Investors have been through countless ups and downs since the start of the year: Positive tech earnings reports and talk of soaring artificial intelligence (AI) demand offered reason for optimism. But worries about AI spending climbing too high, too fast tempered the mood. Since late February, the war in Iran has weighed on investor sentiment, but any signs that the turmoil may soon be over have offered the market a boost.
All of this has led to the S&P 500 fluctuating from gains to losses multiple times, though the negative momentum won out in the first quarter — the famous benchmark ended the period down 4.6%.
Against this backdrop, you might be wondering if you really should buy stocks now. After all, with the war ongoing, oil prices high, and uncertainty regarding the strength of the U.S. economy, plenty of headwinds remain. Fundstrat’s Tom Lee and billionaire Bill Ackman offer an answer to the question that’s crystal clear.
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Three years of a bull market
First, though, let’s briefly consider the stock market’s path over the past few years. The S&P 500 soared, celebrating three years of a bull market this past October, and delivering a 78% gain over the past three calendar years. The reason for such a performance? Investors were feeling confident about a lower interest rate environment — a backdrop that supports corporate and consumer spending — and the potential of AI. They piled into growth stocks, and particularly companies involved in the AI story, and this powered the index’s gains.
Today’s Change
(0.44%) $29.14
Current Price
$6611.83
Key Data Points
Day’s Range
$6579.72 – $6618.13
52wk Range
$4910.42 – $7002.28
Volume
2.3B
The downside here is that this movement also lifted valuations across many stocks, and certain AI players reached levels that prompted investors to question whether a bubble was forming. This concern, along with tech giants’ high spending levels on AI infrastructure, made investors more hesitant. And then turmoil in Iran, and its impact on the economy and markets, added to worries. All of this contributed to the shift in stock market momentum that we saw in the first quarter of the year.
Now, as you wonder whether you should invest in such an environment, let’s turn to words from two investing experts. Tom Lee, managing partner and head of research at Fundstrat Global Advisors, said during an interview on CNBC last week that he would buy stocks at the moment.
“I think we’re 90 to 95% through the sell-off,” he said, noting that stocks tend to bottom early during situations of war. He also predicts that earnings season will show that earnings have been holding up.
“Ignore the bears”
Bill Ackman, the billionaire founder of Pershing Square Capital Management, in an X post last week, encouraged investors to “ignore the bears.” He said many quality stocks were trading at cheap levels and that the present moment was “one of the best times in a long time to buy quality.”
It’s true that many market leaders have seen their valuations drop dramatically, and a good example is AI market leader Nvidia (NVDA +0.10%). The stock is trading at 21x forward earnings estimates, its lowest in a year — and importantly, this level is one often seen in the world of value stocks. So today, Nvidia is offering a value price while maintaining high growth levels. The company recently said quarterly revenue soared 73% to $68 billion.
So, investing experts Lee and Ackman are offering an answer to our question that’s crystal clear: Yes, now is a good time to invest in stocks. But it’s key to remember one major point: Invest for the long term, meaning plan on holding onto a stock for at least five years. It’s impossible to time the market, so a stock you buy today could slip further tomorrow — but when you’re investing for a number of years, that’s OK. Near-term movements are unlikely to greatly impact your returns.
All of this means that now is the moment to go bargain-hunting for quality stocks that have stumbled amid the market turmoil — it’s an opportunity to pay a low price for fantastic companies that have what it takes to supercharge your portfolio over the long run.