In the interview, Seth from Wedbush Securities describes the market as confused amid tariff news, with underlying volatility and a shift from momentum to value stocks, while highlighting Microsoft as a top investment due to its leadership in AI and enterprise cloud services. He also sees potential in homebuilders and REITs if long-term rates fall, prefers the US market over international ones due to stronger growth prospects, and anticipates increased market volatility as tariff uncertainties persist.
In the interview with Wedbush Securities Director of Equity Research, Seth, the current market reaction to tariff news is described as confused. Despite the market hitting new highs and brushing off tariff headlines, there is underlying turmoil with significant negative indicators beneath the surface. Momentum stocks have shifted lower, value stocks have been stronger, and trading volumes have dropped by 15 to 20% compared to previous weeks, indicating some pain among hedge funds.
Seth highlights that the market is priced to perfection, and the new tariff threats against Canada and the EU are causing concern among investors about high valuations and market stretch. Although the VIX volatility index remains low, the uncertainty index is high, reflecting investor uncertainty about whether tariffs will be enforced or rolled back. He expects the VIX to rise as the market grapples with this uncertainty and potential volatility.
Regarding stock picks amid this volatility, Seth identifies Microsoft as a prime investment due to its leadership in the AI revolution. Microsoft’s strong position in enterprise cloud services and AI adoption among its clients makes it a key player to own alongside Nvidia. The AI sector is seen as a major growth driver, with companies like AMD also benefiting from increased revenue expectations tied to AI spending.
Beyond big tech, Seth sees opportunities in less appreciated sectors such as homebuilders and REITs, especially if long-term interest rates decline. Although this is a non-consensus view, he believes falling long-term rates would benefit these rate-sensitive sectors, providing additional investment avenues amid tariff-related market uncertainty.
Finally, Seth expresses a preference for the US market over international markets, which face headwinds from slowing demand and a less favorable currency outlook. The US is expected to remain the most attractive market due to its growth prospects and a more stable dollar, positioning it as the dominant market for investors moving forward.
