Keep calm and keep buying quality tech, says Bell Potter

The headlines over the past month have been ugly, mixed and at times downright nonsensical - truce, no truce, tariffs on, tariffs off - and they’ve only added to the misery for Australian investors holding US growth shares.

But as Bell Potter points out in its latest Reflections on Corrections note, markets have a habit of getting shaken by geopolitical instability.

Of course, the question weighing on everyone’s mind is: “Are we there yet?” - in other words, have we finally found the bottom, after both the S&P 500 and ASX 200 flirted with correction territory before the latest rebound?

To help investors navigate what feels like a chaotic and scary stretch for markets, Bell Potter investment strategist Rob Crookston has laid out a timely framework for thinking through the sell-off.

A crash course in the history of corrections

Crookston argues this is less a reason to panic and more a reminder of how bull markets actually behave.

“While the S&P 500 has recently seen a peak-to-trough decline of approximately ~9% (before the most recent partial recovery), it is important to note that intra-year drawdowns of 10% are a feature of healthy bull markets,” he says.

The key point is what tends to happen next.

Bell Potter’s analysis of the past 20 years shows markets have typically posted robust positive returns over 6, 12 and 18-month horizons following a 10% correction. As such, the periods that feel the most uncomfortable are often the ones that lay the groundwork for the best long-term returns.

Why Bell Potter still backs the US

While the risk of recession rises as the conflict drags on, Bell Potter still views the US economy as operating from a position of relative strength.

Crookston points to four key pillars.

First, the labour market remains resilient. Despite headlines around software-led layoffs, US unemployment remains near historic lows at 4.3%.

Second, the Fed still has room to move. With rates still restrictive, policymakers retain significant dry powder if growth falters.

Third, fiscal stimulus is still working through the system. The US$3.7 trillion “One Big Beautiful Bill” continues to support demand, with reports suggesting Americans are receiving around US$4,000 in extra tax refunds, money that could feed directly into spending and credit growth.

And finally, the AI boom is far from over. The hyperscaler capex race may not dominate headlines every day, but the structural spend behind semiconductors, cloud infrastructure and enterprise AI remains intact.

That’s why Crookston argues:

"While the risk of recession rises as this conflict persists, the US economy continues to operate from a position of relative strength. This positions the US economy favourably to weather a supply-driven shock and support the equity market if we see further de-escalation in the Iran conflict."

Quality is now trading at a discount

With markets dragged lower by headlines rather than broken fundamentals, Bell Potter sees a chance to buy quality at cheaper prices.

“We are observing significant opportunities in the US, where the recent drawdown has compressed the forward P/E ratio from ~23x to ~20x."

In particular, Crookston notes the Mag 7 ex-Tesla is now trading on roughly 22x forward earnings, hovering near decade lows.

"Heavyweights such as Microsoft, Amazon, and Nvidia are trading at or near ten-year valuation lows, yet they maintain a defensive earnings outlook."

As Crookston puts it, these businesses remain “largely insulated from the risks of rising oil prices and slowing global growth.”

Bell Potter’s two ETF ways to play it

To express that view, Bell Potter points investors to two ETFs.

The first is Global X FANG+ ETF (ASX: FANG). It provides concentrated exposure to 10 mega-cap growth leaders, including the original FANG names (Facebook, Alphabet, Netflix and Google) plus Microsoft and Nvidia.

"With a management fee of 0.35% per annum, it offers an efficient way to target the specific mega cap tech names that have seen the most significant sentiment-driven de-rating despite their robust balance sheets and leading roles in the AI revolution," Crookston says.

The second is VanEck MSCI International Quality ETF (ASX: QUAL), which offers exposure to around 300 high-quality global companies screened for high ROE, stable earnings growth and low leverage.

"While still heavily weighted towards US technology giants like Apple and Microsoft, QUAL provides a broader safety net by including high quality names across healthcare, industrials, and consumer staples."

So... are we there yet?

Well, if you haven’t figured it out by now, the moral of the story is that no one has a crystal ball, and no one consistently picks the exact turn.

That’s precisely why Bell Potter’s message is not about trying to nail the bottom tick. It’s about continuing to accumulate quality assets when fear hands you a discount.

"History has shown time and again that the strongest long-term returns are often generated by investors who have the fortitude to increase exposure when the outlook appears most clouded," Crookston says.

By prioritising fundamentals over headlines, disciplined investors can turn volatility into long-term wealth creation. In that respect, US quality may still have more bite than the market is giving it credit for.