"I always tell my students that you should find an opportunity to teach. When you teach others, you teach yourself." – Itzhak Perlman

Good evening, 

Tech investors certainly had their resolve tested this week, with the tech-heavy Nasdaq declining 3.45%. Not that broader equity investors had it much easier, what with the S&P 500 tumbling 3.1% and posting its worst week of the year to date. While the losses can sting, Fundstrat Head of Research Tom Lee continues to urge clients to maintain fortitude and to "stay on target." As he reminded us this week, buy-and-hold strategies tend to outperform efforts to time the market. 

He made the case for that by citing the rule of “10 best days,” – to wit, the stock market makes most of its gains in the 10 best trading days of any given year. Since 1928, the S&P 500 has averaged annual returns of 8%. But if one were to exclude returns generated on the 10 best days of each year, those returns transform into average annual declines of 13%. As our Chart of the Week shows, this rule has held up in the past decade. Average annual returns of the S&P 500 since 2015 have been 12%, but excluding each year's 10 best days, the index has notched an average annual 10% decline.

Thus, attempts at tactical exits and re-entries into the market mean potentially missing out on some or all of those 10 best days. "Investors must remain mindful of the significant opportunity cost associated with remaining sidelined, even during periods of volatility," Lee stressed.

Head of Technical Strategy Mark Newton is similarly maintaining a proverbial stiff upper lip. "When you strip out the effects of technology, the breadth has actually been quite a lot more positive than we saw back in the middle part of January," he told us at our weekly research huddle. "So yes, we have done a little bit of damage in the last few weeks, but the broader trends arguably are still intact. Honestly, we're heading into a level where, in my view, we're going to find pretty good support and start to turn higher."

Newton noted that a lot of the pain being seen in the markets is "really has been technology weakness." However, he noted that there are other parts of the market that now look technically attractive to him. "It’s thought that both REITS and Utilities might continue to offer above-average performance and should serve as a choice for those who wish to lower their portfolio correlation and reduce their Technology exposure," he suggested.

Furthermore, "Chinese equities, along with many Emerging markets, have finally started to wake up as the US Dollar declines," he observed, and though he still favors U.S. equities over Chinese stocks in the long-term, "at present, [the China large-cap ETF] FXI 1.28%  has been working well and appears like an interesting choice for those looking to reduce exposure to U.S. Technology. Other emerging markets of interest are India (INDA 0.53% ) and Mexico (EWW 2.41% )."

There's no denying that the Trump administration's tariff forays have weighed on the market's mood, sending AAII (American Association Individual Investor) sentiment to levels that Newton described as "almost extreme fear levels." To him, this seems like an overreaction. "A 5% drawdown is certainly not the end of the world," he suggested, while reminding us that the last two times that AAII sentiment got this bearish were in 2022 after the market fell 25%, and 2009 after a 40% drawdown. "Nine times out of 10 when [investors get this fearful], it's really getting close to a time you want to buy the market," Newton added. 

Lee also sees initial signs of a possible turnaround approaching. "The recent stock-market drawdown appears to have triggered a shift in rhetoric from Trump and his team," Lee observed, citing this as "evidence of the Trump put returning." He further noted that this week, the Trump administration made conciliatory statements about tariffs on Canadian and Mexican imports, which "signals some desire to reduce harsh financial market consequences." 

At the same time, the Fed put could be returning as well. In Lee's view, this week's weak jobs numbers could not only reinforce the Trump put but also bring the Fed put back into play, potentially "limiting the downside risk for stocks."

Sector Allocation Strategy

These are the latest strategic sector ratings from Head of Research Tom Lee and Head of Technical Strategy Mark Newton – part of the March 2025 update to the FSI Sector Allocation Strategy. FS Insight Macro and Pro subscribers can click here for ETF recommendations, precise guidance on strategic and tactical weightings, detailed commentary, and methodology.

Elsewhere

The February jobs report showed jobs created missing expectations, and unemployment creeping up from 4% to 4.1%. The U.S. added a seasonally adjusted 151,000 jobs, which was below expectations of 170,000 but still higher than the 125,000 figure notched in January. Some economists asserted that February figures do not include the bulk of the impact from the Trump administration's elimination of federal government jobs, in which case they would show up in the March report.

Nasdaq announced preliminary plans to launch 24-hour trading Mondays through Fridays, citing demand from international investors. Nasdaq President Tal Cohen noted, "Our timeline is pending regulatory approval and alignment with critical industry infrastructure providers, which we anticipate being in the second half of 2026."

A SpaceX exploding rocket briefly grounded flights over Florida, after fiery debris falling from the sky prompted safety concerns. The uncrewed rocket launched from Texas but minutes later experienced what SpaceX euphemistically described as "a rapid unscheduled disassembly." The cause had yet to be determined as of this writing. 

European Union leaders agreed to a EUR 800 million ($841.2 billion) boost to defense spending, seeking to counter what many see as Trump's abandonment of Ukraine. The largest defense package in EU history passed during discussions in which French President Emmanuel Macron suggested extending his country's nuclear deterrent to cover the European Union to counter what he described as Russia's "threat to France and Europe."

Germany tentatively agreed to a significant spending increase that circumvents the country's constitutional limits on borrowing by exempting defense spending above 1 per cent of its GDP from the calculation. Though largely seen as part of incoming Chancellor Friedrich Merz's vision of a more militarily assertive Germany in response to Trump's stance on support for Europe, the spending package is also anticipated to provide fiscal stimulus to the country's ailing economy.

BlackRock agreed to pay $22.8bn to take control of 43 ports, including two at either end of the Panama Canal. BlackRock reached the deal with Hong Kong billionaire Li Ka-shing’s CK Hutchison, which has struggled in recent years but is in the midst of bidding for the troubled British utility company Thames Water.

Michael Bloomberg was the single-most generous individual in the world in 2024, topping the Chronicle of Philanthropy's list for a second year in a row. The former New York mayor and founder of the financial data company bearing his name gave away $3.7 billion last year.

And finally: Scientists have identified a gene that interferes with the pathway used to signal the brain about satiety, thus predisposing those who have it with the tendency to eat more. The gene, which was found in both humans and labradors, amounts to what scientists called "a genetic drive to overeat."