Investors rushed out of U.S. technology stocks in strong market rotation

Investors are dumping the stocks of many technology companies that soared during the pandemic as they turn to banks, industrial groups, and energy producers whose wealth is closely related to economic recovery.

Although the large index used by investors to measure the strength of the US$54 trillion US stock market seemed calm at the beginning of the year, the outlook for some of the largest US companies has changed.

This Fierce rotation Part of the reason is that the Omicron coronavirus variant is expected to be less destructive to the world’s large economies than previous strains.

Action is magnified Sell ​​off In the 22 trillion U.S. dollar Treasury bond market, the backbone of the global financial system. As the yield on US government debt climbed earlier this year, the attractiveness of many unprofitable companies has been hit—including many companies that have only recently gone public. Their valuations depend on potential future earnings and are therefore sensitive to rising interest rates.

Hani Redha, a portfolio manager at PineBridge Investments, said that “Spec-tech is undermining,” referring to unprofitable and highly valued “speculative” technology companies that have suffered The biggest hit.

The closely watched index compiled by Goldman Sachs, which tracks the returns of loss-making technology groups, fell 6% this year, well behind the benchmark S&P 500’s 0.2% gain. The stock price of Berkshire Hathaway-backed software maker Snowflake fell 11 In the first few days of 2022, e-commerce groups Etsy and Farfetch both fell 10%.

The drugmaker Moderna and Covid’s test processor Quest Diagnostics both performed well last year, but fell by 12% and 8% respectively in 2022.

In contrast, investors have turned to stocks of automakers Ford and General Motors and banks including Bank of America and Citigroup. The KBW Bank Index has risen by nearly 7% this year, setting a record high.

Company in Tourism and leisure industryThe worst hit during the pandemic also rose, with shares of American Airlines and United Airlines and cruise ship operator Carnival rising. The Goldman Sachs Index, which is closely related to the reopening of the U.S. economy in 2021, has risen nearly 5% so far this year, including shopping center operator Simon, hotel group Marriott International, and aircraft manufacturer Boeing.

The bar chart of the largest stock gains and losses of the Russell 1000 index so far this year (%) shows that technology companies are among the laggards in early 2022

Given the volatility at the beginning of the year, bankers and investors warned that they are preparing for the bumps in the first quarter.Many are positive Focus on the Fed, Which is withdrawing support during the pandemic that helped boost the stock market.

The sharp rise in bond yields in recent days has sparked investor interest. David Lebovitz, an asset management strategist at JPMorgan Chase, said it “destroyed” growth and the stability of technology stocks. According to calculations by the Financial Times, the yield on the 10-year U.S. Treasury bond has climbed 0.17 percentage points from 2022 to date, the largest three-day increase in the past year.

“We don’t pursue noble people,” Leibovitz added. “We are looking for companies that can generate revenue.”

Investors warned that the possibility of further mutations in the coronavirus could also weaken enthusiasm for stocks related to the health of the economic recovery.

“Let’s face it, there is still a lot of uncertainty there… Invesco chief global market strategist Kristina Hooper said that the possibility of new variants can be very problematic. “Frankly, the Fed normalization itself Will cause higher volatility. “

Weekly newsletter

For the latest news and views on fintech from the Global Correspondent Network of the Financial Times, please subscribe to our weekly newsletter #fintechFT

Sign up here with one click

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *