Don’t let the tariff turmoil cause you to throw in the towel on stocks as a whole. Undoubtedly, the S&P 500 spilled further on a tumultuous Monday session that saw the Dow Jones Industrial Average shed close to 1,000 points as China reacted further. Undoubtedly, we’re in the midst of one of the nastiest tariff wars in recent memory. And as the economic battle goes beyond just levies on imports, questions linger as to just how bad things can get. Undoubtedly, buying the dip may or may not pay off in 2025.
In any case, longer-term investors shouldn’t give up on secular trends and themes (think the generative artificial intelligence (AI) boom) just because of an escalating trade war. Indeed, the trade war could last months, quarters, or even years. But, at the end of the day, those investors who have the luxury of a really long investment horizon (think +10 years) should be willing to put a bit of money to work on those really bad days in markets.
Of course, many retail investors who’ve bought the dip could be waiting a long time before the tides turn. That’s why I’d suggest buying slowly throughout the course of the next few months and quarters so that you’re not left without liquidity should today’s solid stock market “deals” become massive bargains should another dip in markets be in the cards.
Buying the dip is painful, and it may not be met with rapid rewards
You not only need a lengthy multi-year (or even multi-decade) time horizon, but you also need a high pain tolerance, given that stocks tend not to bottom out after you’ve initiated a position. In fact, buying in bear markets can be the formula for further losses, causing one to doubt their abilities and eventually pressuring one to sell at a loss. I’m sure you’ve heard of buying low and selling high.
It tends to work wonders in bull markets when retail investors double down on those short-lived dips. However, if we are, in fact, in the midst of a gruelling bear market, the “buy low and sell lower” phenomenon could occur as investors are put to the test by horrifying headlines and falling analyst price targets.
In this piece, we’ll look at two solid AI stocks that are currently down but could do well over the next five to 10 years. Indeed, there’s probably more pain on the horizon as the sell-off worsens. But if you have the time, stomach, and investment dollars to ride things out at a lower level, it may be time to start nibbling as they continue to invest in growth drivers. At the end of the day, strong secular trends are still worth following, even as investor focus shifts elsewhere to more pressing risks facing the world economy.
Amazon
Amazon (NASDAQ:AMZN) is a U.S. e-commerce and public cloud titan we’re all familiar with. As the company moves into its quarterly earnings in a position of pain, questions linger as to whether the budding AI giant can get back to its winning ways amid a mounting tariff war. I think it can, as earnings begin to work their way back to the headlines.
The stock is down 31% from its highs and looks to be the cheapest it’s been on a forward price-to-earnings (P/E) basis, going for 26.1 next year’s expected P/E. That’s too cheap for an underrated AI firm that’s been investing a great deal in automation, robotics, and chatbots.
Will there be turbulence as tariffs look to weigh down the $1.77 trillion juggernaut? Sure, but I think longer-term investors should be ready and willing to buy as shares approach 52-week lows of $167 and change per share.
