the rest of the world.
speaker1
Tom Lee
Oil is going to create a price shock because it's embedded in the economic supply chain.
Even US-produced oil is at $72. Oil companies will benefit, but consumers will feel it during an inflation-sensitive time.
speaker1
Tom Lee
Oil shocks risk tipping a weak economy into recession, but that's not where we are. The Fed might be dovish on an oil spike, not hawkish.
The market's recent moves aren't surprising and are unrelated to last week's events. The Block news makes people question AI hype.
speaker1
Tom Lee
Many companies are rolling out AI workers, but it's unclear if this will ultimately create more jobs.
AI will kill a lot of companies, and AI stocks themselves are richly valued after their run.
speaker1
Tom Lee
Software stocks have fallen back to April 2023 levels, which is clearly an overreaction. Groups that got hit hard, including the Mag7, should mean revert.
Maybe AI leaders stabilize, and oversold areas rebound.
speaker1
Are we at a point where the initial market weakness is forming a bottom? What's the outlook for March?
speaker1
Tom Lee
March is likely to be an up month. Software, Mag7, and crypto had early weakness and are probably in final stages of bottoming, which helps lead the market up.
If you looked at Ethereum's price in the middle of the night, would you be worried?
speaker1
Tom Lee
No, because fundamentals are strong with so much being built on Ethereum. If activity is on Ethereum, price should follow.
Does all the building on Ethereum translate to supply/demand dynamics that raise the price, or can networks keep building at $1900?
speaker1
Tom Lee
That's like saying all activity is in the US but the economy shouldn't boom. If it's all on Ethereum, price follows.
Are you buying more Ethereum on the dip? How much and does that continue?
speaker1
Tom Lee
Yes. Bitmain has been buying about $100 million of Ethereum every week. Cash balance is over $800M, so it can make a major buy. We're getting ready for the crypto bottom and still buying about $100M a week.