While markets continue to grapple with all the continuing inflationary pressures, the performance of the technology sector could indicate troubling times ahead, believes one hedge fund manager, as reported by CNBC.
David Neuhauser, chief investment officer for Livermore Partners, a U.S. hedge fund, thinks that the usual buy-the-dip and investing in high-growth stocks amidst a low-growth environment strategies may not work this time around. Neuhauser believes that prices are going to continue to rise as COVID variants crop up and supply chain issues continue, locking the central banks into the only response they have: interest rate increases.
“That would be bad for obviously any high growth names, technology especially. I think over the next several years, as you see tightening in terms of monetary policy, it could definitely have an effect in terms of reigning in tech valuations,” Neuhauser said.
When calculating economic growth without the upward momentum provided from the fiscal and monetary stimulus over the past two years, that growth is trending below average, and a play to move into big growth and tech stocks could be the wrong one, Neuhauser believes. He argues that many of the major tech players have been down in the last three months, and that it’s somewhat of a writing-on-the-wall kind of scenario.
“If you look underneath the current of the tech sector of the Nasdaq, which is having an explosive year, there are a number of companies that are trading below their 200-day moving averages, that are actually in a bear market, so it is a bit troubling and also fooling people a bit too,” said Neuhauser.
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