The high-growth technology names tend to not do good in the rising rate environment; such is the broadly accepted notion among global investors. But Bespoke’s Paul Hickey says history begs to differ.
Hickey’s remarks on CNBC’s “TechCheck”
On CNBC’s “TechCheck”, Hickey pulled out post-financial crisis data to demonstrate how technology stocks have shown resilience amidst higher yields in the recent decade. He said:
There’s been about 15 periods where we’ve seen the 10-year treasury yield rising by 20% or more. Tech stocks were higher in every one of those periods, 15 out of 15. SPX was also higher 14 out of the 15 times, but overall, tech actually saw a bit of outperformance.
His comments come a day after RBC Capital’s Lori Calvasina said the “next big leg up in the market is for small caps”. She expects 2022 to be another good year for stocks, with a close to 10% gain in the SPX next year.
Why the sell-off in tech stocks this week then?
Hickey attributes the recent sell-off in tech stocks to a “quick spike in rates” and expects the sector to eventually get back on track.
When you see such fast moves in the initial stages of these legs higher in rates, it causes some dislocations, resulting in sell-offs. But then overall, you tend to see the sector recover. I think if you’re betting against the tech on higher rates, you’re going against the grain.
Prior to this week, he noted, the technology sector was actually outperforming the benchmark. This week, the Nasdaq 100 Technology Sector slid from 9,903 on Monday to 9,408 on Tuesday but has climbed back more than 2.0% on Wednesday.
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