Michael Wilson, a well-known U.S. stock bear on Wall Street and chief U.S. stock strategist at Morgan Stanley, warned that the more than 20% rise in technology stocks may not be sustainable, and the industry will return to its low point.
Investors fleeing economically sensitive sectors such as the banking sector and turning to big technology stocks following the collapse of several U.S. regional banks also promptedNasdaq The 100 surged into a bull market.
Part of the reason for this rotation, Wilson noted, is that tech has traditionally been viewed as a defensive sector, although he disagrees and sees better risk-reward ratios in utilities, staples and healthcare. “Technology stocks are actually pro-cyclical, bottoming at the same time as the broader market in a bear market,” Wilson said.
He suggested that investors wait for a sustained low point in the broader market before buying technology stocks, because the industry usually experiences a period of strong performance following the low point, which will be a relatively favorable period in the cycle.
In addition, Wilson also said that expectations that the Fed will soon end monetary tightening will disappoint investors. “We don’t see the recent bank funding program as a form of quantitative easing, nor do we think it will ultimately spur a rally in risk assets,” Wilson said.
JPMorgan strategists including Mislav Matejka said technology stocks may no longer be good targets for structural placement. Strategists also remained neutral on the sector as the strong outperformance of tech stocks may be coming to an end, citing profit risks, unattractive valuations and relatively high prices.
Jimmy Lee, CEO of The Wealth Consulting Group, once said that if you look at the technology industry, which is very sensitive to interest rates, from a valuation perspective, you will find that many of these stocks fell far more than the overall market level last year. The stock is back flowing.
Michael Landsberg, Chief Investment Officer of Landsberg Bennett, an asset management agency, also believes that in the current macroeconomic environment, people should not regard technology stocks as a safe haven. He pointed out that the fundamentals of technology companies are continuing to deteriorate as the U.S. economy enters recession and demand will start to soften.
