Is Now the Time to Buy the Dip in US Stocks, Particularly Value-Driven Asset Managers Like Federated Hermes?

The U.S. equity market in 2025 has been a rollercoaster, driven by the Trump administration’s aggressive tariff policies and the resulting uncertainty. Tariffs averaging 20.2% in July 2025—the highest since 1911—have triggered sharp swings in indices like the S&P 500 and Nasdaq, with declines of 1.6% and 2.2%, respectively, in late August [1]. Yet, amid this turbulence, value-driven asset managers like Federated Hermes (FHI) have emerged as compelling opportunities for long-term investors. With a forward P/E of 9.77, a B VGM Score, and robust earnings revisions, FHI exemplifies the strategic value investing principles that could thrive in a volatile macro environment.

Tariff-Driven Volatility: A Double-Edged Sword

The surge in U.S. tariffs has created a paradoxical market dynamic. While policymakers aim to protect domestic industries, the legal and economic uncertainties have spooked investors. For instance, the Supreme Court’s pending review of the legality of tariffs under the International Emergency Economic Powers Act (IEEPA) has kept markets on edge, with the VIX volatility index spiking to multi-month highs [2]. According to J.P. Morgan Global Research, the average effective tariff rate climbed to 15.8% by August 2025, a stark contrast to the 2.3% recorded at the end of 2024 [3]. This escalation has not only raised consumer prices by 2.1% but also reduced real GDP growth by 0.9 percentage points in 2025 [4].

However, the market’s reaction has been uneven. Sectors like technology, particularly those dominated by companies like NVIDIA, have cushioned the blow due to their outsized influence on market capitalization [5]. Meanwhile, value-oriented sectors—such as asset management—have seen their valuations dip, creating entry points for disciplined investors.

Federated Hermes: A Case Study in Resilient Value Investing

Federated Hermes, a leading asset manager with $845.7 billion in assets under management (AUM), has navigated this environment with notable success. Its Q2 2025 earnings of $1.16 per share—surpassing estimates by 12.62%—highlight its operational strength [6]. Revenue grew 6% year-over-year to $424.84 million, driven by higher fees from money market and alternative assets [7]. These results, coupled with a forward P/E of 9.77, position FHI as a compelling value play.

The Zacks Investment Research VGM Score—a composite metric of value, growth, and momentum—further underscores FHI’s appeal. Its B rating reflects strong value characteristics (low valuation), improving growth (10% increase in equity AUM), and positive momentum (13.73% earnings surprise) [8]. This trifecta aligns with the principles of strategic value investing, which seeks companies that combine attractive valuations with durable earnings power.

Defensive Yet Growth-Anchored: The FHI Thesis

Federated Hermes’ business model offers a unique blend of defensiveness and growth potential. Its dominance in money market funds—accounting for 75% of AUM—provides stability, as these products remain in demand regardless of market conditions [9]. Meanwhile, its expansion into private markets and digital assets, as highlighted by CEO Chris Donahue, signals long-term growth avenues [10]. The company’s recent share repurchase program, authorizing an additional 5 million shares, further enhances shareholder value [11].

Critically, FHI’s valuation remains compelling. With a forward P/E of 9.77, it trades at a discount to the S&P 500’s 18.5x multiple, reflecting its out-of-favor status during the tech-driven rally. This gap could narrow as investors rotate into undervalued sectors, particularly if the Fed’s anticipated rate cuts in Q4 2025 reduce discount rates and boost value stocks [12].

Navigating the Macro Risks

While FHI’s fundamentals are robust, investors must remain mindful of macro risks. The Trump administration’s proposed 200% tariffs on pharmaceuticals, if implemented, could ripple through the economy and weigh on market sentiment [13]. Additionally, retaliatory measures from trade partners—though not yet materialized—could exacerbate volatility. However, FHI’s defensive business model and strong balance sheet (with $607 million in cash and investments) provide a buffer against near-term shocks [14].

Conclusion: A Strategic Buy for Long-Term Investors

The current market environment, marked by tariff-driven dips and divergent sector performance, presents a rare opportunity for strategic value investors. Federated Hermes, with its attractive valuation, strong earnings revisions, and B VGM Score, embodies the qualities of a company poised to outperform in a more stable macro climate. While short-term volatility persists, the long-term fundamentals of asset management—driven by demographic trends and the need for diversified portfolios—remain intact. For investors with a multi-year horizon, FHI offers a defensive yet growth-anchored bet in an uncertain world.

Source:
[1] US Tariffs: What's the Impact? | J.P. Morgan Global Research [https://www.jpmorgan.com/insights/global-research/current-events/us-tariffs]
[2] Stocks Fall, Yields & VIX Soar After Tariff Ruling | Schwab [https://www.schwab.com/learn/story/stock-market-update-open]
[3] State of U.S. Tariffs: July 23, 2025 | The Budget Lab at Yale [https://budgetlab.yale.edu/research/state-us-tariffs-july-23-2025]
[4] State of U.S. Tariffs: July 14, 2025 | The Budget Lab at Yale [https://budgetlab.yale.edu/research/state-us-tariffs-july-14-2025]
[5] Markets stave off tariff pressures | Raymond James [https://www.raymondjames.com/tca/resources/2025/09/02/markets-stave-off-tariff-pressures]
[6] Federated Hermes (FHI) Beats Q2 Earnings and Revenue Estimates [https://www.nasdaq.com/articles/federated-hermes-fhi-beats-q2-earnings-and-revenue-estimates]
[7] Federated Hermes, Inc. Reports Record Assets Under Management [https://www.prnewswire.com/news-releases/federated-hermes-inc-reports-record-assets-under-management-with-second-quarter-2025-earnings-302519091.html]
[8] Federated Hermes (FHI) is a Top-Ranked Value Stock [https://www.nasdaq.com/articles/federated-hermes-fhi-top-ranked-value-stock-should-you-buy]
[9] Earnings call transcript: Federated Hermes beats Q2 2025 earnings expectations [https://www.investing.com/news/transcripts/earnings-call-transcript-federated-hermes-beats-q2-2025-earnings-expectations-93CH-4166209]
[10] Federated Hermes Inc (FHI) Q2 2025 Earnings Call Highlights [https://finance.yahoo.com/news/federated-hermes-inc-fhi-q2-070801602.html]
[11] Federated Hermes Announces Share Repurchase Program [https://www.prnewswire.com/news-releases/federated-hermes-inc-reports-record-assets-under-management-with-second-quarter-2025-earnings-302519091.html]
[12] The August 2025 Stock Market Volatility: What Drives ... [https://www.ainvest.com/news/august-2025-stock-market-volatility-drives-sudden-reversals-investor-sentiment-2508/]
[13] Trump Tariffs: The Economic Impact of the Trump Trade War [https://taxfoundation.org/research/all/federal/trump-tariffs-trade-war/]
[14] Federated Hermes, Inc. Reports Record Assets Under Management [https://www.prnewswire.com/news-releases/federated-hermes-inc-reports-record-assets-under-management-with-second-quarter-2025-earnings-302519091.html]