As equity markets moved Tuesday to recover most of the year’s losses, one financial advisor says he sees some reasons for optimism going forward.
The S&P 500 and Nasdaq 100 indexes both turned higher for the year late Tuesday morning, Bloomberg News reported, reversing multitrillion dollar declines. The reversal came after a pullback in global trade tensions where the U.S. said Monday that it would reduce its combined 145 per cent levies on imports from China to 30 per cent. Meanwhile China said it would reduce its 125 per cent levies on U.S. goods to 10 per cent.
Michael Zinn, managing director and financial advisor at UBS, said in an interview with BNN Bloomberg Tuesday that he thinks the S&P 500 “definitively punching above” its 200-day moving average is a “very supportive case for the bulls.” Now he says he will be looking to see how markets react to any potential negative earnings prints or macro data.
“My sense is we are going to see more of a buy the dip mentality than a sell the rally mentality, and one of the reasons why I say that is because I think institutions generally did a fairly good job avoiding the big decline in the broad markets, but they haven’t really re-engaged for the rally,” he said.
“This rally has kind of been characterized as a hated rally, and as we have walked back this more oppressive tariff regime, I think what they call the left tail risks; the risks of inflation, the risks of recession, those have abated. The VIX (Cboe Volatility Index) is now below 18, so I think it’s more of a green light for institutions to re-engage.”
Broadly, Zinn noted that results from the most recent earnings season were “pretty solid,” with many firms beating expectations. He added that some sectors, like airlines and auto companies, had issues forecasting but by and large the results are “encouraging.”
Meanwhile large technology companies had encouraging results, Zinn said, delivering positive guidance and sticking to capital expenditure numbers.
“I would say that coming into 2025, before the tariff decline happened, we had a little bit of a valuation problem, particularly as far as tech goes. You just had some super high valuation on particularly the AI names. That has deflated a bit. It is better than it has been and earnings have come in better than expected,” he said.
“So, valuation…tends to be an issue that can exacerbate things if there’s a concern on the downside. But if the narrative shifts to being more positive, that we’re going to transition now I think away from tariffs, more to the tax cutting, jobs restitution…more emphasis on that, on all these kind of deregulatory issues and tax cut issues. I don’t see valuation being a big problem for the market as long as the news continues to be relatively favorable.”
Given the current circumstances, Zinn said he continues to focus on the U.S. tech sector and with the current U.S. administration focusing on manufacturing and reshoring, he said he is also interested in grid infrastructure.
“We do think financial deregulation is going to have some teeth in terms of the capital ratios of banks, ability to trade in crypto, lots of different areas, potential M&A activities. So regional banks, financials, that all looks pretty positive to us too,” Zinn said.
“And the derivatives of AI, we think are also still interesting. Some of the power plays related to supporting data center construction. So those are areas for us that I think will be good here in the U.S.”
