Just like that, and the stock markets are pretty much in a correction, with the Dow Jones Industrial Average (DJIA) falling past the 10% mark. It’s a scary and uncertain time, as President Trump looks to reconsider his next moves to defuse a situation that has oil markets rocketing higher and everyday investors fearful that inflation might be making an insidious return.
Arguably, inflation from the post-COVID reopening hasn’t been fully stomped out yet, and with chatter now about rate hikes instead of rate cuts, the bond market is under pressure once again, and the precious metals seem to be giving back a big chunk of their gains from last year.
Given the strength in energy stocks, though, and their recent negative correlation with the broad equity markets, perhaps it’s oil and gas names that could be the ultimate commodity hedges for unforeseen macro crises. Of course, it might be a bit too late in the game to be a big buyer of oil stocks after the run they’ve had.
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The oil shock is causing a bit of panic
While I have absolutely no idea what oil’s going to do at the start of April or the next moves with the conflict over in Iran, I think that investors should adopt more of a bottom-up approach, by looking for stocks that are executing on their long-term game plans, rather than focusing on what could go wrong if energy prices stay higher for longer, potentially paving the way for a stagflationary scenario.
Tech stocks have been on the ropes this year, but the pressures started in the back half of last year. With the Iran crisis considered, perhaps the selling has become severe. Of course, there are tech stocks that may still be overvalued, given the disruptive wave of AI. But, if you know where to look, there are plenty of names that probably don’t deserve to be marked down as the sell-off and negativity broaden.
In this piece, we’ll check in on two tech stocks that might be worth a second look. As always, though, investors must be willing to look bad in the near term. That means expecting a loss after punching a ticket to a plunging stock in the tech scene. If you’ve got the willingness to look like the worst market-timer in the world, at least over the next few weeks and months, perhaps it’s worth it to buy some names that might offer a chance to pay three quarters to get a full dollar.
Shopify and Constellation: These falling stars have cratered
Shopify (TSX: SHOP) and Constellation Software (TSX: CSU) stand out as in the blast zone of the latest sell-off, at least as far as Canadian tech is concerned. At the time of this writing, shares are down just over 36% and 54%, respectively, from their all-time highs.
If you’ve been buying the dip and have been facing rapid, mounting losses, or you’re a bit in “freeze” mode (it’s times like these when fight, flight, or freeze can kick in!) with the expectation that stocks will just get even cheaper tomorrow or next week, perhaps the names can’t get cheap enough.
Either way, if you view the names as having the ability to pivot for the agentic AI age, it might be worth continuing to nibble, even if it feels like taking a nasty-tasting dose of cough medicine.
Corrections happen, and so do crashes. And while there’s no guarantee of a V-shaped bounce in tech, investors who still believe in the longer-term tech-driven opportunity need not buy into the horrifying headlines. Whether it’s the Dow down by 800 points in a day or some other front-page story that might nudge long-term investors to deviate from their path and sell into fear.
You don’t have to jump into the deep end with the fastest fallers at a time like this, but you should be thinking independently based on your personal risk profile.
