Investors Look Past US Tech Sector as Uncertain Environment Clouds Outlook

Investors are wanting past the U.S. know-how sector’s bounceback this yr for longer-term returns, as greater rates of interest and an unsure macroeconomic image might current additional headwinds, fund managers and strategists stated.

The tech-heavy Nasdaq Composite has jumped 21% this yr, greater than doubling the S&P 500’s 9% rise, boosted by stronger-than-expected earnings and cost-cutting measures from main firms, together with expectations that the U.S. Federal Reserve’s mountain climbing cycle is nearing an finish.

Longer time period, different sectors are more likely to supply higher returns at extra enticing valuations, stated Abigail Yoder, U.S. fairness strategist at J.P. Morgan Private Bank.

“The tendency is that … the sector that leads in one cycle doesn’t tend to lead in the following cycle,” Yoder informed the Reuters Global Markets Forum.

The Nasdaq’s present efficiency is a big turnaround from 2022’s 33% drop, its worst yr for the reason that 2008 monetary disaster, however the dangers posed by greater rates of interest and a possible U.S. financial slowdown haven’t light.

“We are staying away from the more interest rate-sensitive sectors such as tech,” stated Jonathan Mondillo, head of North American mounted earnings at abrdn.

Anticipating an financial slowdown within the second half, extra cautious and selective positioning throughout mounted earnings portfolios is a greater guess, stated Jonathan Duensing, head of U.S. mounted earnings at Amundi.

“We’ve always felt that the tech sector in general is one where you need to be very selective,” Duensing stated.

Abrdn’s base case is a possible recession within the fourth quarter of 2023. Based on that, Mondillo prefers credit score in additional defensive sectors, together with healthcare and shopper staples, over know-how.

Similarly, Yoder sees healthcare as a horny defensive choice within the face of recession, with mid-cap shares more likely to outperform their bigger counterparts.

“Longer term, we prefer actually mid-caps, which tend to be higher quality in nature, and tend to exhibit a really good up/down capture over time,” she stated.

(This story has not been edited by News18 employees and is revealed from a syndicated news company feed – Reuters)