This is The Takeaway from today’s Morning Brief, which you can sign up to receive in your inbox every morning along with:
Two market shocks less than three weeks into Trump’s second presidential term have revived a playbook familiar to tech investors: “Buy the dip” is alive and kicking.
Tariff fears sparked the latest rout Sunday evening, sending small-cap stock futures down 4% overnight — only to recover nearly all the losses by Tuesday close.
Only a week before, “fears” of cheap AI from the likes of Chinese up-and-comer DeepSeek sent chip stocks crashing, led by AI poster child Nvidia (NVDA).
On both occasions, investors not only bought the dip, but many bought it in the most aggressive way possible: with leverage.
On Monday, Jan. 27, Nvidia suffered a 17% decline — its worst since the depths of the early pandemic in 2020.
Yet, ETF strategist Todd Sohn, CMT of Strategas ETF Research, recently wrote in a note to clients that the GraniteShares 2x Long NVDA ETF (NVDL) pulled in $1.6 billion singlehandedly last week. That product seeks to deliver twice the daily returns of the underlying Nvidia stock, which means that last Monday’s 17% NVDA loss was inflated to 34% in the leveraged product.
“It’s a reflection that the ‘buy the dip’ mentality still exists for Tech,” said Sohn.
According to Vanda Research, during the height of the Nvidia washout, retail traders were funneling cash into the market at the highest rate since the November election period.
“Mom-and-pop traders poured roughly [$4.25 billion] of new capital into US financial markets,” said Vanda, measuring both ETF and single-stock flows over two market days.
This “buy the dip” mentality isn’t new, but it’s become nearly reflexive. Years of easy money and rapid rebounds during the quantitative easing-driven years of global financial crisis recovery up through the COVID rebound conditioned a generation of traders.
This mentality has a good chance of being tested again soon. (And maybe again, and again.) So far this year, markets have been sensitive to event risk, as the DeepSeek and tariff developments have shown. And with an active president in the first year of his term, stocks are already navigating a seasonally choppy stretch — one that tends to invite volatility even in calmer times. Factor in the sheer number of market-moving headlines, and even the most bullish strategists acknowledge turbulence ahead.
