This week, the stock market is experiencing quite a bit of turbulence, largely due to the ongoing tariff negotiations between the Trump administration and several countries. Despite this rollercoaster, investor Daniel Loeb of Third Point is advising everyone to stay calm. Loeb, a notable hedge fund manager, remains confident that stocks will ultimately gain from the current economic climate, even when facing the occasional shake-ups linked to President Trump’s distinctive style of policymaking.
In his latest letter to investors, dated Tuesday, Loeb expressed his belief that the overall conditions for investing in stocks will stay favorable. However, he did highlight that investors should brace for occasional disruptions, given the administration’s unconventional methods of implementing policies that impact both the markets and the broader economy. He emphasized the necessity for critical thinking during the relentless wave of news and policy updates from the government.
Loeb pointed to the recent volatility surrounding DeepSeek, a Chinese AI competitor, describing it as a clear case of market irrationality. He also mentioned that Trump’s freshly announced tariffs on Mexico, Canada, and China might not be as damaging as the headlines suggest. China has responded by imposing additional tariffs of up to 15% on certain U.S. goods starting February 10.
Interestingly, Loeb’s perspective is more optimistic compared to some other well-known investors who have sounded alarms over the adverse impacts of Trump’s tariff and immigration strategies. Steve Cohen from Point72 has expressed concerns, indicating that some of the president’s policies could trigger inflation and reduce consumer spending, possibly leading to a rocky market later in the year. Meanwhile, Paul Tudor Jones remarked on Monday that the financial markets are entering Trump’s second term much less stable than they were back in 2017, leaving no margin for policy errors.
Third Point’s main fund boasted a 9.2% return in the fourth quarter, achieving a 24.2% gain for 2024, outperforming the S&P 500’s 23.3% increase last year. Loeb explained his optimism about certain sectors poised to benefit from these policies and expects an uptick in mergers, acquisitions, and other corporate actions, which align with his event-driven investment approach. Among the standout performers in his portfolio for the fourth quarter were Amazon, Tesla, LPL Financial Holdings, and Apollo Global Management.
