Big tech is often cited as the primary catalyst in 2023’s stock market rally. Yet at some point, the laws of market gravity will set in, and what comes up must eventually come down. As 2023 winds down, some market experts foresee pressure ahead for big tech.
Interest rates and inflation played a large part in tech’s slump in 2022. This could once again put downward pressure on the sector as 2023 turns into 2024. With many big tech names rallying for much of the year, some analysts may be seeing signs of overvaluation. A potential correction for these names could be ahead.
“For most of the year, markets have been driven by the artificial intelligence promise from the Nasdaq’s seven large tech stocks — Alphabet, Amazon.com, Apple, Meta Platforms, Nvidia, Microsoft, and Tesla,” a Barron’s article said.
However, investors were optimistic heading into 2023 that the Federal Reserve would eventually loosen monetary policy. But inflation has proven to be more stubborn than originally forecasted. Markets can hope eventual rate cuts will happen and big tech names can be obtained at a value in the recent pullback. Yet there’s no telling what will happen.
“The rally was getting challenged Thursday [September 21] thanks to the Federal Reserve,” the article noted. “Central bank officials affirmed their outlook for one more rate hike this year on Wednesday and said the economy should see fewer rate cuts next year, suggesting a restrictive monetary stance. That’s bad news for growth stocks.”
That said, traders can profit from more weakness when big tech pulls back via the Direxion Daily Technology Bear 3X ETF (TECS). The fund puts a bearish spin on the Technology Select Sector Index. It has thrice the leverage for traders who want to maximize profit potential.
Single-Stock ETF Plays
Traders who want to shun a more broad inverse approach via TECS can also opt for single-stock ETFs. The aforementioned Barron’s article mentioned named companies like Microsoft and Amazon, giving traders an option to focus solely on these companies:
- Direxion Daily AMZN Bear 1X Shares (AMZD)
- Direxion Daily GOOGL Bear 1X Shares (GGLS)
- Direxion Daily MSFT Bear 1X Shares (MSFD)
- Direxion Daily AAPL Bear 1X Shares (AAPD)
A single-stock ETF can offer a more targeted approach. For traders looking to play off weakness in earnings reports and gloomy forecasts, these can be valuable tools to stay tactical and flexible in the markets.
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