For a sector accustomed to getting headlines for its stellar growth and equity returns, the past few weeks have felt a bit different for technology companies. It's time to take stock, think about what we’ve learnt and revisit our bullish macro case for the sector. In short, however, I still like tech.
“You only find out who is swimming naked when the tide goes out” (Warren Buffett, 2001). In bull markets, market risk is often the most important driver of performance. However, we should pay attention to bottom-up investors in both equity and credit markets as they can add value in spotting turning points and identifying areas where investors may find themselves overexposed.
Having worked as an equity strategist for well over a decade, I’ve lost count of the number of times I’ve had the debate on ‘what happens to equities when bond yields go up?’. And for most of that time bond yields were in the ice age and falling! To cut down on some future deja-vu, here's my Top 7 list of things to consider about equities when bond yields go up.
How could investors not like technology stocks? They’re cool companies, led by charismatic CEOs making irresistible products. And what's more, they're posting amazing growth rates with stocks that just keep going up. I’m sure the bottom-up investment case is much more sophisticated than that, but today I want to lay out the strong macro case for tech stocks.
In at least one respect, I can identify with Millennials: FOMO. The ‘fear of missing out’ on things such as Game of Thrones, tickets to FC Cologne vs Arsenal, that perfect powder run on my snowboard holiday or front row seats at my daughters’ nativity plays. But looking at markets at the moment, it’s pretty obvious I’m not the only one with FOMO!