Despite the recent bearish views on US tech stocks, despite the current predicament, the future is still to be expected after the brief passing of the bubble. After all, US stocks have been bullish for ten years and have never been short of investment opportunities.

The main logic behind the recent decline in US tech stocks is that the surge in US Treasury yields has made them less attractive to growth stocks with high valuations.

It is worth mentioning that the Nasdaq 100 index fell back quickly after hitting a record high in November, and the broader Nasdaq composite index also fell below the threshold and entered a bear market.

Collective pullback of technology stocks at the beginning of the year

The Philadelphia semiconductor index fell 3.3% to close at its lowest level since the end of October. The index has fallen more than 10 per cent so far this week, the biggest weekly percentage decline since March 2020. The index is now down 13% from its peak in December.

Us bond yields have soared on expectations that the Fed will raise interest rates by more than 25 percentage points in March to curb inflation. On Tuesday, the yield on the benchmark 10-year Treasury note briefly exceeded 1.87 per cent, the highest level since the COVID-19 epidemic disrupted the market in January 2020.

Us technology stocks fell back in the new year as investors sold growth stocks to buy energy, finance and other cyclical stocks, which are expected to benefit from improved economic growth and higher interest rates. The share prices of fast-growing small technology companies have been particularly hard hit because they are more dependent on capital market funding and investors worry that such stocks are more vulnerable to tighter monetary policy.

"growth stocks have been hit hard this year, especially low-quality stocks with very high valuations," Eric Beiley, executive director of Steward Partners Global Advisory wealth management, said in an interview. As the Fed shifts to raising interest rates and investors turn to value and cyclical stocks, returns in the US stock market are likely to be even lower this year. "

It is expected to rebound in the second half of the year

After a year of strong double-digit growth and gains in the US stock market, most strategists expect returns to be more modest in 2022 as the Fed withdraws its stimulus measures during the pandemic. Treasury yields are rising rapidly as investors increasingly expect the Fed to raise interest rates sooner and faster, speculating that the Fed will raise interest rates by 50 basis points in March.

Despite the weak performance of technology stocks, analysts are generally optimistic about the industry. Analysts believe that lingering concerns about tightening monetary policy or the COVID-19 epidemic will not prevent the market from achieving another year of strong gains. In fact, the Fed has experienced four different cycles of raising interest rates over the past 30 years, none of which has historically hurt the stock market. Technology stocks are, on average, one of the best performers in the S & P 500 during these cycles, up nearly 21 per cent, according to Strategas Securities.

"it's not unusual for growth stocks to sell when interest rates rise," Joseph Biondo, chief executive of Biondo Investment Advisors, said in an interview. The stock market this year is likely to be divided into two stages. In the first half of the year, we may see a continued revaluation of growth stocks, which will create huge buying opportunities in the second half of the year and after the dust settles. "

Earlier this week, Bank of America Corporation said that while higher interest rates could pose valuation risks to the industry, "this may be offset by strong capital inflows from investors who are looking for high-quality industries with above-trend growth rates. "in addition, the industry has high profitability, as well as multiple cyclical and long-term positive factors.

Negative emotions may peak.

However, analysts say panic in technology stocks has exceeded March 2020 levels, supporting the market to repair in the future.

Mark Mark Hulbert, a US financial analyst, said Nasdaq-focused indicators of stock market sentiment had reached bearish extremes. His Nasdaq stock investment sentiment index (Hulbert Nasdaq Newsletter Sentiment Index) (HNNSI) has now reached minus 67.2%, indicating that investors are extremely bearish.

Usually, when the extreme bearish index falls to a certain limit, it means that negative sentiment is about to bottom. after all, there is a big contrast between the current market sentiment and the peak of the Internet bubble, and Netflix Inc's earnings are not negative. The earnings of technology stocks have just begun, and the phased pullback of US stocks may come to an end.