Recent trading has been traumatic for investors as both the stock and the cryptocurrency markets have been battered amidst rising uncertainty over President Donald Trump’s tariffs, expected headwinds from the employment report, and resurgent inflation.
Indeed, the last five days saw the benchmark S&P 500 index drop 2.66% and the Dow Jones Industrial Average (DJIA) 1.93%. Out of the major and generally strong stocks, Nvidia (NASDAQ: NVDA) arguably received the biggest beating, as it fell 9.21% to $126.63 within the same time frame.
Despite the seemingly dire circumstances, Fundstrat’s legendary analyst Tom Lee remains optimistic about the stock market in 2025 and has recently opined that the latest downturn was merely a “flesh wound.”
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Why Lee believes stocks will rebound after latest drop
According to Lee, despite the fears arising from recent economic news, investors are likely to see strong buying opportunities amidst the recent price drops and are likely to use the opportunity to “buy the dip,” thus leading to a rally.
Nvidia’s imminent earnings report — scheduled for the February 26 after-hours — is also likely to be a strong catalyst, partially because many of the recent headwinds heavily impacted the semiconductor giant, setting the stage for a rebound and partially due to the company’s own track record of beating the already-bullish forecasts.
It is worth remembering that NVDA stock has been something of a hinge for the greater technology sector due both to its size and the speed of its growth in recent years.
The company’s report is likely to be strong as it covers the period preceding most of the anxiety-inducing developments, such as the Trump tariffs, DeepSeek artificial intelligence’s (AI) release, chip export restrictions, and resurgent inflation.
At press time on February 26, investors also appear to be pricing in an NVDA stock recovery as the shares are up 2.38% in the pre-market.
Additionally, Lee believes that subsequent inflation data — which he believes may come in tamer than feared — could prove a bullish catalyst as it could lead to the Fed cutting interest rates sooner, thus providing tailwinds to the market.
Should investors ‘buy the dip?’
Lee has a relatively strong track record in his forecasts.
In September 2024, after two consecutive stock and cryptocurrency dips, he also recommended investors ‘buy the dip’ as he estimated the corrections would be linked to election uncertainty and that they would be replaced by a strong rally before the year’s end.
Still, while 2024 indeed ended with a strong surge — and while his warning that longer-term performance is less certain was mostly accurate — it is worth remembering he missed the mark when he forecasted an eight-week correction starting in early September of the year.
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