Asset management company bullish on US stocks: Last week due to seasonal volatility, market not overheated, tech stocks not in a bubble.

With the massive sell-off of US tech stocks last week sparking concerns of an economic downturn, asset management company Crossbridge Capital believes that the market has not really experienced severe overbuying, but rather heightened volatility created by a few stocks seasonally, with no overall tech bubble.

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The U.S. Stock Market Is Not Overheated

Crossbridge Capital's Chief Investment Officer, Manish Singh, revealed on CNBC that the widespread sell-off in the U.S. stock market last month and last week is not expected to continue. He also mentioned that there is no overbought situation, therefore a bearish view is not warranted.

Previously, the tech-heavy Nasdaq 100 NDX index dropped by 1.6% in July and has fallen over 4% since the beginning of August. The stocks of the "Magnificent 7" leading large tech companies have been hit the hardest, sparking fears of an impending tech bubble burst.

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Singh clarified the main reasons for the tech stock surge in the first half of the year and stated that the global market is cautiously rebounding from the sharp drop at the beginning of August:

Some tech stocks have performed well, but this is mainly due to their actual performance rather than market speculation, so there is no need to worry about the market being in a bubble on the verge of collapse.

He also emphasized that the current market is not overly reliant on a few stocks:

Even though some tech stocks are doing well, when considering all the stocks in the Nasdaq index, the overall performance has been flat over the past three years, indicating that the market has not lost balance due to the performance of a few stocks, and the overall market is not overvalued.

He added, "The annual growth rate of the S&P 500 index is less than 4%, indicating that the market is not excessively overbought, so it is unlikely to lead to further large-scale sell-offs."

Singh also noted that investors have not completely lost faith in the market, as they sold off on disappointing Microsoft earnings but continued to buy on AMD's impressive performance, showing that demand remains strong.

Asset management giant Morgan Stanley also stated last week that even though tech stocks experienced severe volatility last month, the performance of other stocks has been particularly strong, indicating that the market seems to be undergoing a rotation of funds.

Market Volatility Will Continue and May Expand

Furthermore, Singh mentioned that global capital markets' volatility may persist and even increase:

Similar situations occurred in the market last year, following a seasonal pattern, and we expect volatility to increase in August.

He added, "This is not much different from previous U.S. election years, where significant volatility occurs in the first few months and rebounds post-election."

Matheus Dibo, Managing Director of Investment Strategy at Goldman Sachs, also shared a similar view, pointing out that the VIX panic index soared to unprecedented levels last week since the 2008 financial crisis, but the context is different:

The rise in the VIX index is mainly influenced by yen carry trade unwinding and macroeconomic concerns, leading to simultaneous declines in stocks, bond yields, and commodities.

There are several important data releases in August that will further impact market volatility, including U.S. retail sales data, consumer price index, and the Federal Reserve meeting.

However, he emphasized that despite heightened market volatility, the fundamentals of the U.S. economy remain strong.