Volatility in bank sector stocks caused by the quick collapse of Silicon Valley Bank earlier this month has ignited a rush into technology stocks which are...
Volatility in bank sector stocks caused by the quick collapse of Silicon Valley Bank earlier this month has ignited a rush into technology stocks which are now seen as safe haven trade.
Among the big tech stocks, shares of Apple Inc. AAPL have risen nearly 4% over the past three weeks, putting the stock up 21.3% so far in 2023, while Meta Platforms Inc. META is up 66.8% over this period and Google’s parent Alphabet Inc. GOOG is up 14.5% year-to-date, according to Dow Jones Market Data.
“So the combination of the two caused a sharp reversal across asset classes. One of the big beneficiaries was tech stocks, and I think that is very normal.” The correlation between the Nasdaq Composite COMP and the Treasury yields TMUBMUSD02Y was negative in 2022 as the Federal Reserve began raising interest rates aggressively to slow inflation and cool the economy. When bond yields rise, investors may see more value in fixed income debt because future cash flows and growth in corporate profit will be discounted by higher interest rates, making technology stocks less appealing to investors compared to bonds with soaring yields.
The recent boost to Nasdaq valuations from declines in interest rates was certainly a welcomed change, but tech stocks do need to support their prices with fundamentals, which have “deteriorated meaningfully” from last year, said market analysts.
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