Bank of America's strategist Michael Hartnett said that if the US economy continues to cool, the rise of large tech stocks in the US may further fade. The strategist said that signs of economic slowdown will push investors to stocks that are lagging behind expensive tech behemoths this year. Hartnett said in a report on Friday that recent data showed that the global economy is "weak" and that large tech stocks are only one bad non-farm payroll away from losing their dominant position.
In the past two weeks,$Apple (AAPL.US)$,$Amazon (AMZN.US)$,$Alphabet-A (GOOGL.US)$,$Microsoft (MSFT.US)$,$NVIDIA (NVDA.US)$And.$Meta Platforms (META.US)$the rise of small-cap stocks has deviated from the trajectory of large tech stocks due to investors betting that the Fed may soon begin to cut interest rates. Since reaching an all-time high on July 10th, the market capitalization of technology stocks has evaporated by about $2.6 trillion, also because investors are concerned that massive investments in the field of artificial intelligence may not yield quick returns.$NASDAQ 100 Index (.NDX.US)$Stocks dominated by technology, particularly AI, have seen their market value crumble, while other companies like small-cap stocks have rallied as investors bet on a lower interest rate environment.
However, Hartnett says that market bulls still believe the correction is "healthy" because the market has yet to break key levels. Since July 10th, the Nasdaq 100 Index has fallen about 9%, but the index has still gained over 30% since hitting a low point in October 2023. On Friday, U.S. equity index futures rose and are expected to regain some lost ground.
In the week ending July 24th, Bank of America's custom bull-bear indicator rose slightly to 6.9, the highest level in over three years. Hartnett says that if the index goes above 8, it will send a counter-selling signal, and if fund managers increase their stock allocations and cash levels continue to drop, this signal could be triggered and a rebound in lagging stock could improve market breadth.
Editor/Lambor