The Nasdaq composite index peaked between December 2024 through late February. Readers may blame tariffs as the catalyst for igniting the Nasdaq’s (QQQ) 18% drop from its high. Conversely, stock markets could have enjoyed unsustainable valuations.
The meteoric uptrend that began in late 2022 depended on companies supplying artificial intelligence builders. While Nvidia (NVDA) enjoyed immense growth at that time, H20 chip sales restrictions to China will slow sales. ASML (ASML), Taiwan Semiconductor (TSM), and Broadcom (AVGO) also pulled back as investors brace for slower growth.
When might the index end its slump?
Fed Chair Powell remarked at the Economic Club of Chicago that tariffs would likely generate at least a temporary rise in inflation. The Fed will monitor that this price increase is indeed one-time. If it is, tech investors expect rate cuts to continue their course later this year or by next year.
The Fed would need a rate cut if the economy slowed. Weaker product demand would decrease inflation rates. After disinflation or deflation, the lower rates would stimulate the economy. Investors would buy Apple (AAPL), Amazon (AMZN), Nvidia, Microsoft (MSFT), and Alphabet (GOOGL) first.
Next, Applied Materials (AMAT), Micron (MU), and Arista (ANET) would trade higher.
A stronger economy would boost profits for software stocks. Salesforce (CRM), ServiceNow (NOW), Workday (WDAY), and Adobe Systems (ADBE) would rebound next.
