Last Update: May 20, 2023, 01:57 AM IST
The Nasdaq’s current performance is a significant turnaround from its 33% decline in 2022, the worst year since the 2008 financial crisis.
The tech-heavy Nasdaq Composite has jumped 21% this year, more than doubling the S&P 500’s 9% gain, boosted by better-than-expected earnings.
Fund managers and strategists said investors are looking beyond the bounceback of the US technology sector for long-term returns this year, as higher interest rates and an uncertain macroeconomic picture could pose headwinds ahead.
The tech-heavy Nasdaq Composite has jumped 21% this year, more than doubling the S&P 500’s 9% gain, on the back of stronger-than-expected earnings from major companies and cost-cutting measures. Along with the expectations of the US Federal Reserve hiking cycle. is nearing its end.
Over the long term, other sectors are likely to offer better returns at more attractive valuations, said Abigail Yoder, US equity strategist at JPMorgan Private Bank.
“The trend is that … sectors that lead in one cycle don’t lead in the next,” Yoder told the Reuters Global Markets Forum.
The Nasdaq’s current performance is a significant turnaround from its 33% decline in 2022, the worst year since the 2008 financial crisis, but the risks posed by higher interest rates and a possible US economic recession have not faded.
“We are staying away from more interest rate-sensitive sectors like technology,” said Jonathan Mondillo, head of North American fixed income.
Anticipating an economic slowdown in the second half, a more cautious and selective position in fixed income portfolios is a better bet, said Jonathan Duensing, head of US fixed income at Amundi.
“We’ve always felt that the tech sector in general is one where you need to be very selective,” Duensing said.
Abrdn’s base case is the possibility of a recession in the fourth quarter of 2023. Based on this, Mondillo prioritizes loans in more defensive sectors including health care and consumer staples over technology.
Similarly, Yoder sees healthcare as an attractive defensive option in a downturn, with mid-cap stocks likely to outperform their larger counterparts.
“Over the long term, we really like mid-caps, which are high quality in nature, and exhibit really good up/down capture over time,” he said.
(This story has not been edited by News18 staff and is published from a syndicated news agency feed – reuters,
