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On Wednesday evening, Treasury Secretary Scott Bessent weighed in on the recent stock market sell-off, attributing much of the downturn to a sharp pullback in tech stocks rather than the trade policies of President Donald Trump.

During an interview with Bloomberg TV, Bessent commented, “I’m trying to be Secretary of Treasury, not a market commentator. What I would point out is that especially the Nasdaq peaked on DeepSeek Day, so that’s a Mag 7 problem, not a MAGA problem.”

DeepSeek's Impact on Tech Stocks

Bessent’s comments referred to DeepSeek, a Chinese AI startup whose new language models created a ripple effect in the stock market. The launch of DeepSeek’s models in late January raised alarms among investors, who began questioning whether U.S. tech giants like Apple, Amazon, Tesla, Alphabet, Microsoft, Meta, and Nvidia were over-investing in AI. The models were seen as potentially cheaper alternatives to those being developed by U.S. companies, which led to a massive sell-off in tech stocks.

This sell-off contributed to a 13% decline in the Nasdaq Composite, which had previously reached an all-time high in December 2024. The Magnificent 7 stocks, responsible for much of the Nasdaq’s rise, were especially affected, and this downturn pushed the index into correction territory.

Trump’s Tariffs: A Secondary Factor

While tariffs imposed by President Trump were another factor contributing to the market’s volatility, Bessent downplayed their role in the market’s troubles. Trump’s reciprocal tariff policy introduced duties ranging from 10% to higher rates on goods from several countries, sparking concerns about rising inflation and slower economic growth. As a result, the Dow Jones Industrial Average fell by over 1,100 points, and S&P 500 futures dropped nearly 4% overnight.

Despite this, Bessent argued that the stock market’s peak and subsequent decline occurred long before the latest tariff news. He explained, “If you go back and look, the stock market actually peaked on the Chinese AI announcement,” which he believes is a primary factor behind the current market correction.

Optimism Amid Market Volatility

While acknowledging the challenges posed by both tech sector volatility and trade policies, Bessent remained optimistic about the U.S. economy. He stated, “It’s going to be fine if we put the best economic conditions in place.” The Secretary’s outlook suggests that the market’s recent downturn is part of a natural correction, with broader economic conditions still favoring long-term growth.

Investor Strategy Moving Forward

As the market continues to digest the ramifications of both tariffs and the tech sector pullback, investors are advised to stay focused on a long-term strategy. Experts suggest that the Nasdaq Composite’s recent correction serves as a reminder of the cyclical nature of tech stocks, especially as competition from companies like DeepSeek intensifies. On the other hand, ongoing trade disputes may continue to influence investor sentiment and market expectations in the coming months.

For now, experts recommend that investors adjust their strategies to account for both the evolving tech landscape and the potential economic impact of Trump’s tariffs.

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