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Aftershock

Bloodbath or a value investor’s dream? Both retail and institutional investors were busy making moves in the aftershock of sweeping tariffs that wiped trillions off the market.

‘The tariff Pandora's box has been opened,’ noted Goldman Sachs after US$6.6 trillion was wiped out from U.S. equities last Thursday and Friday. It was the worst 48-hour decline in market history.

Hedge funds sold US$40b worth of stocks on Thursday alone, as retail investors bought US$4.7b. It was the biggest hedge fund selling spree and retail buying spree since 2010. But come Friday, retail had stopped much of the dip buying as they came to terms with the Magnificent 7 cohort’s not-so-magnificent session. 

Nvidia ($NVDA), Tesla ($TSLA), Alphabet ($GOOGL), Amazon ($AMZN), Apple ($AAPL), Meta ($META) and Microsoft ($MSFT) collectively shed a trillion dollars in market cap in one day. It’s the worst case scenario for investors with a portfolio overly concentrated in big tech. And that’s because those big tech firms have overly concentrated production in Asia. (China, Taiwan and Vietnam face some of the highest import tariffs).

China still manufactures about 80% of Apple products, so the Cupertino company was hit hard by the news – the stock saw its largest single-day decline in five years. Well, here’s one way to look at it: if your iPhone is about to get more expensive, might as well buy Apple at a discount? 

That philosophy is what Berkshire Hathaway ($BRK.B) chief Warren Buffett is best known for. The value investor thinks it's wise to be greedy when others are fearful, and vice versa. We know that he sold a few of his portfolio favourites over the last year to shore up US$300b in cash… but he doesn’t appear to be deploying it just yet.

Buffett wasn’t the only one shifting gears this year. Nearly 90% of fund managers surveyed by Bank of America in February thought U.S. stocks were overvalued. Around 73% said they thought buying the Mag 7 was the most crowded trade, and most of them had started rotating into bond-sensitive assets.

In the weeks to come, there will be opportunities to hedge downside risks and even rebuild portfolios at better valuations. There might also be more pain. And as investors brace for retaliation tariffs, they also await the start of another earnings season. Big banks JPMorgan Chase ($JPM) and Wells Fargo ($WFC) are first up on Friday, and there’s good reason to believe they’ll lower forward guidance.

There’s no sugarcoating it: this was market carnage. It also might just be a value investor’s dream come true.


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