The tech sector is experiencing its worst start since 2022, with the "Magnificent Seven" down 16% year to date, following a 67% rally last year.
Roundhill Investments CEO Dave Mazza joins Morning Brief hosts Julie Hyman and Madison Mills to discuss how investors should approach the sector in the second quarter.
To watch more expert insights and analysis on the latest market action, check out more Morning Brief here.
As we look at the Magnificent Seven, really it's been split among the strategists that we've spoken to as to whether they are still sort of all in on big tech or taking a step back. How are you thinking about it since this has really seemed to be the risk aversion barometer that has been very sensitive this year thus far?
Yeah, we know that the Magnificent Seven stocks have been the market generals now for some time and sort of when the generals are wounded, it's hard for the rest of the market, it's hard for the soldiers to really carry the torch forward. And one of the reasons why we're seeing sort of this bifurcation of to your point folks remaining pretty bullish on this group and pounding the table that this is a great buying opportunity and those that are really getting extra cautious is just due to the amount of unprecedented uncertainty that we're seeing. Um just look over the weekend, we're now, you know, the Wall Street Journal is reporting that there could be 20% tariffs uh 20% tariff rate across the board. Um so being much more aggressive than I think even sort of cautious investors and traders were pricing in even on Friday. So the rate of information that we're having just about things that investors and companies themselves can't control is growing and that has made sort of a difficult environment to navigate.
It's certainly difficult, but we are going to ask you how you're navigating it, Dave. Where are you finding opportunity right now and is any of the dip looking attractive to you? Are there any areas even in within tech that you're buying right now?
Yes, so it's interesting. So we're seeing this disconnect between hard data and then soft data. So by soft data, I mean surveys and particularly the consumer surveys have really fallen off a cliff. Um but to to date, hard data, so employment, inflation have not have not rolled over are are not necessarily bad. Um earnings of course, uh last quarter were pretty strong. I think I actually expect to see some strong earnings again, especially out of the tech side in the upcoming earnings season. But right now, um we're we're very cautious. So I think uh boring is better in the very short term if we're sticking with the US. So staples and utilities come to mind. Of course, we know um you know, they've held up a bit better because what we're seeing is just sort of a wave of sort of weaker hands. Um some of that is sort of momentum investors whether that's retail investors or hedge funds who is selling very aggressively. But at the same time, uh and we're seeing this uh with our ETFs, there's still sort of a bid in the markets. Um so people are still allocating to equities but they're doing so while they the share price continues to decline at large. Um so at some point that certainly could stop, um but again, better is boring for the very short term. But I do think there's going to be some opportunities for sort of those high quality Magnificent Seven names as we get into earning season and they can again prove that they're the areas where there's growth coming from, not other places in the equity market.