The Nasdaq 100 index has slipped nearly 5.0% this week on inflation driven sell-off in technology stocks, but Exante’s Victor Argonov says there might be more to come in the coming weeks.
Tech won’t replicate outperformance of previous years
Argonov doesn’t expect 2022 to be another year of outperformance for the tech space. If not a major correction, he sees the sector to at least consolidate this year. In his comments this morning, he said:
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The Santa rally in tech felt like it was setting up for a subsequent rug pull, and that’s how it’s proved to be, over the last couple of sessions. The writing was on the wall with Elon Musk and other celebrity tech CEOs unloading stock into the rally, while the Fed turned more hawkish.
According to Argonov, several companies within the tech space are still trading significantly above their fundamental values, which could mean the sell-off will continue, especially since the U.S. Fed is signalling it will take a more aggressive approach in raising rates than previously indicated.
Value stocks will benefit through it all
On the flip side, Argonov expects value stocks to do well in 2022, particularly ones that benefit from easing COVID-19 restrictions – the likes of travel and tourism stocks. He added:
Dow and some European indices like FTSE have managed to hold their own noticeably better, thanks to the larger proportion of value stocks in those indices. As restrictions ease further, this should see stocks sensitive to COVID do relatively better, even if the wider market falls.
A hawkish Fed, Argonov concluded, will see an increase in bond yield. Bank stocks, therefore, could be another great pick for 2022. Here’s how RBC’s Lori Calvasina says investors can prepare for the rate hikes this year.
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